eCommerce
On November 2, 2022, the Pennsylvania Office of Attorney General filed a lawsuit in federal court alleging that a group of companies offering lead generation services violated the Telemarketing Sales Rule and Pennsylvania consumer protection law. Specifically, the OAG alleges two unlawful advertising practices.
The first unlawful ad practice allegation is that the defendants utilized deceptive online advertisements to direct consumers to websites where they would purportedly be tricked into providing contact information and survey responses. The second unlawful ad practice allegation claims that consumers’ contact information and responses were sold to telemarketers despite numbers being on state of national Do No Call registries.
As stated in the complaint, defendants operate “dozens of websites designed for lead generating” that advertise “gift cards to popular retailers and digital payments to mobile apps” for answering various survey questions. According to the OAG, the websites require visitors to provide personal contact information and click a box indicating consent to mouseprint disclosures stating that consumer will receive prerecorded calls and text messages from marketing partners (the names thereof are disclosed to by a hyperlinked list). According to the OAG, these sellers’ products and services are oftentimes not related to the promotional offerings whatsoever.
Here, according to the OAG’s complaint, the websites violate state consumer protection law because they “create[] a likelihood of confusion or of misunderstanding” by “failing to include clear and conspicuous disclosures advising consumers that by registering their contact information with defendants they are purportedly consenting to be contacted by multiple third party sellers,
“Ringless voicemails” are messages left in a consumer’s mailbox without ringing their cell phone.
The Telephone Consumer Protection Act protects consumers from unwanted robocalls. The TCPA, in pertinent part, prohibits making any non-emergency call using an automatic telephone dialing system or an artificial or prerecorded voice to a wireless telephone number without the prior express consent of the called party.
On November 21, 2002 the Federal Communications Commission issued a unanimous Declaratory Ruling and Order finding that “ringless voicemails” to wireless telephones require consumer prior express consent because they are “calls” made using an artificial or prerecorded voice and therefore covered by the Telephone Consumer Protection Act. The FCC found that RVM are subject to robocalling restrictions. Regulated under the artificial or prerecorded voice prong of the TCPA, the issue of whether the technology used to send RVM is an automatic telephone dialing system may now be moot.
The FCC has clarified that RVM is a form of robocall and is illegal if the caller did not have the consumer’s prior express consent. Violations can be enforced by the FCC or the consumer can sue in court.
“Imagine finding robocallers leaving junk voicemails on your phone without it ever having rung. It’s annoying and it’s happening to too many of us. Today we’re taking action to ensure these deceptive practices don’t find a way around our robocall rules and into consumers’ inboxes,” said FCC Chairwoman Jessica Rosenworcel.
On October 20, 2022, the Federal Trade Commisison announced that the agency is exploring a potential rule to combat deceptive or unfair review and endorsement practices, such as using fake reviews, suppressing negative reviews, and paying for positive reviews.
The FTC’s Advance Notice of Proposed Rulemaking public comment on potential consumer harms arising from deceptive or unfair review and endorsement practices.
“Companies should know by now that fake reviews are illegal, but this scourge persists,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “We’re exploring whether a rule that would trigger stiff civil penalties for violators would make the market fairer for consumers and honest businesses.”
According to the FTC, research shows that consumers rely on reviews when shopping for a product or service, and that bogus reviews drive sales and tend to be associated with low-quality products. The rapid growth of online marketplaces and platforms has made it easier than ever for some companies to create and use fake reviews or endorsements to make themselves look better or their competitors look worse, the FTC states in its recent announcement.
The Advance Notice of Proposed Rulemaking seeks comment on the costs and benefits of a potential rule, as well as the potential harms to consumers and competition from deceptive or unfair reviews and endorsement advertising practices, including:
- Fake reviews: Reviews and endorsements by people that do not exist, have not used the product or service,
The Federal Trade Commission has a long-standing practice of issuing policy statements and reports in an effort to put digital marketers on notice of CID investigation and enforcement priorities.
