As part of our commitment to keeping you informed of new regulatory developments and their potential implications, we have highlighted recent statements by federal officials concerning loyalty programs, such as those involving airline miles and credit card points. These comments signal a potential shift in how these programs are viewed under consumer protection laws, and the plaintiffs’ bar is likely to take notice.

Overview of Government Concerns

In a recent NPR interview, Department of Transportation Secretary, Buttigieg expressed concern that loyalty points and miles are not merely perks but are increasingly considered part of consumers’ savings strategies. The key issue highlighted is the unilateral control companies hold over the valuation and terms of these loyalty currencies. Unlike bank deposits, the value and utility of loyalty points or miles can be altered by the issuer without the consumer’s consent. This situation has drawn the attention of the government and we expect the plaintiffs’ bar to follow. A transcript and audio file of the interview can be found here.

Potential Legal and Regulatory Implications

  1. Consumer Protection Laws: The government is keen to ensure that all advertising and transactions related to loyalty programs are “fair, truthful, and transparent.” Any misleading representations about the nature and value of accumulated points or miles could potentially lead to allegations of breach of federal and state consumer protection statutes.
  2. Contractual Changes: The ability of companies to unilaterally change the terms of loyalty programs may be viewed by the plaintiffs’ bar under the lens of unfair contract terms. Legal challenges could arise, particularly if changes are made retrospectively or are not communicated clearly.
  3. Privacy Concerns: Some of the evolving U.S. state privacy laws, including California and Colorado, are already directly addressing how data gathered through loyalty programs is used and shared, a topic that has been an enforcement priority for the California AG, and this trend is likely to continue.
  4. Antitrust Considerations: If the control over these programs leads to anti-competitive practices, it could attract antitrust scrutiny, especially if dominant players in the market use loyalty schemes to disadvantage competitors.

Advisory Recommendations

Given these developments, we recommend the following proactive steps:

  • Review of Program Terms: Ensure that terms and conditions governing loyalty programs are clear, fair and easily accessible to consumers. Consider legal audits to verify compliance with existing consumer protection laws.
  • Transparency in Communications: Enhance transparency around how loyalty points are earned, redeemed and potentially devalued. Clear communication about any changes to these terms is essential to mitigate legal risks.
  • Data Privacy Compliance: Assess and strengthen privacy policies to manage consumer data responsibly and in accordance with applicable privacy laws.
  • Antitrust Compliance: Evaluate the competitive impacts of your loyalty program, particularly if you hold a significant market share.

We are closely monitoring these developments and are ready to assist you in conducting risk assessments and adapting your practices to meet any new regulatory requirements. For a detailed discussion on how these changes might specifically affect your operations, please contact us at your earliest convenience.

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This alert is for informational purposes only and does not constitute legal advice. Please consult with your attorney for advice on specific legal issues.

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Photo of David Fioccola David Fioccola

A seasoned litigator and trial lawyer, David Fioccola specializes in the defense of complex commercial disputes and consumer class actions. With more than 20 years of experience, David has tried cases in federal and state courts and before arbitral tribunals throughout the U.S.

A seasoned litigator and trial lawyer, David Fioccola specializes in the defense of complex commercial disputes and consumer class actions. With more than 20 years of experience, David has tried cases in federal and state courts and before arbitral tribunals throughout the U.S. He regularly defends Fortune 500 companies in bet-the-company litigation as well as financial institutions against claims involving federal and state law violations, including antitrust laws, trust claims, and breach of contract.

David has extensive experience handling large-scale internal investigations and represents clients before U.S. federal and state agencies, including the Department of Justice, the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Trade Commission, and the Securities and Exchange Commission, and state agencies, such as the New York Department of Financial Services and state attorneys general. Moreover, he has significant experience counseling clients in various U.S. federal laws and statutes, including:

  • The Consumer Financial Protection Act
  • The Unfair, Deceptive, or Abusive Acts and Practices (UDAAP)
  • The Federal Antitrust laws
  • Americans with Disabilities Act (ADA)
  • The Fair Credit Reporting Act (FCRA)
  • The Fair Debt Collection Practices Act (FDCPA)
  • The Servicemembers Civil Relief Act (SCRA)
  • The RICO Act
  • The Truth in Lending Act (TILA)
  • The Telephone Consumer Protection Act (TCPA)
  • California’s Business and Professions Code § 17200

Prior to joining Proskauer, David was the co-chair of the Class Actions and Mass Torts Practice Group at Morrison & Foerster, and the Trial Practice Group.

Photo of Leslie Shanklin Leslie Shanklin

Leslie Shanklin is a partner in the Corporate Department, co-head of the Privacy & Cybersecurity Group and a member of the of the Technology, Media & Telecommunications group.

Leslie’s practice focuses on privacy and data security, delivering comprehensive expertise around data-related risk and…

Leslie Shanklin is a partner in the Corporate Department, co-head of the Privacy & Cybersecurity Group and a member of the of the Technology, Media & Telecommunications group.

Leslie’s practice focuses on privacy and data security, delivering comprehensive expertise around data-related risk and compliance. Leslie provides pragmatic, strategic and tech-savvy legal counsel to clients seeking to realize the essential value of data to their businesses while effectively managing risk and preserving trust. Leslie draws from deep legal, practical and technical expertise gained from leading global privacy teams and operations for multinational companies.

Leslie’s experience includes advising on the legal and risk aspects of data strategy, building and operationalizing data protection compliance programs in all regions of the world, providing strategic legal counsel around data privacy and security issues in commercial transactions, advising on legal aspects of information security risk, compliance and incident response, and advising on federal, state and international regulatory enforcement actions.

Leslie advises clients with a global lens, helping clients craft nimble, risk-based, forward-looking approaches to data management in the rapidly-evolving US and international privacy and information security legal landscape, including:

  • Federal laws such as Section 5 of the FTC Act and FTC rules and guidance, COPPA, VPPA, TCPA, and HIPAA
  • State laws such as the California Consumer Privacy Act (CCPA including CPRA amendments) and the California Medical Information Act (CMIA), as well as various existing and evolving laws in other US states such as Virginia (VCDPA), Colorado (CPA), Connecticut (CTDPA), Utah (UCPA), Iowa (ICDPA), Tennessee (TIPA), Indiana (ICDPA), Montana (MCDPA) and Washington (My Health My Data Act)
  • International law and guidance such as the EU General Data Protection Regulation (GDPR), the ePrivacy Directive, the UK Data Protection Act, Brazil’s General Data Protection Law (LGPD), and Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA)

Leslie is a Certified Information Privacy Professional in the United States (CIPP/US) and Europe (CIPP/E) with the International Association of Privacy Professionals (IAPP). She previously served as Co-Chair of the international Hybrid Broadcast Broadband Television (HbbTV) Association Privacy Task Force.

Prior to joining Proskauer, Leslie led global privacy teams for media and entertainment companies for over a decade and most recently served on the Privacy leadership team for Warner Bros. Discovery.

Photo of Baldassare Vinti Baldassare Vinti

Baldassare (“Baldo”) Vinti heads Proskauer’s Intellectual Property Litigation Group.

Baldo’s practice focuses on litigating patent, false advertising, trade secret, life sciences, trademark and contractual matters in federal and state courts and before the International Trade Commission. He is a seasoned trial attorney responsible…

Baldassare (“Baldo”) Vinti heads Proskauer’s Intellectual Property Litigation Group.

Baldo’s practice focuses on litigating patent, false advertising, trade secret, life sciences, trademark and contractual matters in federal and state courts and before the International Trade Commission. He is a seasoned trial attorney responsible for all aspects of litigation, including Markman hearings, appeals before the Federal Circuit, case preparation and strategy, depositions, motion practice, and settlement negotiations. He has represented clients in high-stakes matters involving a broad range of technologies, including medical devices, diagnostics, immunoassays, prosthetics, pharmaceuticals, dental implants, electronic medical records systems, encryption technology, wound dressings, digital video compression, electronic book delivery and security systems, mobile media technologies, navigation and location-based services, bandwidth management, bar code scanning, lasers , and other technologies. Baldo has represented numerous major corporations, including Arkema S.A., British Telecommunications PLC, Church & Dwight Co., Inc., Henry Schein, Inc., Maidenform Brands Inc., Mitsubishi Electric Corp., Ossur North America Inc., Panasonic Corp., Sony Corp., Welch Foods, Inc., and Zenith Electronics LLC.

In addition, Baldo regularly handles transactional work, including intellectual property due diligence, licensing, intellectual property structural transactions, patentability studies, infringement/non-infringement opinions, and client counseling in intellectual property matters.

Baldo is an author and frequent commentator on patent issues pertaining to medical devices and a host of other intellectual property topics, and has been quoted in the National Law Journal, Bloomberg BNA, Law360, Westlaw Journal and Inside Counsel magazine. He is also a regular contributor of articles published in Medical Product Outsourcing magazine that deal with the medical device industry.

Baldo served as a judicial intern for Hon. John E. Sprizzo of the United States District Court for the Southern District of New York and for Hon. Charles A. LaTorella of the New York Supreme Court.