This Podcast Can Save You $207,000,000 transcript

If you've spent any time on DTC Twitter, you know that my guest today, Rob Freund, is one of the most helpful accounts to follow in the world because he is an actual [music] real-life lawyer who specializes in e-commerce and advertising. So, he can tell you all the ways that your ads are breaking the law and how you're going to get sued into oblivion and lose all your money and lose your company or something like that.

Help you eliminate that risk a little bit with just really, really helpful content about what's going on in the world of law and e-commerce. And that is relevant right now because New York just released a law that is making some waves in our community because of the need for AI disclosure in your ads. [music] And as soon as this law became published, I I knew exactly what I wanted to do, which was get Rob on the podcast, have him talk about it, and so we can figure out what we need to do with AI in our ads.

I think this was this was coming for a while. This this this was always how it was going to go. And so, we're we're starting to see it roll out. And we're going to talk to Rob about what you should be doing and thinking as you [music] begin to think about how to use AI in your ads. Let's get into it with Rob Freund from Robert Freund Law about advertising, e-commerce, and the law, and what you should and shouldn't be doing in relation to not only AI but a whole bunch of other stuff.

Let's do it. Hi, Rob. >> Hey. >> Thanks so much for taking the time to do this. I appreciate it a lot. Your your name came immediately to mind when this New York AI disclosure law came about. You are so helpful with the things that you post. I have followed you for a very long time and been been extremely helped by a lot of your content. So, thanks for doing it. Do Let's just jump right into the New York law. It seemed obvious to me a while ago that we were going to be going this way that like there was going to be people who were going to want to know if content was AI generated or not in ads.

What I've heard about the New York law is that the there's a like a lobbying group that was actors who were basically the ones who who lobbied to get this law on the books, which makes sense. Can you talk through what the law is a little bit? And then we can talk about what e-commerce companies need to do, and maybe we'll prognosticate a little bit about the future of this across other states, too. >> Sure, yeah. I mean, basically, what this law is trying to do is make it so that people understand if they are being advertised to, whether the people that are appearing in the advertisement are real people or not, basically.

Um and so, more specifically, what this law requires is first, it it it defines uh the term synthetic performer, which essentially means if somebody is presented in a way that is intended to appear like a real person, but it's not a real person. It's some fictitious uh computer-generated, AI-generated avatar of a person, that's a a synthetic performer. And if you include such a synthetic performer in a piece of advertising, then the advertiser is obligated to conspicuously disclose to the audience that there are synthetic performers in that piece of content.

It doesn't apply to like a deep fake scenario, like if you were to use an AI-generated celebrity or something, that would not be a synthetic performer because that is a depiction of a real person who actually exists. Um but there are separate laws that already covered that scenario. Uh publicity rights, uh name, image, and likeness uh laws already addressed that scenario. So, this is just addressing like, did you use uh software algorithm is what the the part of what the law says, which isn't defined anywhere, uh or a AI tool to create something that looks like a human, but is not a real person, you got to tell of audience.

There are some carve-outs, if you're advertising a video game or something along those lines like you don't need to make a disclosure there. But for most e-commerce brands this this will apply to them to the extent they're using AI tools to create avatars. >> Okay, a lot of questions about this. So So the first thing is what does like a conspicuous disclosure amount to in in your view? Like uh >> Good question. >> Yeah. >> There are like some frustrating things with this law about what they what it they don't what it doesn't say.

And there isn't a there aren't examples of what would constitute a conspicuous disclosure. Of course you can borrow from other laws that do say those things or at least take guidance from like the FTC's clear and conspicuous standard or other statutes that that get more specific. But suffice it to say or the safe position is you want the disclosure to be something that's not going to be missed by reasonable consumers who are seeing the ad.

So generally speaking like really small fine print is not going to be conspicuous in the context of like a long video, you know, flashing something on the screen for half a second of a 30 minute video or whatever if it's a long form something or other. That's not going to do it. It's just you know, somebody the average person or a reasonable person looking at this, are they going to miss the disclosure? If the answer is yes to that question, it's probably not conspicuous. >> Are you watching or listening to this right now?

