Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
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 Slaughter, Alvaro Bedoya, Melissa 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, protecting the freedom of workers to change jobs,
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;
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,
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.
On December 6, 2023, Federal Communications Commission Chairwoman Jessica Rosenworcel announced a new initiative to strengthen and formalize the cooperation between the FCC and its state partners on privacy, data protection and cybersecurity enforcement matters.
As part of the work of the FCC’s Privacy and Data Protection Task Force, the FCC’s Enforcement Bureau has signed Memoranda of Understanding with Attorneys General of Connecticut, Illinois, New York and Pennsylvania to share expertise, resources and coordinated efforts in conducting privacy, data protection and cybersecurity-related investigations to protect consumers.
The Memoranda of Understanding
The new MOU affirm that the FCC and State Attorneys General “share close and common legal interests in working cooperatively to investigate and, where appropriate, prosecute or otherwise take enforcement action in relation to privacy, data protection or cybersecurity issues” under sections 201 and 222 of the Communications Act.
Coordinated action and information sharing will take place under all applicable federal and state laws, and privacy protections.
Federal and State Comments
FCC Chairwoman Rosenworcel said, in pertinent part, that “[d]efending consumer privacy is an all-of-government responsibility and a shared challenge. Today we take on evolving consumer threats with new formal partnerships with state law enforcement leaders, which have already been successful in obtaining record-breaking results in combatting illegal robocalls.”
FCC Enforcement Bureau Chief Loyann A. Egal said, in pertinent part, that “[u]se of information and communications technology and services have significantly enhanced our lives while at the same time increasing vulnerabilities to our privacy and sensitive data.
Topics
Archives
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.