Federal Trade Commission (FTC)

Recent FTC Matters Targeting Unfair and Deceptive Practices

By Richard Newman / July 20, 2024
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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.

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FTC Warns Sellers and Manufacturers About Warranty Practices

By Richard Newman / July 20, 2024
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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.

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Federal Court Enters Preliminary Injunction Enjoining Enforcement of the FTC Ban on NonCompete Clauses

By Richard Newman / July 9, 2024
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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 utiliznig 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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FTC Statement Regarding TikTok Complaint Referral to DOJ

By Richard Newman / June 20, 2024
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 On June 18, 2024, the Federal Trade Commission released a statement regarding the agency’s referral to the Department of Justice a complaint against TikTok, the successor to Musical.ly, and its parent company ByteDance Ltd.

The FTC’s investigation of these companies began in connection with its order compliance review of Musical.ly following a 2019 settlement with the company for alleged violations of the Children’s Online Privacy Protection Act.  The FTC also investigated additional potential violations of COPPA and the FTC Act, according to the statement.

The investigation uncovered reason to believe named defendants are violating or are about to violate the law and that a proceeding is in the public interest, so the FTC has voted to refer a complaint to the DOJ, according to the procedures outlined in the FTC Act.

The FTC does not typically make public the fact that it has referred a complaint.  Here, however, the agency states that it has “determined that doing so here is in the public
interest.”

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP.  Follow FTC defense attorney on X.

Informational purposes only. Not legal advice. May be considered attorney advertising.

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FTC Consumer Protection CID Investigation Procedures

By Richard Newman / May 29, 2024
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Investigatory procedures, including use of compulsory process, may be used by Federal Trade Commission (FTC) lawyers in connection with the spectrum of activities that the agency is authorized or required to carry out.

For What Purposes May FTC Investigations be Carried Out?

FTC Investigations may be conducted in connection with:

  • law enforcement investigations
  • adjudicatory or rulemaking activities
  • determinations of compliance with agency cease and desist orders
  • penalty or redress matters prior to filing a judicial complaint, and
  • economic and other studies

In the event that compulsory process is used in an investigation to determine whether any person is or has been engaged in any unfair or deceptive acts or practices, the special civil investigative demand (CID) procedures of Section 20 of the Federal Trade Commission Act must be followed.

Are FTC Investigations Public?

As a general rule, the existence of an FTC investigation initiated in order to determine whether a statute for which the FTC enforces is being violated generally is not public. However, disclosure is permitted to potential witnesses or other third parties to the extent necessary to advance the investigation

Note that the existence of an investigation may become public if a respondent files a motion to quash or otherwise – under certain circumstances – discloses the existence thereof.

Bureau of Consumer Protection Investigations

The FTC Bureau of Consumer Protection utilizes an evaluation committee tasked with assessing proposals for enforcement matters.

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FTC Final Rule Bans Most Non-Compete Agreements and Judicial Challenges Start

By Richard Newman / May 23, 2024
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On April 23, 2024, the Federal Trade Commission issued a final rule effectively concluding that it is an unfair method of competition, and therefore a violation of Section 5 of the FTC Act, for employers to enter into non-competes with workers and to enforce certain non-competes.

Except for senior executives, the final rule provides that it shall be unlawful to enter or attempt to enter into a non-compete provision, enforce or attempt to enforce a non-compete provision, or represent that a worker is subject to a non-compete provision.

The final rule is set to become effective in September 2024.  The FTC vote to approve the issuance of the final rule was 3-2 with Commissioners Melissa Holyoak and Andrew N. Ferguson voting no.  Commissioners Rebecca Kelly SlaughterAlvaro BedoyaMelissa Holyoak and Andrew N. Ferguson each issued separate statements.

How Does the Final Rule Define “Non-Compete?”

The final rule defines a “non-compete” provision as a term or condition of employment that prohibits a worker from, penalizes a worker for, or “functions to prevent” a worker from: (i) seeking or accepting work in the United States with a different person after the conclusion of their employment; or (ii) operating a business in the United States after the conclusion of their employment.

What is the Purpose of the FTC Non-Compete Rule?

The final rule is intended to promote competition by banning non-competes nationwide,

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FTC Issues Report to Congress Highlighting Cooperative Enforcement Efforts

By Richard Newman / April 11, 2024
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On April 10, 2024, the Federal Trade Commission issued a report to Congress detailing the FTC’s law enforcement cooperation with state attorneys general nationwide and presenting best practices to ensure continued effective collaboration.

 

The report, directed by the FTC Collaboration Act of 2021, “Working Together to Protect Consumers: A Study and Recommendations on FTC Collaboration with the State Attorneys General” makes legislative recommendations that would enhance these efforts, including reinstating the FTC’s authority to seek money for defrauded consumers and providing it with the independent authority to seek civil penalties.