Like [music] this video, subscribe wherever you are doing that, and leave a comment with any questions or thoughts that you have. I read every comment that comes through my channels and so I'd love to interact with those. It's a big help to me and also it's going to get you content that you like because I'm helping you all the time, trying to help anyway, all the time uh build a better, more profitable e-commerce business.

That's what all of my content is about. So, go do it right now. Like, subscribe, comment. You know the drill. >> Do you think if you put it put it in the text, like in a Facebook ad scenario, in the text of the ad, so not on screen, but like in the sort of description copy, do you think that would count as a conspicuous? >> Pr- So, again, it's it's hard to say with this New York one. I don't want to be the lawyer that just goes with the depends on everything, but if if you were taking a a situation and applying the FTC's clear and conspicuous standard, like let's say it's a a piece of sponsored content and you need to disclose that it's an ad or something.

Like it's like an influencer is posting something on their page. The FTC's position is that if there's a audio-visual piece of media, it's not sufficient to only disclose the a text. Like you it should be audible as well. So, in in a in a piece of like a video that you post, you should have like a superimposed in the content itself the written disclosure and not just in the caption. And also, the FTC would tell you the best practice is to also have someone, if they're speaking, to say like, you know, yeah, I'm proud to be working with whoever the brand is or something like that.

So, applying that here, if it's primarily video content and the only disclosure about the synthetic performers is in the text, that's arguably not conspicuous, especially if it's something that would be like below the fold. Like if I would have to tap on the description on a TikTok or something, I would feel comfortable saying that's not going to cut it. >> It's not not conspicuous. >> Not conspicuous is somebody who needs to take some action to go find the disclosure. >> Yeah.

Yeah. It's it's such a tricky thing with these. Um actually, let me before I get into I want to ask about what do you think the actual liability is here and and some of that, but um but one of the questions I have is sort of like what about if I am making a a still image ad and I just uh like let's say I'm advertising a ring and I just need a I just need a hand to put the ring on. Uh what do you think about this law in relation to is an AI generated hand with a ring?

Cuz it's like yeah. >> It >> It's it's the statute does not draw a line between, you know, someone you facially appearing like a human or just a piece a piece of a human, I suppose it would be the hand. It's not clear that that this law would not apply to this situation. >> Right, that's what it seems >> don't think the intent is that it should. Like if we if we care about consumer protection what is the consumer harm about seeing a a hand that's real or not?

Like people have been using prosthetic hands >> Yeah, yeah. >> advertising for a very long time. I don't see any any difference there. And I I I mean I what you said at the beginning is sort of the counter to that, I guess. To the extent that this law did have backing from SAG-AFTRA and is like a uh performer's rights kind of thing and maybe if you're a hand model this is something that you want to push for, but I don't I mean this is just me sort of off the cuff, but I don't like the idea that it might impose these sorts of requirements for just like a stray body part that appears in a piece of an ad that might not even be the focus of it. >> What you just said is basically the way I've read it, which is like I think it probably technically could apply to that, but also that is stupid and sucks.

And like >> [laughter] >> And so I don't like I actually think the idea of consumer protection for AI people, like video, I think it's pretty reasonable. Like I think we're going to need some of that and I'm I'm sympathetic to that idea as being something enshrined in law in the in the in the brave new world that we're entering into here, you know? So I'm I don't feel as bitter about that and in general I'll tell you from a strategic perspective I just continue to think like there's going to be a premium placed on authenticity and and I you know, I could just I could just imagine a real I felt this for a while.

I could imagine a real sort of consumer backlash to aside from any legal backlash uh consumer backlash to sort of totally fake stuff. Like I got you know, Americans kind of hate AI uh even though they all use it and uh and it and it and it uh I just I just read a study actually from from an academic journal that was um or at least I I read a summarized study from an academic journal that was saying that like when somebody finds out that AI wrote copy for you uh it like decreases trust in the brand.

