The Federal Trade Commission’s recent settlement with Dalal A. Akoury and AWAREmed Health & Wellness Resource Center provides a good overview of how today’s FTC approaches medical claims it believes are unsubstantiated. The case also serves as a reminder that if medical claims sound too good to be true, they probably are.

According to the complaint, filed by the Justice Department on behalf of the FTC, defendants, under Khoury’s leadership, engaged in deceptive acts or practices in violation of Sections 5 and 12 of the FTC Act and the Opioid Addiction Recovery Fraud Prevention Act (OARFPA). The complaint states that defendants deceived reasonable consumers into believing that the medical clinic’s treatments could cure cancer, chronic diseases such as Alzheimer’s and Parkinson’s, and a range of addictions, including to opioids, sex, food, and gambling.

The FTC had previously warned defendants on numerous occasions that making unsubstantiated addiction treatment claims is against the law. Khoury and AWAREmed, a set of companies Khoury controls that operate as a medical clinic, apparently ignored such warnings, causing the Justice Department to try and permanently halt defendants’ deceptive advertising and recover civil penalties. With this complaint the FTC continues its aggressive use of the Opioid Act to fill the hole in its remedial authority after AMG.

Continue Reading In AWAREmed Settlement FTC Says Opioid and Chronic Disease Ad Claims Must Be Backed by Science

Earlier this month, New York Attorney General Letitia James issued a Notice of Proposed Rulemaking aimed at setting greater guardrails against price increases during emergencies. The action comes exactly one year after James first initiated the rulemaking process by seeking comment regarding potential price gouging during the COVID-19 pandemic.

After amending the price gouging statute to expand its scope, in 2020 the New York legislature granted James rulemaking authority. In March 2022, James launched the first rulemaking process with an Advance Notice of Proposed Rulemaking, which sought public comment on whether and how the attorney general might provide regulatory guidance in the area of price gouging. Advocacy groups, consumers, industry representatives, and academics submitted comments, which have informed James’s proposed rules. The proposed rule tightens the screws on companies the AG believes are taking unfair advantage of market disruptions.

Continue Reading New York AG Proposes New Price Gouging Rules

Last month, the National Advertising Division of BBB National Programs reviewed Pier 1’s subscription rewards program and recommended that the company provide clearer disclosures of the automatic renewal program.

The case, brought as part of NAD’s monitoring activities, analyzed the Pier 1 Rewards program, a subscription-based customer loyalty program through which customers are charged a recurring monthly or annual fee. The membership provides a 10% discount sitewide and free shipping and returns on eligible items.

Continue Reading The National Advertising Division Recommends That Pier 1 Modify Subscription Disclosures

The Ninth Circuit has never been shy about declining to compel arbitration, and the Court has issued multiple cases outlining what constitutes sufficient notice of certain provisions in consumer-facing terms and conditions, including website terms and conditions.

Just last year, in Berman v. Freedom Financial Network LLC, the Court agreed that a motion to compel arbitration should be denied where the plaintiff alleged that he did not see a notice stating, “I understand and agree to the Terms & Conditions which includes mandatory arbitration.”

The Court noted that the text that purported to notify users that they were agreeing to a mandatory arbitration provision was displayed “in a tiny gray font considerably smaller than the font used in the surrounding website elements, and indeed in a font so small that it is barely legible to the naked eye.” The Court further criticized how the notice was “further deemphasized by the overall design of the webpage, in which other visual elements draw the user’s attention away from the barely readable critical text.”

Continue Reading Ninth Circuit Rejects Dark Patterns Challenge to Arbitration Agreement

On February 27, 2023, the Supreme Court granted the certiorari petition of the Consumer Financial Protection Bureau (CFPB) to hear a case that could cast doubt on all of the regulations that have been promulgated by the bureau to date, as well as all pending investigations and litigation brought by the agency.

The Court will consider in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA) whether the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution, which says, “no money shall be drawn from the Treasury, but in consequence of appropriations made by the law.”

Continue Reading Supreme Court Agrees to Hear Case Involving CFPB Funding

Last week, the Federal Communications Commission (FCC) issued a Notice of Proposed Rulemaking proposing to “ban the practice of obtaining a single consumer consent as grounds for delivering calls and text messages from multiple marketers on subjects beyond the scope of the original consent.”

According to the FCC, the proposed rule’s intent is to prevent lead generators from obtaining consent to receive calls and texts from multiple “partner companies” identified through a hyperlink rather than on the same page where consent is obtained. Implementing this rule could drastically change the way lead generators obtain consent for marketing calls and texts under the Telephone Consumer Protection Act (TCPA).

Continue Reading FCC Proposes Rule to “Close the Lead Generator Loophole,” with Business-Changing Ramifications

The first quarter of 2023 hasn’t started much better for the blockchain and cryptocurrency industry than the fourth quarter of 2022 ended. Last week, in Friel v. Dapper Labs, Inc et al., a federal judge declined to dismiss a class action complaint alleging securities law violations, finding that the Plaintiffs plausibly alleged that the non-fungible tokens (NFTs) sold on the NBA’s Top Shot platform could be securities. The ruling was the first of its kind, and while the court expressly stated that it is narrow in scope and other NFTs may not be securities, the holding could ultimately have far-reaching implications for other NFT projects and marketplaces as applied, particularly in today’s uncertain environment.

NBA Top Shot is an NFT platform, owned and operated by Dapper Labs, that allows consumers to buy, sell, and trade “Moments” NFTs (digital video clips of player highlights) on Dapper Lab’s Flow Blockchain. On February 22, 2023, the United States District Court for the Southern District of New York denied Dapper Labs’ motion to dismiss, holding that although “it is a close call and the Court’s decision is narrow,” Moments NFTs qualify as securities under the Howey test, the four-pronged test created by the Supreme Court in SEC v. Howey Co. to determine whether certain transactions qualify as investment transactions and are thus regulated securities. In its decision to deny the motion to dismiss, the court focused on prongs two and three of the Howey test.

Continue Reading Layup or Airball? Court Holds NBA Top Shot NFTs May Be a Security in Friel v. Dapper Labs

In what could be a seminal case of the Internet age, the U.S. Supreme Court this week heard arguments in Gonzalez v. Google, its first case concerning the hotly debated Section 230 of the Communications Decency Act. The case’s potential ramifications might be gleaned from the 70-plus amicus briefs filed by major companies, states, elected officials, and organizations.

Section 230 provides immunity to Internet platforms from liability arising out of third-party content posted to the platform’s websites.  The statute prevents a “provider or user of an interactive computer service” from being treated as “the publisher or speaker of any information provided by another information content provider.” In this case, the Gonzalez family sued YouTube for making targeted recommendations of recruitment videos created by the terrorist organization ISIS. The Gonzalez’s daughter died in an ISIS terrorist attack, and they claim that Section 230 should not shield YouTube from civil liability when its algorithms recommended harmful content such as these videos.

YouTube’s parent company, Google, countered that almost every major Internet platform uses algorithms to provide content to users, for a variety of reasons, and that limiting Section 230 to exclude protection where algorithms are used would stifle the Internet as it’s known today.

Although oral argument at the Supreme Court cannot predict the outcome of a case, it provides insight into what issues concern the justices. With their questions, the justices grappled with whether the use of algorithms by Internet platforms created content.  They spent much of the argument trying to distinguish the difference in outcomes, if any existed, between Internet platforms merely organizing and prioritizing content versus taking actively recommending and pushing content to users.

Justice Clarence Thomas asked if and how a “neutral” algorithm recommending content could be seen as aiding and abetting unlawful conduct. The same algorithms that push extreme terrorist content could also push rice pilaf recipes or cat videos, to name some of the examples posed at argument.

Justice Sonia Sotomayor queried whether the platforms could be held liable for writing algorithms that inadvertently discriminate against a class of individuals. Google’s counsel responded that such an interpretation would permit a deluge of negligence and product liability claims, with any user able to bring a lawsuit if they were unhappy with how platforms presented content to them.

A ruling that curtails Section 230’s immunity could change the kind of content that users see. Google warned that if the Court adopted the Gonzalez’s reading of Section 230, platforms might be forced to aggressively censor third-party content, including advertisements, making sure only the most benign content is allowed to appear on their sites.

The justices also openly worried about the practical consequences of opening platforms to suit based on third-party content. Chief Justice John G. Roberts noted that enormous amounts of content are fed to users based on individualized metrics. Justice Brett M. Kavanaugh also noted such a change could lead to a flood of lawsuits and nodded to the concern that such a change could “crash the digital economy.”

Justice Samuel A. Alito and Justice Ketanji Brown Jackson appeared amenable to reviewing how the lower courts have interpreted Section 230. Alito suggested that any content posted online that is not displayed randomly by platforms could be considered “publishing” and therefore outside of Section 230’s protection. Jackson questioned Google’s counsel about whether Congress had today’s algorithms in mind at all when it crafted those protections.

The Solicitor General’s Office appeared to take a middle-ground view, seeking to preserve the distinction between a platform’s decision about how to distribute third-party content and the content itself. The government did not support a liability exception for when a platform makes a recommendation without the user requesting it, but did support exemption if a platform somehow incorporated its own comment or endorsement of that third-party content.

In response to Kavanaugh’s concern that such an exemption would capture almost all algorithmic actions, the government noted that if a state legislature enacted legislation that prohibited Internet platforms from prioritizing companies that advertised with them, there was an open question of whether that violated the Commerce Clause or First Amendment. The government noted that it preferred courts to look at the elements of the cause of action rather than whether immunity was proper under Section 230.

In a lighter moment during arguments, Justice Elena Kagan dryly noted that the Court was not composed of the “nine greatest experts on the Internet” and asked why they should not leave it to Congress to amend Section 230.

The Court is expected to release a decision this summer. How it decides the Section 230 question may shape how content is shared on the Internet. Once the Court issues its decision, and if it decides to hear whether to review the constitutionality of Texas and Florida’s censorship laws, the Internet landscape faces potentially significant changes in the near future.

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Gather your W-2’s and call your CPAs! Tax season is upon us, and that means one thing for the FTC—another flurry of activity in its ongoing action against Intuit, Inc., one of the largest online tax-filing services. Recently, the FTC issued an order denying complaint counsel’s motion for summary decision in the case, concluding that the matter will proceed to a full evidentiary hearing—the FTC’s administrative version of a trial.

As we previously reported, the FTC initially brought its case against Intuit in March 2022, alleging that the marketing of TurboTax as free was misleading because the free service applies only to those customers filing “simple” tax returns, while the service charges many other customers at the end of the filing process. Two months later, we wrote about the states’ investigation of Intuit, which overlapped with the FTC case, and the resulting $141 million settlement with all 50 states and the District of Columbia. Along with the restitution payment, Intuit was required to cease its “free” advertising campaign as part of the settlement.

Continue Reading FTC’s Case Against Intuit Isn’t Won—Yet