Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
California’s stringent Automatic Renewal Law is heavily focused upon free trial requirements, promotional periods and annual programs. Various obligations and restrictions are discussed, here.
In 2021, Jack Gershfeld initiated legal action against TeamViewer US, Inc. Mr. Gershfeld alleged that TeamViewer violated California’s Consumer Privacy Act and Unfair Competition Law when it automatically renewed his software subscription without his consent.
TeamViewer is a remote access and control computer software, allowing maintenance and management of computers and other devices. In short, Mr. Gershfeld alleged that he purchased a one-year subscription, that automatically renewed thereafter at a higher price.
The California district court reviewed TeamViewer’s website enrollment funnel and post-purchase acknowledgments. In doing so, the lower court held that TeamViewer did not violate California’s ARL because there was an adequate disclosure on the “checkout summary.” The lower court noted that the disclosure partially stated, in bold and directly above the “Continue to Payment” button, that the “subscription will automatically renew every 12 months, unless you terminate your contract at least 28 days before the end of the initial term or any renewal term.”
Additionally, TeamViewer was found to have secured appropriate consent because Mr. Gershfeld was required to check a box affirmatively acknowledging that his subscription was subject to a hyperlinked end user license agreement.
TeamViewer’s post-purchase acknowledgment was also deemed adequate. Here, it sent an invoice to Mr. Gershfeld reminding him, in bold, that “The license term of the subscription is automatically extended for another 12 months if not cancelled in written form 28 days prior to expiry.” TeamViewer forwarded another reminder two months prior to the renewal,
February 2023 has been a busy couple of months at the Federal Trade Commission. High-profile consumer protection actions and announcements span a broad spectrum of digital advertising and marketing. From “review hijacking, health product-related claim substantiation issues and lead generation, to the first Health Breach Notification Rule case and a reminder that willful blindness is not a defense for service providers that turn a blind-eye to third-party conduct. The FTC also announced a new office to keep pace with digital marketplace developments, and issues a Criminal Liaison Unit Report.
First Law Enforcement Action “Review Hijacking”
According to the Commission, a marketer of vitamins and other supplements, called The Bountiful Company, abused a feature of Amazon.com to mislead consumers into thinking that its newly introduced supplements had more product ratings and reviews, higher average ratings, and “#1 Best Seller” and “Amazon’s Choice” badges. The agency alleges that Bountiful carried out this tactic by merging its new products on Amazon with different well-established products that had more ratings, reviews, and badges.
“Boosting your products by hijacking another product’s ratings or reviews is a relatively new tactic, but is still plain old false advertising,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The Bountiful Company is paying back $600,000 for manipulating product pages and deceiving consumers.”
Bountiful, based in Bohemia, New York, manufactures vitamin, mineral, and other nutritional supplements. Its brands include Nature’s Bounty and Sundown. As alleged by the FTC, Bountiful sells its supplements to Amazon,
FTC’s Bureau of Consumer Protection Issues Criminal Liaison Unit Report Outlining Efforts to Ensure Wrongdoers Face Accountability
On January 30, 2023, the Criminal Liaison Unit of the Federal Trade Commission’s Bureau of Consumer Protection (BCP CLU) issued its 2022 Criminal Liaison Unit Report, describing the history of the BCP CLU, its program operations, and major accomplishments over the past five years. In an effort to ensure criminal prosecution of appropriate consumer fraud cases, the BCP CLU refers cases to partner agencies with criminal jurisdiction, including U.S. Attorney’s Offices across the county, Divisions of the Department of Justice (DOJ) and others.
“For the worst individual and corporate wrongdoers, civil remedies may not be sufficient to protect the public from further harm,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Government works best when agencies work together toward a common goal, and we are proud that our partnership with criminal enforcers leads to justice for bad actors and a safer marketplace for us all.”
The FTC, which is not authorized to bring criminal law enforcement actions, established the BCP CLU in 2002 to bring the “worst of the worst” offenders to the attention of prosecutors. As it grew, the BCP CLU worked to establish relationships with prosecutors and educate them about the Commission’s consumer fraud and deception cases. Success in initial cases proved that criminal consumer protection cases were not only viable, but could result in substantial prison sentences.
Over the past five years, the report notes, BCP CLU referrals have led to criminal charges against 107 new defendants,
The Federal Trade Commission has taken action against Instant Brands, manufacturer of Pyrex-brand kitchen and home products, for allegedly falsely claiming that all its popular glass measuring cups were made in the United States during a time some measuring cups were imported from China. The FTC’s proposed order against Instant Brands would stop the company from making deceptive claims about products being “Made in USA” and require them to pay a monetary judgment.
“Consumers rely on marketers to make truthful ‘Made in USA’ claims,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “If marketers move their manufacturing outside the United States, even temporarily, they must update their advertising to make it accurate.”
According to the FTC’s complaint, Instant Brands faced increased demand for its glass measuring cups in the early days of the COVID-19 pandemic, when consumer interest in home baking spiked. Pyrex has purportedly long used the U.S. origin of its products as a selling point. By early 2021, the company was allegedly not able to meet the demand for certain measuring cup sets sold on Amazon with cups produced in the United States. From March 2021 to May 2022, Instant Brands produced some Pyrex cups in China, according to the FTC.
When the production shifted to China, the company allegedly continued to market the Chinese-made products on Amazon as “Made in USA,” despite the cups themselves being marked “Made in China.” While the Chinese cups were being sold the company also purportedly continued its marketing that implied all Pyrex cups were of U.S.
On January 13, 2023, the Federal Trade Commission announced that as a result of a Federal Trade Commission lawsuit, investment advice company WealthPress has agreed to a proposed court order that would require it to refund more than $1.2 million to consumers and pay a $500,000 civil penalty for allegedly deceiving consumers with purportedly “outlandish and false claims about their services.”
The case marks the first time that the FTC has collected civil penalties against a company that received the Notice of Penalty Offenses regarding money-making opportunities sent last October, and the first civil penalties for violations of the Restore Online Shoppers’ Confidence Act. (ROSCA)
“We’ve brought several cases this year against companies making false earnings claims, and we won’t hesitate to bring more,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “WealthPress is now paying the price for deceiving its customers and ignoring our Notice of Penalty Offenses on money-making claims.”
The FTC’s complaint against WealthPress and its owners, Roger Scott and Conor Lynch, alleges that the company used deceptive claims to sell consumers investment advising services—often claiming that the services’ recommendations were based on a specific “system” or “strategy” created by a purported expert. The company charged consumers hundreds or even thousands of dollars for access to these services.
WealthPress sold consumers on their services with purported false claims about the likelihood consumers would make money by following the recommended trades,
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.