Federal Trade Commission (FTC)
On August 14, 2023, the Federal Trade Commission announced that it will require Experian Consumer Services, which offers consumers access to their Experian credit information, to pay $650,000 to settle charges it sent consumers unsolicited email without offering them a way to opt out of such messages, as required under the CAN-SPAM Act.
In a complaint filed by the Department of Justice on behalf of the FTC, the agency says that California-based Experian Consumer Services (ECS), also known as ConsumerInfo.com, Inc., spammed consumers with marketing offers after they signed up for an account with the company in order to manage their Experian credit report information.
In the emails, the FTC alleges that the company failed to provide clear and conspicuous notice of consumers’ ability to opt out of receiving additional marketing messages and a mechanism for doing so, in violation of the CAN-SPAM Act, according to the complaint.
“Signing up for a membership doesn’t mean you’re signing up for unwanted email, especially when all you’re trying to do is freeze your credit to protect your identity,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “You always have the right to unsubscribe from marketing messages, and the FTC takes enforcing that right seriously.”
Consumers who wish to freeze or take other steps to manage their Experian credit information online must create an account with ECS. The complaint charges that consumers who signed up for a free membership account with ECS were then sent emails promoting Experian’s products and services such as one touting Experian Boost,
FTC advertising compliance and defense attorney Richard B. Newman was recently quoted in an article for Cybersecurity Law Report titled “Xbox and Alexa COPPA Case Lessons: Avatars, Biometrics and Other New Expectations.”
The article discusses the FTC’s recent privacy enforcement run and how it reinforces regulators’ expanding expectations for companies using video and audio recordings, smart devices and AI. The article further discusses recent agency settlements with Microsoft, Amazon and educational technology provider Edmodo that drew $51 million in penalties, broke new ground on the Children’s Online Privacy Protection Act Rule enforcement and signaled new expectations for all companies’ privacy compliance.
In discussing how COPPA is a tool for financial penalties and how these cases highlight the value of COPPA enforcement to the FTC versus its Section 5 authority under the FTC Act, Mr. Newman noted that “[i]n Amazon, obviously, the $25‑million settlement amount leaps out” for Alexa’s improper retention of voice recordings in violation of COPPA.
Mr. Newman further shared that “not just the FTC, but state attorneys general are becoming increasingly interested in expanding regulation of the use and sharing of consumer data, including geolocation data.”
While the FTC contests the issue at the federal level, data brokers and those that interact with them should expect that the plaintiffs’ class action bar and state AGs may lodge claims under state “little FTC acts” that echo the FTC’s July 2022 statement about geolocation data or the biometric one,
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.
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,
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.
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.
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,
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.
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.
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.
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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.