It like it the people have a feeling of disgust and it uh and it and it decreases trust in the brand, you know, like 25% or something like that. I don't know I didn't see the methodology on the study, but that that sounds right to me that like essentially people people see it as cheap and work around and inauthentic and all these kinds of things. So um so I I you know, from a from a broader perspective it seems to me that like that this kind of thing for brands they ought to be thinking in general like how do we um how do we use real creators wherever possible and and get real people on on film, you know?

And and there may be an arbitrage moment where you don't do that, but yeah. What were you going to say? >> Yeah, I was a couple of things like one is from if if we're still thinking about actual uh consumer harm concerns. There there are already laws that would cover some of what I see those risks as being. So for example, like you can imagine that if you're a skin care brand or something and you want to show before and after pictures of what a certain cream can do to your for your skin and you're using just like AI pictures like if it doesn't really reflect what the typical person's skin is going to look like after using that product, that can be a misleading situation. >> Yeah. >> And very tempting for a brand to want to do.

There are already like laws that would uh subject that brand to exposure but having a more directly worded statute like this could address that more cleanly. Uh and so I can imagine that being like a a good thing to have out there. But um to your other point about, you know, what are what is the exposure, what are the risks? I think with this law in particular in its current state, the risk might be more reputational than uh financial.

Like if if you you don't want to be the first brand that the New York AG has a press release about like, "We're doing it. We're going after these scamming AI cheap business people and here's our here's our first one." Like that would probably cost you more money than what well, I mean, I'm speculating, but that that might be a more negative scenario for a brand than whatever the financial repercussions are, which are uh $1,000 for the first offense. $5,000 for additional offenses.

There is no private right of action, which is kind of a blessing for brands. Only the New York Attorney General can enforce this law, so it's not like bait for plaintiff's class action lawyers. If there were a private right of action this would be like you the zone would be flooded with cases starting today. Like that that would be the reality, but it's not the reality, so um you're dealing with just the AG. I think this is a good point for me to also say like this is not legal advice.

I'm a lawyer, I'm not your lawyer. This is just sort of information. I'm happy to chat with someone in a, you know, privileged setting if they have specific questions, but >> Yeah. >> I'm sort of just giving my takes. This is This is a new law. We're all looking at the same statutory language and and trying to read the tea leaves about what comes next. >> Open up more margin in your business by actually putting the effort you need to into your supply chain.

That is obvious advice in a lot of ways. The reason you're not doing it, I know this, is because you're too busy and you don't know where to start and it feels like a crazy world and a black box. It doesn't have to feel that way. You can work with my friends at Move Supply Chain who are a Philippines-based supply chain agency that I have worked with on my own brand that I'm working on starting up. I have sent them to lots of other people and they're helping a lot of different e-commerce brands at this point build their e-com supply chains and um and they do that because they have really deep supply chain experience while being based in the Philippines, which means they're reasonably priced for you.

And so they can go and do all the things that you need to do to go after your supply chain. That means going and negotiating with additional vendors to see if it's possible for you to make just as good of a product as you're making right now at a lower price or negotiate faster uh turnaround times or [music] uh negotiate your pricing terms or negotiate things like MOQs, whatever. All of the areas of your business where a better supply chain can make things work better in your business makes sense.

Roman Khan a long time ago said to me that the reason that his teams for his Monster Aggregator business uh are so disproportionately in meta ads and then their supply chain is for the very simple reason that they have uh that met that ads [music] and supply chain at COGS are the two biggest costs in his business. So, that's where he puts his team. Effort those and you're going to do better because that's where all the money in your business going.

It's true for you too and yet I know many of you are doing very little to really seriously um put in the effort you need to improve your supply chain. Go to movesupplychain.com. They're in the Philippines, which means they're a very short flight to China and Vietnam. They can go there on behalf of your team, find you backup vendors. They're just really, really great. Get on a call with them and see. Tell them about your supply chain.

See, can they help you get lower prices, get better turnaround times, all those things, get better payment terms that would make your business work a lot better. Go to movesupplychain.com and tell them that I sent you. >> Yeah, and let's just do that right now. People should be following you on X either way. That's just like a no-brainer. It's one of the most helpful accounts you can follow and that's @robertfreundlaw and that's linked linked in the show notes as well.

