Richard Newman
On October 16, 2024, the Federal Trade Commission announced the final FTC “Click-to-Cancel” Rule pertaining to recurring subscriptions and memberships.
The Federal Trade Commission is not the only regulatory agency that actively enacts, updates and polices legislation governing autorenewals, subscriptions and continuous service offers. For example, state attorneys general are, in some instances, more aggressive than the FTC. Some notable states with automatic renewal legislation include New York, Vermont, Colorado, Illinois, Tennessee, Virginia, Minnesota, South Carolina, Utah and California.
California’s Current Automatic Renewal Law
California’s auto renewal legislation is perhaps the most aggressive of all. In short, California’s ARL applies to contracts with consumers, defined as “any individual who seeks, acquires, by purchase or lease, any goods, services, money, or credit for personal, family, or household purposes.” It includes notice and cancellation requirements for free trials and automatically renewing subscription plans. It also emphasizes the provision of a simple, easy-to-use cancellation mechanism. In California, those making an automatic renewal or continuous service offer are required to present material terms in a “clear and conspicuous manner.” Businesses are also required to seek and obtain a consumer’s affirmative consent to such terms in close proximity to making these material disclosures and prior to the point of billing the consumer.
Disclosures must include, for example and without limitation, that the subscription or purchase agreement will continue until the consumer cancels, a description of the cancellation policy, that recurring charges will be charged continuously until cancellation,
The Federal Trade Commission and the Justice Department’s Antitrust Division recently participated in the G7 Competition Authorities and Policymakers Summit to discuss ways to ensure competition in artificial intelligence (AI)-related technologies, products, and applications. At the conclusion of the summit, FTC Chair Lina M. Khan and other representatives of the G7 competition authorities and government policymakers issued a Communiqué highlighting potential competition concerns in AI-related markets and identifying guiding principles to ensure fair competition across AI markets.
The Communiqué underscores the important role that competition authorities and policymakers have in addressing competitive threats. As the Communiqué outlines, concentrated market power in AI-related markets and possible collusion or improper information sharing using AI technologies require careful vigilance and vigorous and timely competition enforcement. The G7 competition authorities and policymakers reaffirmed that they are working to ensure there is open and fair competition in digital markets and AI and seeking to ensure that the benefits of AI are fully realized and widely available across society.
The summit was convened by the G7 Industry, Technology and Digital Ministerial Declaration and hosted in Rome by the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato) in conjunction with Italy’s rotating G7 presidency.
The Federal Trade Commission works with counterpart agencies to promote sound antitrust, consumer protection, and data privacy enforcement and policy.
Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP.
Informational purposes only. Not legal advice.
As previously blogged about here, following notices of proposed rulemaking in 2022 and 2023, on August 22, 2024 the Federal Trade Commission finalized a rule that will impose monetary civil penalties false and misleading consumer reviews and testimonials. Those covered by the Final Rule, including, but not limited to, advertisers, marketers, manufacturers, brands and various intermediaries, and businesses that promote and assist such entities, should consult with an experienced FTC compliance lawyer and begin to prepare for its enforcement, immediately.
What Does the FTC Final Rule Banning Fake Consumer Reviews and Testimonials Cover?
The FTC Final Rule Banning Fake Consumer Reviews and Testimonials formalizes the prohibition of various practices relating to the use of consumer reviews and testimonials and sets forth which practices may be considered unfair or deceptive pursuant to the FTC Act.
In short, the Final Rule is intended to foster fair competition and protect consumers’ purchasing decisions. In general, the Final Rule covers: (i) the purchase, sale or procuring of fake reviews or testimonials (for example and without limitation, a reviewer that does not exist, a reviewer that did not actually use or possess experience with the product or service, or a review that misrepresents actual experience); (ii) providing compensation or other incentives in exchange for reviews that express a particular sentiment; (iii) facilitating “insider” consumer reviews and testimonials that do not contain a clear and conspicuous disclosure of the relationship; (iv) utilizing websites that appear to be independent review websites when,
On September 25, 2024, the Federal Trade Commission announced “Operation AI Comply.” According to FTC attorneys, “some marketers can’t resist taking advantage of that by using the language of AI and technology to try to make it seem like their products or services deliver all the answers.”
