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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

Michigan Law Firm - Warner Norcross + Judd LLP

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For real, this time.&nbsp; Unlike <a href="http://www.wassom.com/an-inauspicious-beginning-to-ar-litigation.html" target="_blank" rel="noreferrer noopener">the prisoner lawsuit I discussed last month</a>, a newly filed legal complaint raises non-imaginary (although certainly still-untested) legal theories concerning an actual, commercial use of augmented reality. &nbsp;AR litigation is now a cold, hard reality. &nbsp;And the result of this initial salvo could have a huge impact on AR campaigns across the board.

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On October 19, 2011, four consumer advocacy groups (the Center for Digital Democracy, Consumer Action, Consumer Watchdog, and The Praxis Project--who I'll refer to collectively as "CDD") filed a&nbsp; <a href="http://case-studies.digitalads.org/wp-content/uploads/2011/10/complaint.pdf" target="_blank" rel="noreferrer noopener">Complaint and Request for Investigation</a> with the <a href="http://ftc.gov" target="_blank" rel="noreferrer noopener">Federal Trade Commission</a> (FTC) against PepsiCo and its subsidiary, Frito-Lay.&nbsp; The complaint calls on the FTC to investigate and bring action against these companies for allegedly "engaging in deceptive and unfair marketing practices in violation of <a href="http://www.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00000045----000-.html" target="_blank" rel="noreferrer noopener">Section 5 of the FTC Act</a>."&nbsp; Together with their complaint, the CDD issued <a href="http://case-studies.digitalads.org/wp-content/uploads/2011/10/FTCcomplaintCDDRelease1019FINAL.pdf" target="_blank" rel="noreferrer noopener">a press release</a> and <a href="http://case-studies.digitalads.org/ftc-complaint/" target="_blank" rel="noreferrer noopener">a detailed collection of case study videos</a>--apparently from the advertisers themselves--explaining the challenged ad campaigns.

The CDD objects to several aspects of Frito-Lay's online ad <a href="http://doritoslatenight.com/" target="_blank" rel="noreferrer noopener">campaign </a>for its "<a href="http://www.fritolay.com/our-snacks/doritos-all-nighter-cheeseburger.html" target="_blank" rel="noreferrer noopener">Doritos Late Night" line</a> of products.&nbsp; The campaign was a multi-faceted approach that employed&nbsp; a variety of cutting-edge techniques.&nbsp; Most of these are rooted in social media, such as the <a href="http://hotel626.com/" target="_blank" rel="noreferrer noopener">"Hotel 626" and "Asylum 626"</a> social games.&nbsp; (I'll discuss these in more detail in subsequent posts. This post focuses on the AR aspects of the campaign.)

The ultimate point of the Complaint is to argue that Frito-Lay's campaign deceives teens into eating too many unhealthy snacks, thus contributing to the childhood obesity problem.&nbsp; For support, the complaint relies on a report called <a href="http://casestudies.digitalads.org/ftc-complaint/">Digital Food Marketing to Children and Adolescents</a>, conducted by National Policy &amp; Legal Analysis Network to Prevent Childhood Obesity (NPLAN).&nbsp; The Report (non-coincidentally released on the same day as the Complaint) begins from the unstartling premise that "contemporary marketing practices are increasingly multidimensional" and rely on social and relational methods rather than hard-sell advertising.

But the Report and the Complaint go on to <a href="http://case-studies.digitalads.org/wp-content/uploads/2011/10/complaint.pdf" target="_blank" rel="noreferrer noopener">call out five specific forms of outreach</a> to which teens are "uniquely susceptible."&nbsp; At the top of that list are

Augmented reality, online gaming, virtual environments, and other immersive techniques that can induce “flow,” reduce conscious attention to marketing techniques, and foster impulsive behaviors ....

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The CDD's reasoning, therefore, is not limited to what Frito-Lay did.&nbsp; But the Complaint chooses to single out the Doritos campaign as "particularly problematic."

At least one, and arguably two, aspects of this campaign qualify as AR.