So somebody just tap that link and go go follow you right away. And then also robertfreundlaw.com to go reach out to you and and and seek a counsel on any actual legal issues with their e-commerce advertising brands. While we're on the subject, do you want to tell people sort of what any specialties are and who are the best people to reach out to you where you can help them for? >> Um yeah, I mean my my most of my clients are direct-to-consumer e-commerce brands and and then it's ad agencies and and marketing agencies.

And then I sometimes work with individual talent and creators, but it's usually because they're they have their own brand or they're trying to launch one or or get into that arena. Um yeah, my my background is I I was a commercial litigator at a big law firm for close to 7 years at the start of my career uh defending a lot of consumer class actions, a lot of the basically the cases that I I tweet about now. Um I left in 2019 to start my own practice.

I intended to get away from litigation focus on helping clients hopefully avoid these sorts of cases in the first place by you know, education and basically compliance type work. And I I do transactional stuff related to that as well, but primarily focusing on on this kind of thing like consumer protection law, compliance, and um helping helping clients run campaigns that will still convert, and at least understanding what the risks are, so they can make that kind of choice about what they want to do. >> Yep.

Awesome. Okay, so go reach out there. Uh I want to come back to the liability in the New York law cuz you started to talk about it, but uh it's actually that's much smaller, simpler, and lower than what I thought. So, you said it's a $1,000 risk on the first offense, and then 5,000 on the second offense, and it can only be prosecuted by the New York AG. Is that right? >> That is correct, yes. >> Okay, so that strikes me as extremely lopsided or asymmetric risk here.

I like I'll tell you what my actual read on this is, and not asking for your legal advice here just to be clear. >> Yeah. >> Uh my response to that is to ignore it. Um like it's like if you're just in like the the value to the brand if if you had an ad that actually worked doing this, especially if you're not a you know, nine-figure plus brand. It just feels very unlikely to me that the New York AG is going to take the time to prosecute your $10 million e-commerce brand for something. >> Yeah, I mean I again, like every scenario is different, and and whether to take on risk is a business call, but we we do have like a sort of new guard in place in New York, and some uh you know, former FTC people who are very pro-consumer.

Uh work for New York now. It would It's possible that they could do, you know, a sweep of uh >> Yeah. >> a dozen businesses or something. And what if you have a a massive TikTok AI campaign with a whole bunch of like bot accounts or something, or you're using a big affiliate uh network, or you know, a group of affiliates that are like just pumping out AI content, $5,000 per video could get pretty expensive. >> Yes. >> Um but you know, like like anything else, some people will get away with it.

A certain number to to be seen won't. And uh each business owner can can decide what what they want to do with that risk. But you at least understanding like, okay, these these are the penalties, this is what the law says I cannot do, this is what's to be determined sort of. Here are potential arguments you could raise depending on what your specific conduct is. That that's what you need to then make that decision. >> Yeah.

Okay, that's that's a helpful helpful framework to view it through. Anything that we missed on that that you want to talk about? I want to ask you about a couple of other legal risks and legal like the kinds of class actions that you post a lot. But um but anything else in the New York law that's you think is worth pointing out? >> I would I would say just a sort of practical tip generally is that if you're a brand who's working with an agency that uh either you know is using uh this sort of generated AI stuff or you're not you're not that close to exactly what they're doing, um look at your contracts with them.

Maybe you want to require that they tell you if they're going to be using synthetic performers as this law defines it. Uh and and maybe consider including some indemnification obligation if your brand gets named because of because your agency has put synthetic performers in pieces of content without disclosure. >> Yeah, makes sense. Makes sense. Um okay. Um let's talk about uh a couple of other things. And I I want to talk to about some of the big mistakes that brands make or the big risks that they take on.

And I want to start with one that I see a lot, which is um I was looking at a brand the other day that no that that were on sale for like 50% off. They had a strike-through price. It was like a you know, like a $120 anchor price struck through for $60 offer or whatever. Um, and I was looking at the brand and just going like, I bet they have never charged $120 for that product. Um, that feels like a really common one uh that I'm almost certain is uh illegal and the reason I'm certain of that is because I've watched you post about it.