As part of Operation AI Comply, the FTC announced five cases exposing allleged AI-related deception.
First, the FTC announced four settlements involving allegedly deceptive claims about AI-driven services, three of which are purported business opportunity scams that claim to use AI to help people earn more money, faster. The agency also announced a settlement involving a company that purportedly offered a generative AI tool that let people create what the FTC alleges to be fake consumer reviews.
- DoNotPay: An FTC complaint claims U.K.-based DoNotPay told people its online subscription service acts as “the world’s first robot lawyer” and an “AI lawyer” by using a chatbot to prepare “ironclad” documents for the U.S. legal system. The complaint says DoNotPay told small businesses its service could check their websites for law violations and help them avoid significant legal fees. According to the complaint, DoNotPay’s service did not live up to the hype. The FTC welcomes comments on a proposed settlement between FTC and DoNotPay, which requires DoNotPay to stop allegedly misleading people, pay $193,000, and tell certain subscribers about the case.
- Ascend Ecom: An FTC complaint filed in California alleges a group of companies and their officers used deceptive earnings claims to convince people to invest in “risk free” business opportunities supposedly powered by AI.
On August 30, 2024, the Federal Trade Commission announced that the Department of Justice filed a complaint upon notification and referral from the FTC against a surveillance camera company that allegedly failed to provide reasonable security for the personal information it collected—including 150,000 live camera feeds in sensitive areas like psychiatric hospitals, women’s health clinics, elementary schools and prison cells.
According to the complaint, these alleged failures allowed a threat actor – in March 2021 – to remotely access the company’s customer camera feeds and watch consumers live, without their knowledge or consent. Despite the purported invasive security breach, the company allegedly remained unaware of the threat actor’s exploration until the threat actor self-reported the hack to the media.
According to the FTC, the vast majority of the company’s customers throughout the U.S. and abroad include small businesses spanning multiple industries, including education, government, healthcare, and hospitality. The FTC says that the compromise went beyond the company’s security cameras. According to the complaint, the threat actor also exfiltrated data about the company’s own customers, mostly businesses, including, but not limited to, names, email addresses, physical addresses, usernames and password hashes, and geolocation data for security cameras.
The company’s alleged security failures “are in stark contrast to its many public promises to keep personal and customer information safe,” according to the FTC.
According to the complaint, the company’s own privacy policy claimed that the company “take[s] customer privacy seriously,” and “[w]e will use best-in-class data security tools and best practices to keep your data safe and protect [the company’s] products from unauthorized access.”
The FTC also states that the company’s publicly promised that it was HIPAA certified or compliant and that it followed the EU-U.S.
On August 7, 2024 the Federal Communications Commission proposed new consumer protections against AI-generated robocalls and robotexts. The Notice of Proposed Rulemaking broadens the FCC’s efforts to address AI’s impact on the rights of consumers under the Telephone Consumer Protection Act.
The NPRM seeks comment on the definition of AI-generated calls, requiring callers to disclose their use of AI-generated calls and text messages, supporting technologies that alert and protect consumers from unwanted and illegal AI robocalls, and protecting positive uses of AI to help people with disabilities utilize the telephone networks.
The Notice of Proposed Rulemaking proposes to define “AI-generated calls,” and introduces such a definition that would include calls using artificial intelligence generate voice or text. For purposes of identifying the types of calls that would be subject to the new proposed rules, the FCC proposes to define “AI generated call” as “a call that uses any technology or tool to generate an artificial or prerecorded voice or a text using computational technology or other machine learning, including predictive algorithms, and large language models, to process natural language and produce voice or text content to communicate with a called party over an outbound telephone call.”
