Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
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.
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.
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 utilizing 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.
As previously blogged about here, the Federal Communications Commission recently published the final, single-seller, one-to-one lead generator consent rule (the “Rule”). The Rule amends the definition of “prior express written consent” for purposes of the Telephone Consumer Protection Act and will dramatically impact the lead generation industry.
How Does the New One-to-One, Single Seller Rule Impact Lead Generation?
When utilizing regulated technologies such as automatic telephone dialing systems (“ATDS”), artificial or prerecorded voice telephone calls, artificial intelligence voice telephone calls, outbound interactive voice response, and voicemail technology using artificial or pre-recorded voice messages, consumers will be required to select each “seller” – the ultimate provider – of a product or service from whom they want to receive telephone calls from.
Note that manual dialing may not provide cover, including insofar as telephone numbers on a do-not-call registry and various state legal regulations are concerned.
Further note that single “seller” consent does not encompass lead generators and other intermediaries, with potentially limited exception. Furthermore, it also appears that sharing consent across corporate affiliates will also be considered a Rule violation.
The cost of violating any of the Rule’s provisions are potentially devastating. Plaintiffs’ attorneys will be ready to pounce. Do not attempt to secure compliance on your own. Contact an FTC lawyer to discuss legal regulatory considerations for keeping you and your business from becoming low hanging fruit.
The effective date for the single seller provisions of the Rule is January 2025.
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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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.