Uh, so can you talk about uh laws and rules related to sales and what you have to do uh with with offers like that? >> Sure, yeah. So, the this sort of former price advertising issue is something that both federal and state laws apply to. There there is a uh the FTC has guides against deceptive pricing. Um, and states like California have uh laws that specifically talk about advertising a price that's been uh or or advertising a price as being marked down from some regular or former price.

Uh, the state laws are the ones that you really need to care about the most because unlike this New York law we've been talking about, there is a private right of action in states like California and it's one of the most popular categories of consumer class action that there is. And there have been I used to try to stay on top of all of the ones that are being filed, but I I literally cannot and I've like tweeted to that effect saying like, I can't keep up with these.

Yesterday there were seven filed against seven different brands by the same law firm. And unlike uh ADA website cases, they're not like nuisance value cases. They're not like, okay, well, I'm going to pay $4,000 or whatever and this will go away, assuming that they they have an actual claim. They're they're very real. Some of the the largest settlement that I'm aware of is uh the fashion brand Boohoo agreed to a settlement worth $200 million over this pricing issue.

Uh J.C. Penney paid over 50 million um in the in the last couple years. Uh Hot Topic paid 14 million. Rugs USA paid like 12 million. These are real real cases that are going on and they all the complaints basically look the same. It's like It's like you described. A brand says, you know, was $100, now $70. The way California's law works is if you're going to advertise a price as being marked down from some former or regular price, then the price that you're saying was the original price needs to have been the prevailing market price for that item within the previous 90 days.

So, you take today and look back 3 months and say, effectively, like, for at least 46 of those days, were was that really the the predominant price for that item in the marketplace? And you can't get cute and like I've seen this a couple times where uh a brand would just put up like a dummy landing page that no traffic goes to. It always has a higher price. Uh courts have rejected that. You can't get around it, or I should say I should say like courts have rejected trying to skirt that by always offering that item for $100, but also always having a coupon code.

Like, you can't use a coupon code to try to skirt it. Um the the the premise is like if something's always on sale, it's never on sale, and it's deceptive to tell people they're getting a bargain that they're not getting. >> Mhm. >> And these cases almost always survive uh dismissal um unless there's some some defect with the facts of the case, it's and so, yeah, they're they're they're a real problem to deal with. >> You mentioned in the beginning it seems like the volume of those cases are increasing.

Is that Is that true, do you think? >> Yeah, I don't have the exact data on it, but there was a big law firm last year that published or published an article last year saying that the volume of this type of case in particular doubled in 2025 from 2024. And this is not a new theory of the case. Like one of the very first cases I worked on in 2012 was one of these cases. Like it's just a perennial source of money for plaintiffs lawyers because brands keep doing it. >> What if I have like a offer funnel where I have a product that's always priced on my website at sort of normal pricing and people are actually buying it at that price, but I have sort of a a some particular ad where it's like, you know, exclusively through this ad you can get it at that price.

Do you like Is that too much like the scenario you said where it's like you're running them side by side, it doesn't make sense? >> Then it gets complicated and then you have to get much more granular about, well, what are the comparative volume of sales across the different channels or like vectors where people land on it. >> Yeah. >> The and and you may ultimately be able to establish through like you might need expert testimony, maybe not.

You might be able to establish like you know, only 5% of people who bought this product during that time period even saw that ad, so really the prevailing market price was the higher price. But to get to that point is going to be expensive. >> Yes, right. >> It's not the sort of argument that you can raise usually at an early stage of the case on a pleadings challenge. It's a discovery type thing and by that point like you've already invested of probably a decent chunk of change in in your legal defense. >> Oh yeah.