Most notable is the "Late Night Concert" featuring the band Blink-182.&nbsp; Here's how the Complaint describes it:

The Late Night music experience utilized “augmented reality,” an immersive marketing technique featuring a vivid interactive experience that can be personalized for individual users.&nbsp; Bags of Doritos Late Night chips were printed with a special symbol to serve as a “ticket” for the concert. Flashing that symbol at their webcams would create the appearance of the stage popping out of the bag of chips.

The CDD also calls out a related feature involving the music video for Rihanna's song "Who's That Chick."&nbsp; The producers filmed <a href="http://www.youtube.com/watch?v=fzQiQ5bhswA" target="_blank" rel="noreferrer noopener">two versions of the video with identical camera angles and choreography</a>.&nbsp; The only difference is that the default video is shot with "daytime" lighting and costumes, while the "Late Night" version has a "darker" backdrop and wardrobe.&nbsp; Holding a Doritos Late Night bag up to a webcam while the video is playing will "unlock" the Late Night version and automatically switch between the two.&nbsp; By at least&nbsp;<a href="http://socialtimes.com/rihanna-360-degree-video_b26045" target="_blank" rel="noreferrer noopener">some definitions,</a> this, too, is augmented reality.

The Doritos Late Night campaign appears to have been a success.&nbsp; According to the Complaint and the <a href="http://www.youtube.com/watch?v=ikpAWgzpLgE&amp;feature=player_embedded" target="_blank" rel="noreferrer noopener">video case studies</a> it cites, the website received almost 100,000 hits in its first week, with an average visit length of 4.5 minutes.

Next Steps for the Doritos Complaint

I've been careful to describe this as a "legal complaint" rather than a "lawsuit." &nbsp;The process that the CDD has started is not a "lawsuit" in the traditional sense of a plaintiff suing a defendant in order to get certain relief.

Rather, what the CDD has done is to gather all of the data it can find to support its argument, package the data in what it thinks is the most persuasive manner, and lain it all at the FTC's doorstep, asking the FTC to do something about it.

The FTC' has no legal obligation to act. &nbsp;It can choose simply to do nothing. &nbsp;The FTC is "empowered and directed" by Section 5 of the FTC Act (<a href="http://www.law.cornell.edu/uscode/html/uscode15/usc_sec_15_00000045----000-.html" target="_blank" rel="noreferrer noopener">15 U.S.C. S45</a>) "to prevent persons, partnerships, or corporations ... from using unfair methods of competition in or affecting commerce and unfair or deceptive acts or practices in or affecting commerce." &nbsp;But it's up to the FTC itself to decide whether such methods are being used, and if they are, whether "a proceeding by it in respect thereof would be to to the interest of the public." &nbsp;To reach that decision, it usually conducts an investigation first.

Even if the FTC does act, there's no deadline for action. &nbsp;It has been known in some cases to let investigations lie dormant for years, only to pick them up again and take action months or years later.

After investigating, if the FTC decides to act, it has two options under Section 5. First, it can file a lawsuit in federal court against the allegedly deceptive marketers, seeking an injunction against the unlawful practices and penalties of up to $10,000 "for each violation."

Second, it can hold an administrative hearing, in which the FTC files a complaint and the marketer may defend itself before the Commission itself. &nbsp;Any interested third party (e.g., the CDD) may petition to intervene and offer testimony. &nbsp;That process can also result in an order that the marketer cease and desist the objectionable practice. &nbsp;In either scenario, the ruling may be appealed to a U.S. Court of Appeals.

Meanwhile, PepsiCo has little it can do but wait, and to parry the CDD's PR blitz. &nbsp;"We are aware of the filing to the FTC and believe it contains numerous inaccuracies and &nbsp;mischaracterizations," Frito-Lay spokesperson Aurora Gonzalez <a href="http://www.brandchannel.com/home/post/2011/10/20/PepsiCo-Frito-Lay-Refutes-Complaint-102011.aspx" target="_blank" rel="noreferrer noopener">has been quoted</a> as saying.&nbsp;"PepsiCo and its Frito-Lay division are committed to responsible and ethical marketing practices. Our marketing programs, which are often innovative, comply with applicable law and regulations."

Those in the AR industry will recognize Doritos' webcam-based AR advertising model as entirely commonplace.&nbsp; Although the production values for the campaign appear quite high, the technique of holding a marker up to a webcam to activate content on a desktop monitor is first-generation AR that has been around as long as the industry itself (which is to say, at least a couple years).

