Federal Trade Commission (FTC)

Florida District Court Permanently Bars Alleged Deceptive COVID PPE Marketer from Selling Any Protective Goods or Services

By Richard Newman / June 6, 2023
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The United States District Court for the Middle District of Florida, Ocala Division, issued an order permanently banning the defendant from offering for sale or selling any protective goods or services, after granting the FTC’s motion for summary judgment.

The order also includes two monetary judgments against the individual, who has allegedly done business under different corporate names.  The first judgment is for $989,483.69, to be returned to consumers allegedly harmed by his violations of the FTC Act and the Commission’s Mail Order Rule.  The court also entered a second civil penalty judgment of $2,562.21 for his alleged violations of the FTC Act with regards to the COVID-19 Consumer Protection Act.

In a complaint filed in June 2021, the FTC alleged that he preyed upon consumers’ fear of COVID-19 by advertising the availability and quick delivery of PPE, including N95 facemasks, even though he had no basis to make those promises.

The complaint stated that he failed to deliver PPE on time (if at all), failed to notify consumers of delayed shipments, failed to offer the cancellations and refunds required by the Commission’s Mail Order Rule, and failed to honor refund requests.

When the individual eventually did deliver the products, he often sent supplies that were inferior in quality to what consumers ordered, according to the complaint.  Based on this conduct, the complaint alleged that his deceptive and unfair conduct violated the Mail Order Rule, the FTC Act, and the FTC Act with regards to the COVID-19 Consumer Protection Act.

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FTC Finalizes Order Against Motocross and ATV Parts Maker for Alleged False Made in USA Claims

By Richard Newman / June 6, 2023
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The Federal Trade Commission has finalized its order against a motocross and ATV parts maker, and its officer, for allegedly falsely claiming that the company’s products were manufactured in the U.S.

The FTC’s order, first announced in April, 2023 would stop both from making deceptive claims about products being “Made in USA” and require them to pay a monetary judgment.

The FTC’s order against both the parts maker and its officer includes a number of requirements about the claims the defendants make:

  • Restriction on unqualified claims: The company will be prohibited from making unqualified U.S.-origin claims for any product, unless it can show that the product’s final assembly or processing—and all significant processing—takes place in the U.S., and that all or virtually all ingredients or components of the product are made and sourced in the U.S..
  • Requirement for qualified claims: The company is required to include in any qualified Made in USA claims a clear and conspicuous disclosure about the extent to which the product contains foreign parts, ingredients or components, or processing.
  • Requirement for assembly claims: The company must also ensure, when claiming a product is assembled in the U.S., that it is last substantially transformed in the U.S., its principal assembly takes place in the U.S., and U.S. assembly operations are substantial.

The order includes a monetary judgment of $872,577,

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FTC Reevaulates Green Guides and Pending Civil Penalty Implementing Rulemakings

By Richard Newman / June 4, 2023
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On May 23, 2023, the Federal Trade Commission hosted a national workshop designed to consider the current state of recycling practices and recycling-related advertising.

This follows an FTC announcement in December 2022 that the agency was seeking public comment on potential updates and changes to its ‘Green Guides’ for the use of environment marketing claims.  The Green Guides help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act.

Updates to ‘Green Guides’

In December 2022, the FTC announced that it would seek public comment on potential updates to its “Green Guides” for the use of environmental marketing claims.  FTC attorneys seek to update the Green Guides based on increasing consumer interest in buying environmentally friendly products.  The comment period was extended through April 24, 2023.

“Consumers are increasingly conscious of how the products they buy affect the environment, and depend on marketers’ environmental claims to be truthful,” said FTC lawyer and Bureau of Consumer Protection Director Samuel Levine.  “We look forward to this review process, and will make any updates necessary to ensure the Green Guides provide current, accurate information about consumer perception of environmental benefit claims.  This will both help marketers make truthful claims and consumers find the products they seek.”

The Green Guides were first issued in 1992 and were revised in 1996, 1998, and 2012.  They provide guidance on environmental marketing claims, including how consumers are likely to interpret particular claims and how marketers can substantiate these environmental claims to avoid deceiving consumers. 

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FTC Issues Policy Statement About Misuses of Biometric Information and Harm to Consumers

By Richard Newman / May 20, 2023
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FTC issues policy statement addressing emerging technologies that might harm consumers and violate the FTC Act.

On May 18, 2023, the Federal Trade Commission issued a warning that the increasing use of consumers’ biometric information and related technologies, including those powered by machine learning, raises significant consumer privacy and data security concerns and the potential for bias and discrimination.