The definition proposed by the FCC is broad enough to encompass existing and evolving AI technologies. Importantly, it is limited to outbound calls. AI technologies that are used to answer inbound calls are not within the scope of the proposed definition of “AI-generated calls.”
“We believe this definition is consistent with federal and state AI definitions cited in the AI NOI,
On July 30, 2024, New York Attorney General Letitia James announced the launch of two privacy guides on the Office of the Attorney General (OAG) website: a Business Guide to Website Privacy Controls and a Consumer Guide to Tracking on the Web.
The Business Guide is intended to help businesses better protect visitors to their websites by identifying common mistakes the OAG’s office believe businesses make when deploying tracking technologies, processes they can use to help identify and prevent issues, and guidance for ensuring they comply with New York law. The Consumer Guide is intended to assist New Yorkers by offering tips they can use to protect their privacy when browsing the web, including how to safeguard against unwanted online tracking.
The OAG issued the guides following a review that purportedly uncovered unwanted tracking on more than a dozen popular websites, collectively serving more than 75 million visitors per month.
“When New Yorkers visit websites, they deserve to have the peace of mind that they won’t be tracked without their knowledge, and won’t have their personal information sold to advertisers,” said Attorney General lawyer James. “All too often, visiting a webpage or making a simple search will result in countless ads popping up on unrelated websites and social media. When visitors opt out of tracking, businesses have an obligation to protect their visitors’ personal information, and consumers deserve to know this obligation is being fulfilled. These new guides that my team launched will help protect New Yorkers’ privacy and make websites safer places to visit.”
While many websites provide visitors with information about the tracking that takes place and controls to manage that tracking,
On August 14, 2024, the Federal Trade Commission announced a Final Rule combatting bogus consumer reviews and testimonials by prohibiting their sale or purchase. The Rule allows the FTC to strengthen enforcement, seek civil penalties against violators and deter AI-generated fake reviews.
“Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” said FTC attorney Chair Lina M. Khan. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”
The Rule announced on August 14, 2024 follows an advance notice of proposed rulemaking and a notice of proposed rulemaking announced in November 2022 and June 2023, respectively. The FTC also held an informal hearing on the proposed rule in February 2024. In response to public comments, the Commission made numerous clarifications and adjustments to its previous proposal.
What Does the FTC Final on the Use of Consumer Reviews and Testimonials Prohibit?
The FTC Final Rule on the Use of Consumer Reviews and Testimonials prohibits:
Writing, selling, or buying fake or false consumer reviews.
The Rule prohibits businesses from writing or selling consumer reviews that misrepresent they are by someone who does not exist or who did not have actual experience with the business or its products or services,
The Federal Trade Commission and the U.S. Department of Justice possess both overlapping and distinct authority to challenge anti-competitive practices under federal law. The FTC enforces, without limitation, the FTC Act and the Clayton Act. The DoJ enforces, without limitation, the Sherman Act and the Clayton Act. The FTC also may refer evidence of criminal antitrust violations to the DoJ. Only the DoJ can obtain criminal sanctions.
The FTC primarily focuses on policing deceptive or unfair business practices, and from unfair methods of competition. The DoJ enforces a much wider range of legal regulations on behalf of the federal government. Sometimes, the federal agencies cooperate on antitrust issues. There is a clearance process to determine which federal agency will investigate and enforce a particular matter.
FTC and Department of Justice Announce Public Strike Force on Unfair and Illegal Pricing Meeting
On July 26, 2024, the Federal Trade Commission and U.S. Justice Department announced the first public meeting of the Strike Force on Unfair and Illegal Pricing on Thursday, August 1, 2024, to discuss Strike Force enforcement actions taken to lower prices for Americans.
The meeting will include an open-press session with remarks by FTC attorney and Chair Lina M. Khan, Associate Attorney General Benjamin C. Mizer, Assistant Attorney General for the Antitrust Division Jonathan S. Kanter, and Principal Deputy Assistant Attorney General for the Civil Division Brian M. Boynton. Senior officials from other agencies will then offer remarks as well.
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.
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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.