Yeah. Are you seeing any of these come down on smaller brands? >> Yes. Yeah. I mean there brands I've never heard of not that I've heard of every brand but like you look at the you look at the complaint and it's like very obviously a small e-commerce store maybe like a solo operation that does almost no revenue and it's like some of the firms that file these apparently don't it doesn't matter that much to them like it's a volume game there's so many targets to work with and it it it's not expensive to get a case going so why not why not see what's up with that smaller brand and and and target them as well. >> It just seems like it's it's seems to me like there's real risk here.

Like essentially it seems like like like this is this is an area where where brands ought to be pretty careful about what they're doing. >> Yes. Yeah. Totally. I mean it because of the sheer volume of the of the cases and the the potential exposure and the size of some of the settlements it's like this is the sort of thing you need to pay attention to and care about more than like my website is not fully ADA compliant or like some of the pixel tracking cases that are seem to be losing some steam.

Like this this is just a different thing. >> What am I what about if I'm um constantly changing my offer? So like let's say right let's say I have a product that's 100 bucks and I say like okay for the next 20 days it's buy two get one free and then for the next 20 days after that it's um 50% off and then for that whatever. So, so for So, in this in this case, it's rarely actually $100, but it is but the offer is changing all the time.

Uh, is that Do you think that works? >> That wouldn't fix it because the the way the law is. >> not the not the prevailing price. >> Right. Yeah. That's right. You can you can rotate uh, offers on different SKUs though. Like if you want to and there's some brands that I see do that and and that's not a problem. Like, hey, 20% off socks now and then we do underwear and then we do our hoodies or whatever and you just always have something on sale.

Or even within a particular category, just like these ones and not those ones. That's fine and that that can work. You are growing an e-commerce business, that means you need a team to staff that business. If you are not thinking about staffing that business overseas with my friends at More Staffing, you're missing out on a huge opportunity. You should know that it is possible to run your business with a very, very lean OpEx and that is where a lot of the profit is in e-commerce and one of the ways to do that is not only by being disciplined about your hiring, but by hiring incredible talent from places where the economic market is just different than it is in the US.

That means going to the Philippines, finding incredible talent across your e-commerce business in the Philippines, integrating them into your team and you can do that with More Staffing because More Staffing is not just a hiring agency that helps you connect to great Filipino talent, but they're a hiring agency built off the back of e-commerce businesses, so they understand what e-commerce brands need specifically in hiring.

They can help you find incredible talent. I just opened up yet another search with More Staffing to get another team member on my team. Uh, I've been doing that for years. I will keep doing it for a long time. It's been revolutionary for my business, life-changing for me in a lot of ways. Uh, and you can do it beyond the virtual assistant. Don't think about just $5 an hour positions. Think about everything from coordinator level positions up to manager, director, uh even executive level hires across your business.

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It's just awesome. Morestaffing.co/af They're really great. They'll give you a 1-year guarantee on anybody they hire so that if you hire somebody with More Staffing and they don't work out, they will help you replace that person with no additional hiring and staffing fee for a whole year. So, go to morestaffing.co/af. Tell them I sent you. You know the deal at this point. Go hire more. They're great. >> Yeah, it's interesting.

I mean, I I just think it's the kind of thing that people in my world don't actually talk about when they're talking about offers and pricing very often and they probably should talk about it more um because because it is a real concern and I I think Yeah, I think if you're seeing the volume of these cases go up, if it's not just huge brands getting it, um it seem it seems to me that it would be wise to be careful about how you are handling this as a brand cuz there's there's just a a lot of risk.

One of the things I've said to some clients at times, particularly clients with like really good, healthy businesses uh that are just as long as they just kind of keep going the right way, they're they're going to have a good outcome even if it's not a world-changing bajillion-dollar outcome, it's going to be a good outcome. Uh one of the things I'll say to them is like just don't step on a landmine. Like just just you know what I mean?

Like the the for some brands that is the biggest risk they have. It is like the product is working the the ad account basically works and you know, there're going there's going to be ups and downs and all that kind of stuff like normal course of business kind of things, but like just don't step on a landmine. Like um and and this maybe is a good opportunity to move into supplements a little bit um where it just feels like the craziest black box, but also like every brand now in e-commerce This a supplement brand. >> Yeah. >> The reason for that is that the economics are just so good.