Biometric information refers to data that depict or describe physical, biological, or behavioral traits, characteristics, or measurements of or relating to an identified or identifiable person’s body.

“In recent years, biometric surveillance has grown more sophisticated and pervasive, posing new threats to privacy and civil rights,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.  “Today’s policy statement makes clear that companies must comply with the law regardless of the technology they are using.”

In a policy statement, the Commission said the agency is committed to combatting unfair or deceptive acts and practices related to the collection and use of consumers’ biometric information and the marketing and use of biometric information technologies.

Recent years have seen a proliferation of biometric information technologies. For instance, facial, iris, or fingerprint recognition technologies collect and process biometric information to identify individuals. Other biometric information technologies use or claim to use biometric information in order to determine characteristics of individuals, ranging from the individuals’ age, gender, or race to the individuals’ personality traits, aptitudes, or demeanor.

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FTC Attorney Update on Existential Threat to Lead Generation Industry Arising Out of FCC Notice of Proposed Rulemaking

By Richard Newman / May 18, 2023
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As previously blogged about here, the FCC recently proposed a rule that would turn the lead generation on its head.  The proposed new rule goes quite a bit further than simply requiring wireless carriers to block texts from illegitimate numbers.

In addition to carrier investigation and blocking obligations, as well as an extension of DNC protections to text messages, the FCC proposes:

“…to ban the practice of obtaining a single consumer consent as grounds for delivering calls and text messages from multiple marketers on subjects beyond the scope of the original consent.”

In an illustration of the issue, Company A describes a website that purports to enable consumers to comparison shop for insurance.  The website sought consumer consent for calls and texts from insurance companies and other various entities, including Company A’s ‘partner companies.’  The ‘partner companies’ were listed in a hyperlink on the web page (i.e., they were not displayed on the website without clicking on the link) and the list of ‘partner companies’ included both insurance companies and other entities that did not appear to be related to insurance.”

Public Knowledge, an influential non-profit Washington, D.C.-based public interest group argues that lead generators and data brokers use hyperlinked lists to harvest consumer telephone numbers and consent agreements on a website and pass that information to telemarketers and scam callers.  Commentors have argued that the telemarketer that obtains the consumer’s contact information from the lead generator may believe that it has the consumer’s prior express consent,

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FTC Pursues Blanket Prohibition on Meta’s Monetization of Children’s Data

By Richard Newman / May 4, 2023
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On May 3, 2023, the FTC announced that it is proposing a blanket prohibition preventing Facebook from monetizing youth data.  The Commission alleges that the company violated the 2020 privacy order and now proposes new protections for children and teens.

The Federal Trade Commission proposed changes to the agency’s 2020 privacy order with Facebook after alleging that the company has failed to fully comply with the order, misled parents about their ability to control with whom their children communicated through its Messenger Kids app, and misrepresented the access it provided some app developers to private user data.

 

“Facebook has repeatedly violated its privacy promises,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The company’s recklessness has put young users at risk, and Facebook needs to answer for its failures.”

As part of the proposed changes, Meta, which changed its name from Facebook in October 2021, would be prohibited from profiting from data it collects, including through its virtual reality products, from users under the age of 18.

The company would also be subject to other expanded limitations, including in its use of facial recognition technology, and required to provide additional protections for users.

This marks the third time the agency has taken action against Facebook for allegedly failing to protect users’ privacy.

The Commission first filed a complaint against Facebook in 2011, and secured an order in 2012 barring the company from misrepresenting its privacy practices. 

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Supreme Court Again Dents FTC Enforcement Authority

By Richard Newman / April 25, 2023
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On April 14, 2023, the U.S. Supreme Court provided FTC action defendants with the ability to directly challenge the structural constitutionality of the Federal Trade Commission (and the Securities and Exchange Commission) in federal court without having to wind their way through pre-enforcement administrative proceedings that many believe deprive defendants of due process.

Axon Enterprise, Inc. v. FTC (consolidated with SEC v. Cochran, a similar case involving the Securities and Exchange Commission).

Like the Supreme Court’s recent blow to the FTC’s authority in AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341 (2021), the Axon decision was unanimous.

At issue in Axon was whether defendants in an agency’s administrative enforcement action are permitted to challenge its structure or processes in a federal district court or must first endure the agency’s administrative proceeding, which may be costly and time consuming.

By ruling in the affirmative, the Supreme Court has once again brought into question the scope and legitimacy of the agencies’ respective enforcement authority.

The FTC administrative adjudication process, in part, consists of the FTC’s commissioners voting to initiate complaints.  Then, FTC staff investigates and prosecutes those complaints before the agency’s Administrative Law Judge.  The commissioners themselves then assess (and virtually always affirm) the complaints that they voted to initiate.  That is an enormous amount of discretion bestowed upon the prosecutor, judge and jury.  Defendants are only permitted to appeal in federal court once all three steps are completed.

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Richard B. Newman Selected to Author Consumer Protection Section of Prestigious ALM FTC Law, Practice and Procedure Treatise

By Richard Newman / April 13, 2023
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As a result of the firm’s demonstrated subject matter expertise and track record of success in the fields of FTC advertising compliance, investigations and defense, Richard B. Newman has been selected to assume authorship of the Consumer Protection Section of the American Lawyer Media International Federal Trade Commission: Law, Practice and Procedure Treatise, a comprehensive resource of developments of concern to advertisers, marketers and legal professionals that practice before the Commission.

Mr. Newman’s contributions shall feature detailed analyses of emerging legal regulatory issues pertaining to advertising and marketing compliance, civil investigative demands (CIDs), judicial litigation and administrative enforcement actions, rulemaking, civil penalties and consumer redress, legislative updates, evolving guidelines of unfairness and deception, data privacy in designated market sectors, telemarketing regulations and case law developments.

With publications including Law.com and The American Lawyer, ALM is the most trusted media, information and intelligence company supporting both the practice of and business of professionals in the legal, insurance, commercial real estate and financial services industries.  ALM delivers leading data, intelligence, insights, events and audiences essential for growing businesses globally to over 7 million professionals.

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FTC Proposes Broad Sweeping Updates to Recurring Subscriptions and Memberships

By Richard Newman / March 30, 2023
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The Federal Trade Commission recently announced a proposed a “click to cancel” provision requiring sellers to make it as simple for consumers to cancel their enrollment as it was to enroll.

According to the FTC, if consumers are unable to easily leave any program when they want to, the negative option feature becomes nothing more than a way to continue charging them for products they no longer want.  To address this issue, the proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it.  For example, if a consumer can sign-up online, cancellation much be able to be effectuated on the same website, in the same number of steps.

But that’s not all the FTC is proposing regarding subscriptions and recurring payments.

The FTC is also proposing:

  • Expanded Scope: The proposed “Rule Concerning Recurring Subscriptions and Other Negative Option Plans” would cover all forms of negative option marketing, whether via internet, phone, through print materials, and in-person transactions.  Any persons “selling, offering, promoting, charging for, or otherwise marketing a negative option feature” would be subject to the new Rule.
  • Additional Consent Requirements: The proposed rule requires marketers to obtain independent consent for the negative option feature and precludes the inclusion of additional information that could interfere a consumer’s ability to provide consent. It sets forth requirements about how consent must be obtained.  Marketers would be required to obtain consent for the whole transaction and maintain proof for three years.

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National Advertising Division Recommends that Pier 1 Provide Enhanced Clear and Conspicuous Automatic Renewal Program Disclosures  

By Richard Newman / March 14, 2023
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As part of the independent, non-profit BBB National Programs, the National Advertising Division independently evaluates and regulates the truth and accuracy of national advertising.  It also works to increase the public’s confidence in advertising.  The NAD also offers dispute resolution process for advertisers.

Recently, the NAD reviewed Pier 1’s automatic renewal subscription rewards loyalty program that charges consumers a recurring monthly or annual fee for products discounts, and free shipping and returns on select items.  In doing so, the NAD recommended that the company provide enhanced “clear and conspicuous” disclosures.

As described by the NAD, items added to a consumer’s cart on the company website automatically include the rewards subscription via a pre-checked box.  Additionally, the terms of the renewal subscription program appeared under the pre-checked box.  According to the NAD, consumers are required to take affirmative action to uncheck the box to opt-out of the automatically renewing subscription and cost related thereto.

According to the NAD, one issue was whether promoting a lower price for a product or service is deceptive if that price is only made available to those that agree to the automatically renewing subscription.  The other issue was whether the material terms of the automatic renewal subscription program were “clearly and conspicuously” disclosed prior to a consumer’s decision to make a purchase.

The NAD ultimately concluded that, unless the terms of the automatically renewing subscription are appropriately disclosed, it is misleading to promote a discounted price if the discount is only available when a consumer consents to a subscription. 

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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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