There’s been a lot of talk about the one eensy weensy Supreme Court vacancy, but nary a word about the not one but TWO FTC vacancies. Indeed, if any of you were out and about recently, say at the theater perhaps, you might have been sitting near a future FTC Commissioner. So, let’s imagine for a second that we were talented enough to appear in the theater (ok, truth be told, Amy is, but that’s a blog for another day) and that all of you are wealthy enough to be able to afford Hamilton tickets and sit among possible future FTC appointees. What would we say to all of you about the possible future direction of the FTC? What might be on a new administration’s wish list? We’ll explore these questions in a few upcoming blogs. We’d love to hear your thoughts as well.
In case you were like Alabama football coach Nick Saban and unware, there was an election last week. One post-election issue has been the use of “fake news” to try and sway voters and possible steps to prevent those types of stories going forward. The FTC has been trying to stop “fake news” advertising for some time; see our earlier posts on the Lean Spa case, Lord & Taylor case, and Native Advertising Statement. Earlier this month, a court affirmed those efforts. The case provides a list of lessons on what not to do when advertising your products.
The FTC sued a company called Pure Green Coffee and others in 2014 alleging that they violated the FTC Act by making unsubstantiated and false weight loss claims and through the use of deceptive advertorials and testimonials in the sale of Green Coffee Weight Loss products. Apparently, the defendants entered the business after having seen an excerpt of the Dr. Oz Show touting the effects of Green Coffee Extract. The company’s advertising made claims that the product could cause dramatic weight loss including: 17 lbs. in 22 weeks; 17 lbs. in 12 weeks, 16% of body fat in 22 weeks, 20 lbs. in four weeks, and 1-2 inches of belly fat in one month.
In 2015, most of the defendants settled for judgments in the amount of $30 million, with almost all of that suspended based on the inability to pay. One defendant, Nick Congleton, chose to fight. In early November, the court entered summary judgment against him for $29 million, a HUGE amount.
Since the election, several questions have emerged about the near future of the consumer financial services federal regulatory landscape. We’ve gathered some of the most common questions below. The FAQs, based on input received from members of our consumer financial services team, are intended to help provide basic information to help place the results into perspective.
Who will President Trump be listening to as he develops his consumer financial services policies?
It is difficult to predict how a Trump administration will proceed specifically with policy issues regarding consumer financial services. While these issues did not play a significant role in the debates or the campaign discussions, we know that the challenges facing the industry have been front and center for Congress.
In the short term, we expect a Trump administration to be influenced by the legislative efforts to date of the House Financial Services Committee (expected to be led by Chairman Jeb Hensarling) and Senate Banking Committee (expected to be led by Senator Mike Crapo).
When the Federal Trade Commission (FTC) investigates a case, it looks at it from the first contact the consumer has with a product or service through the end of the consumer experience. For many consumers, the first contact with a product comes through lead generation, where a “lead generator” tries to find consumers interested in a particular type of good or service and then sell those leads to marketers. The FTC released its staff perspective paper on lead generation in September. Demonstrating that the FTC’s interest in lead generation is not just academic, the FTC recently asked the Department of Justice to file a complaint on the FTC’s behalf against a collection of entities known as the Consumer Education Group, charging them with violating the Telemarketing Sales Rule. The complaint alleged that the Defendants made illegal outbound telemarketing calls — some using robocalls delivering prerecorded messages — to consumers on the national Do Not Call (DNC) Registry without consumers’ express written consent or a preexisting business relationship.
It has been almost a decade since a water-drinking contest held by an Entercom’s Sacramento radio station resulted in the death of a contestant, but the Federal Communications Commission (FCC) has a long memory. Last week, the FCC issued a Hearing Designation Order (it can be found here) to determine whether the license held by Entercom – one of the largest station owners in the country – should not be renewed based on new information about the “Hold Your Wee for a Wii” contest.
The 2007 contest challenged participants to compete for a prize by drinking water at regular intervals. To win, a contestant would have to be “the last one standing” (or holding it) – the competitor could not use the bathroom until the competition was over. The radio station at no point, either before or during the contest, announced the risks associated with the contest in general or water intoxication. Ultimately, the contest led to the fatal water intoxication of contestant Jennifer L. Strange. Civil claims for wrongful death were filed against the radio station, which was ultimately found to have been negligent.
Among other things (National Pizza Month, anyone?), October was Breast Cancer Awareness Month and the Washington Post recently published an interesting article about the connection between retail apparel marketing and breast cancer awareness efforts. The combination of the two – “pink marketing” – is as ubiquitous during the month of October as Halloween candy and pumpkin-spiced lattes.
