The FTC’s recent law enforcement and policy initiatives suggest that the agency will continue to aggressively pursue a broad spectrum of unfair and deceptive trade practices.
- Practices affecting small businesses.
In 2017 the FTC targeted companies that targeted small businesses with deceptive promotions. A pending lawsuit alleges that New York- and Illinois-based A1 Janitorial Supply Corp. and other defendants bilked small businesses for millions of dollars with bogus offers of “free” supply samples.
Settlements with Lighting X-Change and Midway Industries addressed charges that the unrelated companies pitched “free” light bulbs or cleaning supplies to small businesses and then followed up with insistent invoices for unordered merchandise.
The FTC also took action against companies that made unsubstantiated money-making claims. Examples include settlements with Work at Home EDU, Thrive Learning and Lift International, and Advertising Strategies LLC. And don’t let 2017 end without reading the Court’s Preliminary Injunction in the FTC’s case against invention promotion outfit World Patent Marketing.
- Health claims.
Ads promising no-sweat weight loss, miraculous relief from arthritis pain, easier withdrawal from opiate addiction and treatment for HIV, Alzheimer’s, dementia and cancer are certain to attract law enforcement attention.
They did in 2017.
Cases like NutriMost, XXL Impressions, Catlin Enterprises, Health Research Laboratories, and NextGen Nutritionals demonstrate that companies need serious science to support serious health claims about serious medical conditions.
The FTC’s settlement with Breathometer, a smartphone breathalyzer pitched on the TV show Shark Tank, illustrates a similar concern when safety is at issue.
And if companies need a reminder about the importance of complying with orders in FTC cases, a federal court found Hi-Tech Pharmaceuticals, Jared Wheat, and Stephen Smith in contempt for violating orders related to the sale of weight loss products and entered a $40 million judgment against them.
- Data security and consumer privacy.
The FTC continued to look carefully at companies’ security and privacy promises and practices.
On the data security front, the 12-part Stick with Security blog post series offered practical suggestions for businesses based on the lessons of recent law enforcement actions, closed investigations and experiences that companies have shared about how they start with security.
One notable development in 2017 were complaints featuring both data security and privacy counts, as a proposed settlement with Lenovo and settlements with Uber and TaxSlayer illustrate. (TaxSlayer focused specifically on the Gramm-Leach-Bliley Safeguards Rule and Privacy Rule.)
Affirming its commitment to the EU-U.S. Privacy Shield Framework, the FTC brought three cases challenging false claims about companies’ Privacy Shield participation.
On the subject of privacy – including consumers’ right to have their Do Not Call preferences honored – a federal judge imposed a record-setting $280 million civil penalty against satellite TV provider Dish Network in an action brought by the FTC and Department of Justice, in partnership with the California, Illinois, North Carolina and Ohio AGs.
And in a settlement that attracted a great deal of attention in the lead generations industry, the FTC challenged the practices of Blue Global, a company that allegedly used deceptive loan offers to get consumers to turn over sensitive personal information and then sold the data to pretty all those willing to pay for it.
- Debt collection.
Cases like American Municipal Services demonstrate the FTC’s commitment to ensuring that companies comply with the law when collecting debts they’re owed.
Another important priority for the agency is fighting back against businesses that violate the FDCPA and the FTC Act by collecting debts they are not owed.
In addition, the FTC’s lawsuit against Joel Tucker for peddling portfolios of alleged fake payday loans resulted in a $4.1 million judgment.
If there is a connection between an endorser and a marketer that consumers would not expect and it would affect how consumers evaluate the endorsement, the connection should be disclosed.
That is a key takeaway from the FTC Endorsement Guides.
The importance of disclosing material connections was the message of FTC staff’s April 2017 educational letters to influencers and marketers, follow-up warning letters in September 2017, and the agency’s first settlement with online influencers in CSGO Lotto.
In addition, FTC staff updated its Endorsement Guides: What People Are Asking brochure to assist companies’ compliance efforts.
- Seals and certifications.
One of the leading endorsement-related issues continues to be advertisers that tout their products with what falsely appear to be independent third-party certifications.
Benjamin Moore’s Green Promise logo, ICP Construction’s Eco-Assurance seal, Moonlight Slumber’s Green Safety Shield and NextGen Nutritionals’ Certified Ethical Site are examples that the FTC challenged as deceptive.
In addition, the FTC alleged that the “Trampoline of the Year Award” bestowed by a purportedly independent group called Trampoline Safety of America was really a selfie seal that two trampoline sellers awarded to their own sites.
The FTC’s settlement with Tarr, Inc. illustrates a related deceptive practice, ads that mimic the format of popular magazines and often feature bogus celebrity testimonials.
- ROSCA and “free” trials.
Offering an online negative option, “free” trial, or similar promotion?
Under ROSCA – the Restore Online Shoppers’ Confidence Act – marketers must: (1) clearly disclose all materials terms of the deal before obtaining a consumer’s billing information, (2) get the person’s express informed consent before making the charge, and (3) provide a simple mechanism for stopping recurring charges.
- Financial injury to consumers.
2017 began with the announcement of a $586 million FTC settlement with Western Union for looking the other way while consumers lost massive money to alleged scammers on its system.
Western Union’s agreement with the Justice Department resolved criminal investigations and established a refund process for victims.
Federal, state and international partners joined the FTC in Operation Tech Trap, a global crackdown on tech support scams that tricked consumers into believing their computers were infected with viruses and malware, and then charged big bucks for unnecessary fixes.
In Operation Game of Loans, the FTC and state AGs filed 36 lawsuits against dozens of defendants charged with taking more than $95 million in illegal fees for questionable student loan debt relief services.
Struggling homeowners were the targets of the defendants behind the Brookstone Law “mass joinder” lawsuit operation. FTC actions yielded orders again multiple parties, lifetime bans from the debt relief business and a judgment of more than $18 million.
The FTC’s action against Amazon for unauthorized charges in kids’ apps made consumers eligible for millions of dollars in refunds.
- Green marketing.
A settlement with baby mattress company Moonlight Slumber was the FTC’s first case challenging “organic” product claims.
Emission-free and VOC-free representations were at issue in proposed settlements with paint companies Benjamin Moore, Imperial Paints, ICP Construction and YOLO Colorhouse.
The FTC followed last year’s historic $10 billion settlement with Volkswagen Group of America for false “clean diesel” claims for 2.0L cars with a similar settlement benefiting owners of 3.0L vehicles. And the United States Court of Appeals for the Sixth Circuit’s ruling in ECM BioFilms v. FTC offers insights for companies making representations about biodegradability.
In 2017 the FTC played an important role in framing the conversation about how established consumer protection standards apply as technologies evolve.
The FTC-NHTSA Connected Cars conference, the FinTech Forum on artificial intelligence and blockchain, the FTC-Department of Education workshop on Student Privacy and Ed Tech, the second PrivacyCon and the Informational Injury workshop gathered advocates, academics and industry members to discuss how to protect consumers while encouraging the emergence of innovative products and services.
Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. You can find him on Twitter or on LinkedIn.
ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.