eCommerce
On the eve prior to its effective date, the FCC’s One-to-One Consent Rule which sought to redefine the meaning of “prior express written consent” under the Telephone Consumer Protection Act, was postponed for one year by order of the FCC’s Consumer and Government Affairs Bureau. Just minutes thereafter, the rule was struck down by the U.S. Court of Appeals for the Eleventh Circuit.
Background
The Telephone Consumer Protection Act (TCPA) , in part, requires callers to possess “prior express consent” when making non-emergency telephone calls to cell phones using an automatic telephone dialing system, or artificial or prerecorded voice; and telephone calls to residential telephone lines using an artificial or prerecorded voice (with limited exceptions).
In 2012, the Federal Communications Commission established that the foregoing calls (including SMS text messages) for marketing purposes must have “prior express written consent,” defined as “an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered.”
The Federal Communication Commission Government Affairs Bureau Postpones Effective Date of the TCPA One-to-One Consent Rule
On January 24, 2025, the FCC announced that it has postponed the effective date of the one-to-one consent rule. “By this Order,
On Friday, December 27, 2024, the Justice Department issued a final rule to address “urgent national security risks posed by access to U.S. sensitive personal and government-related data from countries of concern and covered persons.” The final rule was posted publicly and addresses “continued efforts of countries of concern to access, exploit, and weaponize Americans’ bulk sensitive personal and U.S. government-related data.”
This rule reflects the Department’s careful consideration of the comments received in response to the March 5, 2024 Advance Notice of Proposed Rulemaking (“ANPRM”) and the October 29, 2024 Notice of Proposed Rulemaking (“NPRM”) as well as feedback from hundreds of representatives from companies and organizations and extensive consultation with dozens of other U.S. Government agencies and offices, along with engagement foreign partners.
As previewed in the ANPRM and NPRM, the final rule establishes a national-security program within the Justice Department’s National Security Division that restricts and in some instances prohibits U.S. persons from engaging in certain categories of data transactions with six “countries of concern” (including covered persons and entities subject to coercion by those countries) because such transactions pose unacceptable national-security risks of giving those countries, entities, or persons access to U.S. bulk sensitive personal data or government-related data.
The rule will become effective 90 days after publication. Certain affirmative compliance obligations will be phased in with a later effective date of 270 days after publication.
The Department also intends to continue engaging with industry and other stakeholders to determine whether any general licenses are appropriate as this program goes into effect.
On January 1, 2025, an amendment to California’s existing false advertising law will become effective. The amended legislation takes aim at deceptive digital ad representations that lead consumers to believe that they are purchsing owership rights in a product when, in fact, only a revocable license is being conveyed.
With limited exception., AB 2426 prohbitis sellers of digital goods from using terms such as “buy,” “purchase” or similar terms when the net impression thereof objectively leads a reasonable person to believe that they are purchasing an unrestrictice ownership interest. The exception to the foregoing restriction is when a seller of digital products obtains affirmative acknowledgement from the buyer of a complete list of restrictions and conditions of the license, and that access to the digital product may be unilaterally revoked by the seller (e.g., if the seller no longer has the right to license). Additionally, prior to completing the sale, the seller must provide the buyer with a hyperlink, QR code or other means of accessing the license terms and conditions, a a clear and conspicuous disclosure that purchase of the digital product merely constitutes a license.
The new legistlation defines “digital goods” broadly. The law also sets forth exclusions, such as any distribution of television, video or radio service. The new law also does not apply to specifically enumerated subscription-based services and digital goods such as those advertised for no monetary consideration.
Violation of the amended statute can result in civil penalties of up to $2,500 per violation. It couls also potentially exposure a violator to class action litigation pursuant to California’s UCL law.
The Federal Trade Commission is watching the healthcare lead generation industry closely.
On December 10, 2024, the Federal Trade Commission announced that it has sent warning letters to 21 companies that market or generate leads for healthcare plans. The letters were sent as open enrollment season for healthcare plans is ongoing. They provide guidance and provide about deceptive or unfair claims that likely violate laws enforced by the FTC.
The letters were sent to companies that provide marketing or advertising, including lead generation, related to Affordable Care Act Marketplace health insurance and healthcare-related products, such as limited benefit plans and medical discount programs.
The purpose of FTC warning letters is to warn companies that their conduct is likely unlawful and that they can face serious legal consequences, such as a federal investigation of lawsuit, if they do not immediately stop. Overwhelmingly, companies that receive FTC warning letters take steps quickly to correct and come into compliance with applicable legal regulations.
“It is critical for consumers’ health and financial well-being that marketers of health plans be honest about the plans they and their partners are offering,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC has been watching this important sector closely, especially during open enrollment season, and these warning letters put companies on notice that unlawfully marketing or advertising health plans to consumers can result in serious legal consequences.”
Based on information collected by FTC staff and the agency’s enforcement experience in this area,
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,
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 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.
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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.