Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
When it comes to false “Made in USA” claims, the FTC continues to ramp-up investigations and enforcement.
The FTC states taht misrepresentations about a product’s origin is injurious to consumers, honest businesses and American workers. That is why FTC attoreys continue to investigate and sue manufacturers and markerters that fail to adhere to applicable legal regulations, such as the Made in USA Labeling Rule, assessing civil monetary penalties where appropriate and returning money to consumers.
The FTC provides guidance and case documents at www.ftc.gov/musa.
In JUly 2024, FTC lawyers released a refreshed version of the agency’s Complying with the Made in USA Standard guidance document. It contains updated information about how teh FTC believes that consumers understand Made in USA claims, how the Federal Trade Commission evaluates advertisements, and how the laws and rules teh agency enforces interact with those enforced by other agencies.
Here are some key takeaways:
- Consumer expectations control. The FTC’s job is to make sure marketers’ claims match consumer expectations. According to the FTC, when consumers see Made in USA claims they expect advertised products to be “all, or virtually all,” made in the United States. All the way back to raw materials. If that is not true, or there exists uncertainty, manufacturers and marketers should make a different claim that is capable of being lawfully substantiated. Caveat. Just because parts are purcahsed from U.S. suppliers does not necessarily mean those parts are made in the USA.
On July 23, 2024, the Federal Trade Commission announced the issuance of orders to eight companies offering surveillance pricing products and services that incorporate data about consumers’ characteristics and behavior. The orders were sent to: Mastercard, Revionics, Bloomreach, JPMorgan Chase, Task Software, PROS, Accenture, and McKinsey & Co.
The orders seek information about the potential impact these practices have on privacy, competition and consumer protection.
The orders are aimed at helping the FTC better understand the opaque market for products by third-party intermediaries that claim to use advanced algorithms, artificial intelligence and other technologies, along with personal information about consumers—such as their location, demographics, credit history, and browsing or shopping history—to categorize individuals and set a targeted price for a product or service.
The study is aimed at helping the FTC better understand how surveillance pricing is affecting consumers, especially when the pricing is based on surveillance of an individual’s personal characteristics and behavior.
“Firms that harvest Americans’ personal data can put people’s privacy at risk. Now firms could be exploiting this vast trove of personal information to charge people higher prices,” said FTC lawyer and Chair Lina M. Khan. “ Americans deserve to know whether businesses are using detailed consumer data to deploy surveillance pricing, and the FTC’s inquiry will shed light on this shadowy ecosystem of pricing middlemen.”
The FTC is using its 6(b) authority, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose,
The FTC recently announced various examples of how the agency works to ensure that small businesses and consumer are not the victims of unfair or deceptive practices and unfair methods of competition.
Here are some recent examples.
“Made in the USA” Must Mean Made in the USA
Many small businesses make an effort to keep manufacturing jobs in their communities. If they meet the standards established in the FTC’s Made in USA Labeling Rule and Statement on U.S. Origin Claims, they may be able to lawfully label or advertise their products as “Made in the USA.” However, the FTC’s long record of law enforcement establishes that many manufactureres and marketers seek to undermine those efforts by falsely including an unqualified U.S. origin statement on products even though significant parts, processing and labor are not U.S.-based. Consult with an experienced Made in USA attorney to discuss agency guidance and enforcement of domestic origin claims.
Right-to-Repair Legislation
After addressing “misconceptions” about product repair in its Nixing the Fix report and bringing law enforcement actions to challenge illegal terms in product warranties, the FTC continues to work toward ensuring that dealers compete fairly with independent third-party repair businesses. One example is our work in support of state right-to-repair laws. For example, the FTC recently testified before the Colorado General Assembly’s Committee on Business Affairs and Labor in support of proposed legislation to expand the state’s right-to-repair statute to include digital electronics.
The FTC has made no secret about its recent focus upon anticompetitive practices related to repair marketers and ensuring that consumers have options when it comes to repairing products. Those that offer product warranties should take a close look at their warranty terms and related communications to ensure that they comply with the Magnuson Moss Warranty Act and developing federal and state laws specific to right to repair.
Product Repair Restrictions Workshops, Reports and Policy Statements
In 2019 Federal Trade Commission lawyers held a workshop to discuss manufacturer restrictions on proposed state consumer good repair rights legislation. For example, making it unreasonably difficult – if not impossible – for a consumer or an independent third-party – to make product repairs. Various approaches were proposed by panelists, including federal guidance on the right to repair; a requirement that manufacturers disclose product information with everyone, and not only certified repair shops; state right to repair legislation; and permitting consumers to pay for repairs.
Subsequently, in 2021, the FTC cited a report stating that there is “scant evidence to support manufacturers’ justifications for repair restrictions.” A strong statement toward legislation mandating that manufacturers ensure that consumer goods are able to be repaired without consumers having to incur extra costs.
In 2021 Federal Trade Commission attorneys approved the adoption of a policy statement reflecting aggressive enforcement against manufacturer restrictions that prevent consumers and businesses from repairing their own products. The policy statement also sanctions more aggressive enforcement of the Magnuson-Moss Warranty Act.
In July 2024, a U.S. District Court for the Northern District of Texas entered a preliminary injunction enjoining the enforcement of the Federal Trade Commission’s recently announced ban on noncompete clauses. Importantly, the injunction is limited to the plaintiff and intervenors in the lawsuit, including, but not limited to, the U.S. Chamber of Commerce.
What is the FTC NonCompete Ban?
In January 2023, the FTC announced a notice of proposed rulemaking pertaining to a ban on employers entering into and utilizing noncompete clauses. In April 2024, FTC commissioners voted on the final rule, including a limited exception for “senior executives.” The effective date for the new rule was anticipated to by September 2024.
FTC policy supporting the ban includes, without limitation, purported economic benefits that would result from banning noncompetes. A number of dissenting statements by Commissioners resulted in various challenges to the rule, and perhaps the federal court order referenced herein.
How has the FTC NonCompete Ban Rule Been Challenged?
Following the FTC adoption of the final rule, a Texas-based tax firm Ryan LLC filed various legal challenges in the US District Court for the Northern District of Texas. In doing so, the plaintiff sought a stay of the effective date and to preliminarily enjoin enforcement of the rule. Subsequently, the U.S. Chamber of Commerce sought almost identical relief in the Eastern District of Texas on behalf of itself and other business associations, ultimately intervening in the Ryan matter.
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About This Blog and Hinch Newman’s Advertising + Marketing Practice
Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.