“Today’s consumer protection challenges require an all-hands-on-deck response, and our report details how the FTC is working closely with state enforcers to share information, stop fraud, and ensure fairness in the marketplace,” said FTC attorney Samuel Levine, Director of the Bureau of Consumer Protection. “We look forward to seeking new opportunities to strengthen these ties and confront the challenges of the future.”

In June 2023, the FTC announced a request for public information seeking public comments and suggestions on ways it can work more effectively with state attorneys general to help educated and protect consumers about and from deception and fraud. After reviewing and analyzing the comments received, the FTC developed the report to Congress.

The report is divided into three sections: (i) the FTC’s Existing Collaborative Efforts with State Attorneys General to Prevent, Publicize and Penalize Frauds and Scams; (ii) Recommended Best Practices to Enhance Collaboration;

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FTC Implements New TSR B2B Rules and Proposes Rulemaking on Tech Support Scams

By Richard Newman / March 8, 2024
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On March 7, 2024, the Federal Trade Commission announced a final rule extending telemarketing fraud protections to businesses and updating the rule’s recordkeeping requirements as a result of developments in technology and the marketplace.

FTC lawyers also announced a proposed rule that would provide the agency with significant new tools to combat tech support scams.

Both actions are part of the FTC’s current review of the Telemarketing Sales Rule (TSR), which includes the Do Not Call Registry (DNC) rules and provisions banning nearly all telemarketing robocalls to consumers.

Importantly, the FTC also affirms the TSR’s prohibitions on robocalls using voice cloning technology.

“Today’s changes provide important new protections for small business and will help ensure that the FTC can take action against deceptive marketers who use AI robocalls and other emerging technology,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.  “We look forward to comments from the public on the additional proposals that would deter tech support scams and aid the Commission’s efforts to put money back into the pockets of defrauded consumers.”

The TSR became effective in 1995 and applies to virtually all “telemarketing” activities, both in the United States and international sales calls to consumers in the United States.  The rule generally applies only to outbound calls made by telemarketers to consumers, with some exceptions, and protects consumers in a range of ways.

For example and without limitation,

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How the FTC Uses Tolling Agreements During Civil Investigative Demand Investigations

By Richard Newman / March 2, 2024
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The Federal Trade Commission Bureau of Consumer Protection welcomes an open dialogue with parties cooperating with its investigations.   According to FTC lawyers, such dialogue allows the agency to make more informed decisions on whether to recommend an enforcement action and, if so, whether such an action can be resolved without the need for protracted litigation.

However, the Federal Trade Commission is also mindful of and believes that delays in investigations can undermine the public interest by allowing alleged lawbreaking to continue and by depriving consumers of redress for harms they may have suffered.  Consequently, the FTC has made it clear that while substantive engagement is welcome and constructive, the FTC is prepared to pivot more quickly to litigation if undue delay comes at the expense of redress for consumers.

Delay causes particular concern to the agency in matters where the conduct extends beyond the statute of limitations period.  In these cases, the FTC’s ability to provide refunds to injured consumers may be barred in whole or in part.

This risk has become more acute following the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021).  Because of AMG, the FTC can no longer seek monetary relief under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), which does not have a statute of limitation.  Instead, the FTC must often rely on Section 19, 15 U.S.C. § 57b, which authorizes courts to order defendants to provide redress only when violations occurred within three years of the initiation of the Commission’s action.

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FTC Settles With For-Profit College Over Alleged Deceptive Job Placement Claims

By Richard Newman / November 2, 2023
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On October 18, 2023, the Federal Trade Commission announced that it has agreed to a $3.4MM settlement with New Jersey for-profit Sollers College over alleged deceptive ads that lured prospective students into unlawful contracts, purportedly falsely touting relationships with prominent employers and inflating job placement rates.  The charges were brought by the FTC and the state of New Jersey.

According to the FTC’s complaint, Sollers, and its parent company, used their website, social media, and email campaigns to falsely advertise their partnerships with prominent employers in the fields of information technology, clinical research and drug safety.  According to the complaint, Sollers falsely claimed that its partnerships with prominent employers, such as Pfizer, Weill Cornell Medicine, and Infosys, resulted in jobs for its graduates at those companies. Many of the businesses featured on Sollers’ website had no partnership with the school at all, says the FTC.

The complaint states that, since at least 2018, Sollers advertised that the vast majority of Sollers graduates are placed in jobs.  For example, the company purportedly advertised, “90% of our students are placed within 3 months of graduation,” on its website.  In reality, the job placement rate for Sollers graduates is substantially lower than the 80 percent, 82 percent, 90 percent or “near perfect” rates featured prominently on its website and in its advertising campaigns, the FTC states.  According to the FTC, the school’s own data suggests that the current job-placement rate for graduates of its Life Sciences programs remains as low as 52 percent.

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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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