For example, in 2021, FTC attorneys warned marketers about the utilization of deceptive tactics in conjunction with automatically renewing subscription services. The agency policy statement, designed to place marketers on notice that sign-ups must be clear and fully consensual, material terms conspicuous presented, and cancellation mechanisms simple to effectuate, calls attention to a newly issued enforcement policy statement regarding negative option marketing that prohibits illegal “dark patterns” that trick consumers into subscription services.
“Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Firms that deploy dark patterns and other dirty tricks should take notice.”
The FTC approved the issuance of the enforcement policy statement with a 3-1 vote, with Commissioner Christine S. Wilson voting no and issuing a dissenting statement. Commissioner Noah Joshua Phillips also issued a separate concurring statement.
The FTC will continue to take aggressive investigative and civil penalty enforcement action against marketers that utilize deceptive automatic renewal subscriptions, continuity plans and free-trial conversion plans.
Without limitation, all material terms of the product or service, including how much it costs,
The Federal Trade Commission aggressively enforces the Restore Online Shoppers’ Confidence Act (“ROSCA”) against online marketers that offer Internet-based automatic renewals and subscriptions. Basically, ROSCA requires the clear and conspicuous disclosure of material terms, affirmative consent to certain cancellation requirements in online transactions.
The FTC has the ability to seek monetary relief, in addition to injunctive relief, for ROSCA violations. A violation of ROSCA is considered an unfair deceptive act or practice which subjects sellers to civil monetary penalties. State attorneys general may also have a cause of action.
What are the Bascis of a ROSCA Violation?
Some rather obvious components of a ROSCA violation include, but not are not limited to, a misleading “risk-free” trial offer, an undisclosed charge if consumers do not quickly cancel the “risk-free” trial, an undisclosed automatic shipment program that sends consumers unordered merchandise, difficult to follow upsells that add another layer of confusion, unlawful charges to consumers’ credit or debit cards, difficult cancellation procedures, straw owners that conceal operators’ activities and/or conceal operations from payment processing entities and banks.
Do Individual States Have Their own Automatic Renewal Laws?
Automatic renewal and subscription laws (ARLs) are in place in a number of states. Many have even recently amended and bolstered their ARLs. Failure to comply can result in private plaintiff actions, class action lawsuits and regulatory action.
At the state level, approximately two-dozen states have implemented ARL legislation. Some states impose additional consent and disclosure requirements if the subscription begins with a free trial.
In 2019 and in response to a competitor challenge, the National Advertising Division ruled on the “#1 Rated” claim made by TaxSlayer LLC in its promotional messages. In doing so, the NAD recommended that TaxSlayer discontinue the unsubstantiated representation.
More specifically, the claims at issue included “Slay your taxes. So you can enjoy your refund. Maximize your refund with TaxSlayer. #1 rated on Trustpilot” and “#1 Rated in the Tax Prep Software Category on Trustpilot. Start free today!”
Theer was a disclosure that stated that the foregoing claims were “based on more than 2300 verified customer reviews on Trustpilot. TaxSlayer has 1500+ 5-star reviews, and 84% of TaxSlayer customers rate TaxSlayer Great or Excellent on Trustpilot. Learn more at trustpilot.com/review/taxslayer.”
The NAD opined that for “#1 Rated” claims, advertisers should compare themselves with at least 85% of the applicable marketplace, and the consumers surveyed should represent a broad base of customers that used the product.
According to the NAD, TaxSlayer did not satisfy such requirements because the population of online reviews that created the basis for Trustpilot’s score allegedly failed to represent the general opinion of tax preparation software consumers across the United States. The NAD also rejected TaxSlayer’s argument that a consumer could simply visit the Trustpilot website to clarify any confusion about its ranking.
“Consumers should not have to search to learn more about the limitations on an advertising claim,” said the NAD. “Here, while the claim informs consumers that it is limited to companies in the tax prep software category on a certain website,
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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 compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.