In other words, there's nothing about the technical aspects of this campaign that make it "particularly problematic." Rather, the CDD is on a mission to reduce the consumption of junk food by teens. &nbsp;This campaign used AR to sell teens such food, so it attacked AR. &nbsp;Presumably, if the Ad Council were using AR to lower teens' inhibitions against quitting smoking, the CDD would not object.

But Doritos Late Night is far from the only campaign on the CDD's radar. &nbsp;The CDD has already <a href="http://www.brandchannel.com/home/post/2011/10/20/PepsiCo-Frito-Lay-Refutes-Complaint-102011.aspx" target="_blank" rel="noreferrer noopener">made it known</a> that, while&nbsp;PepsiCo “is in forefront ... we are likely to file other complaints in the next year or so.” &nbsp;And the CDD's&nbsp;<a href="http://case-studies.digitalads.org/ftc-complaint/" target="_blank" rel="noreferrer noopener">website about the complaint</a> lists some specific examples of other campaigns it objects to. &nbsp;Some of the examples on that list were also successful AR campaigns.

The reasoning behind the Doritos Complaint doesn't stop at foods, either. &nbsp;Consider this passage from the Complaint about the ills of "immersive" environments:

Frito-Lay’s ability to disguise its marketing efforts is further enhanced by the use of&nbsp;“immersive” techniques. Immersive marketing is designed to foster subjective feelings of being&nbsp;inside the action, a mental state that is frequently accompanied by “intense focus, loss of self,&nbsp;distorted time sense, effortless action.” Immersive environments can also induce a state of&nbsp;“flow,” causing individuals to lose any sense of the passage of time. Immersive environments&nbsp;use augmented reality techniques to deliberately blur the lines between the real world and the&nbsp;virtual world, making the experience even more compelling, intense, and realistic. In such an&nbsp;emotional environment, a teen is even less likely to recognize that the game or concert event is&nbsp;marketing for the reasons discussed above.

The same reasoning could be applied to adults, and to the use of immersive AR to sell virtually anything. <a href="http://www.wassom.com/ar-addiction-could-augmented-reality-get-too-immersive.html" target="_blank" rel="noreferrer noopener">Some of the most active discussion on this blog has been on that very subject</a>. &nbsp;If the CDD makes any headway with this argument in fighting snack sales, who will use it next against some other use of AR? &nbsp;"Immersion" is the sine qua non of AR. &nbsp;The CDD's line of attack, if successful, could pose a potentially existential threat to a large portion of the AR industry as we know it.

Of course, we don't currently have reason to conclude that the people behind the Doritos Late Night campaign did anything wrong, or that the FTC will ultimately take any action on the matter. Any discussion of the merits of this particular dispute is necessarily one-sided at this point, because <a href="http://bible.cc/proverbs/18-17.htm" target="_blank" rel="noreferrer noopener">we've only heard one side of the story</a>. &nbsp;People in the AR industry (many of whom, I'm honored to say, read this blog) could tic off a laundry list of ways that AR can positively impact the consumer experience.

But that won't stop additional complaints from being filed.

&nbsp;AR is on the radar of consumer watchdog groups. &nbsp;They see "immersive" as a code word for "deceptive."

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Any AR advertising campaign targeting teens or other groups that are arguably more vulnerable to suggestion should be particularly wary of attacks by such groups.

Be careful about how you describe your own campaigns! &nbsp;The CDD's complaint and website is chock full of quotes and excerpts from the Doritos advertisers' own case studies. &nbsp;Be aware that someone may try to use your own words against you.

Start making notes about how your use of AR benefits consumers and the public.

Get legal advice about what constitutes "unfair and deceptive practices" while you're designing your campaign, not after it's over.

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Acknowledgment: In preparing this post, I consulted one of my law partners, Attorney <a href="http://www.honigman.com/professionals/xprProfessionalDetailsHon.aspx?xpST=ProfessionalDetail&amp;professional=436" target="_blank" rel="noreferrer noopener">David Ettinger</a>, who has extensive experience with FTC investigations. Many thanks for his useful insights into FTC procedure.

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First, They Came for the Doritos: AR Campaign Spurs Legal Complaint, With More to Come

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