But, uh what are you seeing First of all, I'm curious what you're seeing in terms of in terms of volume of uh of of uh cases there? Is there any uptick in like the FDA cracking down on this? Cuz I feel like there's a new supplement brand every 20 seconds. Um and and is there any anything related to that? Cuz it's so hazy. >> Yeah. I I I can't say about the data. Uh I just don't know. >> Yeah, sure. >> I I I know enough about FDA stuff to provide like general guidance, but I work pretty closely with an attorney who who really focuses on FDA issues specifically.

But, the supplement space has been that way for a long time, and it's always >> Yeah. >> it it the barrier to entry is low. Uh like you said, the margins can be phenomenal. And uh the it's it's not regulated the way that a lot of people would expect uh you know, health products that you consume to be regulated. And so, there's um a lot of brands that are not doing everything above board, suffice it to say. There's they've it's always been an area that's pretty active for FDA enforcement in terms of claims that are being made, substantiation, um unlawfully marketing things as drugs that haven't been cleared as drugs and and things like that.

Um same same with the FTC, you know, health-related claims. The supplement space is is always been uh fertile ground for FTC cases and for class actions. So, it's something that, you know, it's it's always sort of been a litigation engine and I don't I haven't noticed that the volume of cases has gone up and then it may well have, but I I just don't know. >> Yeah, I mean I I certainly don't have any clear idea about that, but I I just wondered.

Um I did see you post about somebody making some claims uh getting sued about making some claims around GLP-1 and this is another claim I've seen really specifically in a bunch of uh supplement ads, which is like like naturally activates your body's GLP-1 or something like that, you know? Um uh it here's like this is actually this is maybe actually the the genesis of my don't step on a landmine advice. Was like I was looking at a brand where they wanted to make some claims like that and for all I know they were true, right?

But um but it just feels like that word GLP-1, you're just begging to get sued or shut down or something like that. Like do you have any do you see anything related to that specifically? >> Yeah, I mean there's the case I posted about I think it was late last night. There was a a class action against a supplement brand that was saying like nature's Ozempic and um the the idea from or the net impression that a reasonable person would get from this piece of advertising is like instead of my GLP-1 meds, I can take this and I can get similar results.

And that is like pretty clearly making what the FDA would consider a drug claim. If you're making a claim that a product can treat, medicate, mitigate uh or cure a a disease or or you know, be a substitute for a prescription medication, then that's a drug claim. And supplements cannot make drug claims and you have to go through the FDA's drug approval process if you're going to do that. So, yeah, I mean comparing a nutritional supplement or a dietary supplements to a prescription drug especially is going to be a very risky thing to to in all circumstances. >> Yeah.

Yeah. Um Yeah, okay. Um okay, let's let's just uh move to anything else that you want to highlight as like the big ones uh Robbie and you have right better sense of this than I do, but just stuff where there's like you know, we talked about the pricing issue. Is there anything else that you you say like if you're running an e-commerce brand right now, here's where your biggest risks lie in sort of legal potential risk? >> Yeah, subscriptions is number two for me easily. >> Huh?

Huh? >> Um There's again uh federal and state laws that apply to auto automatically renewing offers, sometimes called negative option offers. Basically like if people are going to be charged unless they take some action to stop charges, these laws apply to that scenario. So, most subscriptions >> What What So So yeah, what are the laws around that? >> There's the federal law is called the Restore Online Shoppers Confidence Act, called ROSCA for short.

Uh the FTC enforces that. They're pretty active with it. They uh you know, tend to go after larger brands because they're federal agency, but this is another like very, very popular area for consumer class actions and uh the various state subscription laws impose different requirements. Like then it's not uniform in every state what is required of you as the brand. Um California, unsurprisingly, I'm sure has far and away the highest volume of these cases.

Um but uh you know, different states have different peculiar things and it's not just California. And basically like the the law California's law covers not just like how you present the terms, that's one piece of it. Um but also it gets very specific about what needs to be disclosed, in what way, uh, how you obtain a customer's consent to the offer, what you put in the confirmation email that you send to the customer, your cancellation process, and the way in which you alert the customer to the cancellation process, um, renewal reminders, um, and and that might be it.