Over time, cancer charities have sought to increase donor awareness of their mission and boost fundraising by partnering with for-profit corporations. This cause-related marketing can be mutually beneficial: the charity is helped by the company’s marketing budget and public relations heft, while the company enhances its goodwill with customers (indeed, some research supports the notion of a “halo effect” for retailers that consumers believe are socially conscious). Thus, we see successful partnerships like the one featured in the Washington Post article between the National Football League and the American Cancer Society, or relationships between World Wrestling Entertainment and Susan G. Komen. In October, hulking athletes incorporate pink into their uniforms and leap from pink wrestling ropes. Celebrities wear pink ribbons and retailers offer pink-colored versions of their products. Even the White House goes pink.
On October 19, 2016, Judges Srinivasan, Pillard, and Edwards of the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in ACA International, et al. v. FCC, No. 15-1211, a consolidated appeal filed by various telemarketing industry members challenging a number of aspects of the FCC’s July 2015 Telephone Consumer Protection Act (TCPA) Declaratory Ruling and Order. We previously summarized that Order here.
Over the course of the two and a half hour hearing, petitioners and respondents fielded questions by the three-judge panel regarding (1) the definition of an automatic telephone dialing system (ATDS) and specifically the Order’s treatment of the term “capacity”; (2) the meaning of “called party” and the problem of reassigned numbers; (3) the manner in which consent may be revoked by the called party; and (4) whether healthcare-related calls should be excluded from TCPA liability because they purportedly are covered by the Health Insurance Portability and Accountability Act (HIPAA). A recording of the oral argument is available on the D.C. Circuit website.
The National Association of Attorneys General (NAAG) and the National Association of State Charity Officials (NASCO) convened for their 2016 Annual Conference in Washington, DC this week. The “Public Day” of the conference, held on Monday, October 16, provided an opportunity for nonprofit leaders, professional counselors and advisers, and academics to learn about “the evolving world of state charities regulation,” which was the theme of this year’s conference.
The public session included informative panel discussions on non-traditional models of philanthropy; regulation of donor-advised funds, endowments, and restricted gifts; top issues in corporate governance and the importance of nonprofit board education; new tools for the nonprofit sector; current trends in cybersecurity and how to handle data breaches; and the collaboration between the Federal Trade Commission (FTC) and regulators from all 50 states and the District of Columbia in the historic civil suit against four cancer charities in 2015. The final panel of the public session featured state attorneys general of the NAAG Charities Committee discussing how the regulation of charities has evolved over time and what to expect in the years to come.
Below are some highlights of the Public Day of the 2016 NAAG/NASCO Annual Conference: Continue Reading
We have written several times about the FTC’s effort to rein in what it sees as unsubstantiated cognitive improvement claims (see prior blogs: Brain Training, Lumosity, Word Smart, and Your Baby Can Read). Well, the states appear focused on this segment, too. On October 7, 2016, after two years of litigation and a trial, Judge Beth Andrus of the Superior Court of King’s County Washington issued a 59 page opinion resolving claims the Washington State AG had made against the makers of 5-Hour ENERGY® for alleged deceptive advertising in violation of the Washington Consumer Protection Act (CPA). For those of you who do not watch TV, browse the Internet, visit convenience stores or spend time with college students, 5-Hour ENERGY® is an “energy drink” marketed as a dietary supplement, with ingredients consisting of caffeine, B vitamins and other nutrients. The court found for the AG on some claims and for the defendants on some others. How the court reached its decision is worth spending a little time if you have the energy.
The case arose out of a multi-state investigation that began in 2012. While the other states appear to have closed their investigations, in 2014, Washington State sued and subsequently filed an amended complaint in 2015. At trial, the court considered live or deposition testimony from close to 20 scientific experts, including a former Director of the FTC’s Bureau of Consumer Protection, Howard Beales. The legal framework used by the court mirrored that used by the FTC in determining whether the claims were deceptive. The court considered five claims at trial, assessing the company’s advertising to determine whether the claims were made, and then the substantiation to support the claim if made.
Thursday, October 27, 2016
2:00 p.m. – 3:00 p.m. ET
A Venable LLP Webinar
Since opening its doors, the Consumer Financial Protection Bureau has conducted dozens of examinations of banks and, for the first time for a federal regulator, non-bank financial services providers. As a result of this supervisory activity, the CFPB has ordered more than $350 million in consumer relief and, in some cases, brought follow-up public enforcement actions. How a company prepares for and manages a CFPB exam can make the difference between a passing grade and an enforcement action. This webinar will take a close look at the interplay between the CFPB’s supervision and enforcement work and what that means for companies that are subject to examination. Among other things, we will address: