SCOTUS ruling makes it easier to challenge federal ad regulations

U.S. Supreme Court rulings don’t often impact marketing, but a decision handed down last month likely will. Lober v. Raimondo sharply curtails the power of federal regulators — like the FTC and FCC — saying federal courts should no longer defer to them when interpreting laws.

Chief Justice John Roberts said federal judges “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” The decision overruled the landmark 1984 decision in Chevron v. Natural Resources Defense Council, which said judges should defer to the executive branch when laws passed by Congress are ambiguous.

The new ruling increases the likelihood of people and brands winning lawsuits over regulatory decisions. And, of course, regulators created a lot of rules around advertising. Some of these are industry-specific, like disclosure requirements for the financial and pharmaceutical industries. Others are broader, like the FTC’s rulings around truth in advertising.

“The Federal Trade Commission is probably one of the biggest beat cops on the [regulatory] street [because they can] prohibit false advertising,” Jason Gordon, advertising and brand protection partner at Reed Smith LLP, told MarTech. “When they spot false advertising, they say that it’s an unfair deceptive act or practice, whatever the ’it’ is.”

Changing enforcement priorities

The FTC isn’t arbitrary about these issues and puts out books of guidelines to help marketers know what’s legal and what isn’t. However, the FTC — like all regulatory agencies — is political. Its commissioners are appointed by the president and confirmed by the Senate. As a result, enforcement priorities, penalties and interpretations change with every administration. 

“There are some who believe that this particular FTC is getting out a little bit ahead of its skis,” said Gordon. “This ruling will provide those skeptical advertisers an opportunity to say, ‘Maybe we want to challenge this.’”

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Truth in advertising is not something companies are likely to challenge, because it can generate a lot of bad publicity. However, the FTC has a lot of rules about disclosures that might rub people the wrong way.

Under the Biden administration,  the FTC is particularly interested in enforcing rules that cover things like:

• Influencers saying when they’re paid for an endorsement.
• What manufacturers must do to in order to say something is made in the USA.
• How difficult it can be to cancel a subscription.
• What’s in end-user license agreements.
• Automatic renewals.
• Junk fees .
• Delivery app fees.

Consumers may not think of those as part of advertising and marketing, but the FTC does. 

FTC versus the AI industry

Also, the FTC is showing interest in regulating the use of artificial intelligence. While the EU has laws about this, Congress has yet to address the topic. By and large, people and companies in that sector see current regulations — regarding privacy and the use of data — as burdensome. They are very likely to fight any further rules.

However, winning that fight isn’t a sure thing. For better or worse, the Chevron ruling gave judges a clear guideline on how to deal with ambiguous laws addressing complex issues. Now the judiciary must come up with other ways to handle this. For now, no one knows what will happen.

Kathryn Judge, Columbia University Harvey J. Goldschmid Professor of Law, illustrated the problem in an interview with Reuters:

Federal bank supervisors “may be less inclined to regulate aggressively out of fear that banks, being the more well-funded out of the potential litigants, are more likely to fight back in the event of aggressive regulation,” she said. “But there’s no reason to assume that courts are necessarily going to be any more inclined to side with banks.” 

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