Um, but any violation of any of those pieces can give rise to a class action for violation of the subscription laws very easily. And the these are filed, you know, if not every day, then almost every day. >> Um, and you is there anything that are like the the absolute things? Like, it sounds like charging people to renew without warning them that you're about to charge them is like a sort of obvious one. Disclosing very clearly up front that you're being opted into a subscription feels like another obvious one.

Um, but I in the way I hear you describe it, it sounds like in fact, it's um, it's uh, even that may may not sort of be clear enough. Like, it sounds like it's just like there should be a baseline skepticism of subscriptions as a mechanism. >> It's worth really taking a look at whether your subscription flow aligns with what California law requires. And the way to figure that out is like not just looking at California law, but also like courts who have analyzed with screenshots the checkout process and the sign up flow, and said, this is is not above board, see how that maps over your checkout process.

Because sometimes it's like something as simple as, well, we don't have Shopify Plus, but like the basic Shopify terms that say, you know, you're signing up for a subscription that recurs monthly or whatever. And plaintiff's lawyers are saying, successfully, or at least at the early stages of the case is successfully that that's not enough. That you're not uh hitting all of the points that these laws require specifically in in the way that you disclose them, in the way that the sign-up mechanism works.

An obvious don't is and I still get this question. It's obvious to me now, but maybe not to everybody. You can't have a pre-checked box. If you need like people say, "Oh, I need a checkbox for people to sign up." Well, I'll just pre-check it and then it's on them to opt out. That is absolutely that is never okay uh under any of the state laws. So, for sure don't do that. >> So, let me just let me just ask you be clear on that.

So, like on a PDP if I have two options, buy once or subscribe uh if I have the default selected option being subscribe uh that's no bad news. >> Okay, that that is a good question and I I want to be clear on that because that that by itself is not problematic. >> Okay, got it. That's not what I'm talking about >> it. When I mean consent. So, basically what what California says is before you obtain the customer's billing information, you have to make these disclosures and then you need the customer's affirmative consent to those terms before they complete the purchase.

So, if you have somebody if it's fine to have that default option be, "Hey, subscribe and save." And then when they make it to the checkout page then you say like, "Hey, you're going to pay this much today. You're going to pay this much every month until you cancel. Here's how you cancel." Uh best practices an unchecked box and at that point where they say, "I agree to the auto-renewal terms." or something similar. And then they check that box and complete the purchase you've satisfied what the law requires and that first sort of default opt-in to that funnel so to speak, is not problematic. >> Um, awesome.

Okay. Thank you, Rob. I appreciate your time so much. Here, just to repeat where people can follow up with you, do that on X. The link for that's in the show notes. Uh, Robert Robert Freund Law. Uh, also go check out Rob's website and you can reach out to him there if you want to work with him in some kind of a way or another. Rob, thanks for your time. I really appreciate it. >> [music] >> Huge thanks to Rob for that episode.

Extremely helpful, extremely clear on an area of business that I find to be difficult and >> [music] >> hazy and tough. So, thanks to Rob. If you want to follow up with me at all, you can do that at ajfgrowth.com. If you'd fill out the intake form, we're certainly taking Rob's advice and putting it into our documentation to make it so that our ads don't break these laws and our advice about offers and things like that don't break those laws.

Uh, we'd love to work with you if you're growing your DTC brand [music] uh, with Meta ads. So, go fill out the intake form, tell me about your business and we'll get a conversation going about whether or not we are the right fit. You can also email me at podcast@ajfgrowth.com. Big uh, thanks to my sponsors, Move Supply Chain and More Staffing. Their uh, links for both of those are in the show notes as well. All kinds of really good episodes coming up.

I have Meeta Bogle coming back, just one of the best, most interesting thinkers in e-commerce. Brad Plocks coming to talk [music] about landers and offer testing. Uh, just a whole bunch of really good episodes, so don't miss out on those. Subscribe [music] wherever you're watching or listening. I'll see you next time.