Richard Newman

FTC and Justice Department Participate in Summit with G7 Enforcement Partners on Artificial Intelligence Competition Challenges

By Richard Newman / October 10, 2024
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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.

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What Digital Advertisers and Influencers Need to Know About the FTC Final Rule Banning Fake Consumer Reviews and Testimonials

By Richard Newman / October 4, 2024
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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,

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FTC Announces Operation AI Comply to Address AI-Related Deception

By Richard Newman / September 26, 2024
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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. 

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FTC Charges Security Camera Firm With Failing to Secure Videos and Personal Data, and Violating CAN-SPAM Act

By Richard Newman / August 31, 2024
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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.

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FCC Proposes First-of-Their-Kind TCPA Disclosure Rules for AI-Generated Robocalls and Robotexts

By Richard Newman / August 18, 2024
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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,

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What Digital Marketers Must Know About New York AG’s New Website Privacy Guides for NY Consumers and Businesses

By Richard Newman / August 17, 2024
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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,

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FTC Announces Final Rule Imposing Civil Penalties for Fake Consumer Reviews and Testimonials

By Richard Newman / August 14, 2024
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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,

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FTC and DOJ Joint Task Force News

By Richard Newman / July 27, 2024
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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.  

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FAQ About FTC U.S. Origin (Made in USA) Claims Investigation and Enforcement

By Richard Newman / July 25, 2024
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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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FTC Issues Orders to Eight Companies Seeking Information About Surveillance Pricing

By Richard Newman / July 23, 2024
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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,

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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.

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