On January 7, 2021, the Federal Trade Commission ("FTC") announced that it had settled its consumer reward investigation into the business practices of Tapjoy, Inc. ("Tapjoy"), a mobile advertising company, over allegations that Tapjoy failed to provide users with promised rewards featured in various mobile games and applications. Under the terms of the proposed settlement, Tapjoy will be prohibited from misleading consumers about rewards that they can earn within mobile games. Tapjoy must also monitor and police its third-party advertiser partners to ensure that those partners deliver promised rewards to consumers.
What was alleged by the FTC?
Tapjoy's Advertising Practices
According to the FTC's complaint, Tapjoy operates an advertising platform featured within mobile games. The platform promotes in-game rewards (virtual currency, such as virtual gold, coins, and diamonds) to users that require them to engage with third-party advertisers in order to qualify to redeem such rewards. In turn, Tapjoy receives fees and commissions from third-party advertisers that engage with users through the platform. Examples of user engagement include purchasing products, completing surveys, and watching videos. The FTC alleged that Tapjoy advertisers regularly fail to issue the promised rewards to users who complete the required actions as instructed, or only issue the rewards after substantial delay. Often, users must perform additional tasks that are not clearly disclosed in the advertisements, such as providing personally identifiable information, to obtain the rewards. Users report significant difficulty contacting Tapjoy to complain, and even those who are successful in reaching Tapjoy often do not receive the promised rewards. The consumer reward investigation into Tapjoy's business practices led the FTC to conclude that Tapjoy was engaged in deceptive acts or practices in violation of Section 5(a) of the Federal Trade Commission Act (the "Act").
Consumer Reward Investigation Settlement Order
Tapjoy's integration into mobile games allows it to act as a middleman between advertisers, game users, and game operators. The FTC alleged that Tapjoy promoted the deceptive offers made by its advertisers to bait customers into the promise of big rewards that it knew, or should have known, would never materialize. Accordingly, the FTC claimed that Tapjoy violated the Act not only by making its own misleading statements, but also by failing to police the business practices of the advertisers located on its platform.
The proposed settlement order with the FTC requires Tapjoy to create and implement screening and testing procedures to weed out advertisers that cheat both game users and game developers. Tapjoy will be required to monitor the marketing published by its advertisers to ensure that the complete terms of their offers – including explanations as to how to obtain rewards – are clearly and conspicuously displayed. The proposed order defines "clearly and conspicuously" to mean that the offer terms are easily noticeable and understandable. This means that the text of such offers stands out from any other text or visual elements located on consumers' screens. In addition, Tapjoy must now promptly investigate consumer support requests/complaints so that it can promptly identify any third-party advertisers engaged in unlawful behavior. Once Tapjoy identifies any non-compliant advertisers, it must immediately cease the publication of their misleading marketing.
As readers know, the FTC and state attorneys general frequently investigate and prosecute companies for deceptive advertising practices. This consumer reward investigation settlement demonstrates that advertising platforms may face liability not just for their bad acts, but also for the misleading statements of advertising partners hosted on their platform. Accordingly, it is important that marketers and online advertisers work with experienced attorneys to guide them through state and federal consumer protection laws in order to avoid regulatory trouble. If you need assistance reviewing your online advertising practices, please e-mail us at email@example.com, or call us at (212) 246-0900.
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