With the holiday shopping season in full swing, companies will soon begin the annual fight for every consumer dollar. But before companies can make the sale, they will face an even more daunting task: grabbing customer attention in the crowded world of online shopping.

As social media companies integrate shopping features into their base platforms, an industry shift often called “social commerce,” influencer marketing becomes an increasingly important method for driving sales.

As innocuous as those 30-second influencer marketing social media clips may seem to be, companies and influencers should be aware that the Federal Trade Commission (FTC) is keeping a watchful eye. This month, the agency issued dozens of warning letters to influencers for the lack of adequate disclosures in their social media posts as required by the recently updated FTC Endorsement Guides.

Continue Reading Influencers on Notice: FTC Issues Warning Letters for Inadequate Disclosures

On Thursday, October 12, a bipartisan group of senators—Chris Coons (D-Del.), Thom Tillis (R-N.C.), Marsha Blackburn (R-Tenn.), and Amy Klobuchar (D-Minn.)—released a Discussion Draft of the Nurture Originals, Foster Art, and Keep Entertainment Safe (dubbed the “NO FAKES”) Act that would protect the voice, image, or visual likeness of all individuals from unauthorized AI-generated digital replicas, also referred to as “deepfakes.” This draft bill, while focusing on protections required by the advancement of AI, would establish the first federal right of publicity—the right to protect and control the use of one’s voice, image, and visual likeness. The NO FAKES Act could have widespread impacts on the entertainment and media industries, among others. 

Generative AI has opened new worlds of creative opportunities, but with these creative innovations also comes the ability to exploit another’s voice, image, or visual likeness by creating nearly indistinguishable digital replicas. This has caused great concern among musicians, celebrities, actors, and politicians regarding viral AI-created deepfakes circulating on social media and the Internet more broadly. To date, advancements in AI technology used to create digital replicas have outpaced the current legal framework governing unauthorized use. Although there are existing laws that may be used to combat digital replicas, these laws either vary from state to state, creating a patchwork of differing protections based on where one is located, or do not directly address the harms caused by producing and distributing unauthorized digital replicas.

Continue Reading AI Deepfake Bill: Senators Contemplate the First Federal Right of Publicity

The Federal Trade Commission (FTC) announced it has reached a settlement with the bankrupt crypto company Voyager over the company’s alleged deceptive crypto marketing practices. Specifically, the FTC’s complaint alleges that from at least 2018 until its declaration of bankruptcy in July 2022, Voyager enticed consumers with promises that their deposits were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe.” However, consumers’ deposits with Voyager were not eligible for FDIC insurance and were not protected in the event that Voyager failed.

The FDIC only insures deposits held by insured banks or savings associations, and only up to certain limits. Voyager, however, is not a chartered bank or savings association. While Voyager’s bank partner was FDIC-insured, FDIC deposit insurance protects deposits only in the event of the insured institution’s failure, not the failure of a non-bank partner in the event of that company’s failure. According to the FTC, Voyager’s false assurance lured customers into entrusting their funds to the company, resulting in significant losses for those affected by the company’s bankruptcy in July 2022.

Continue Reading FTC Settles with Bankrupt Crypto Company, but Pursues CEO for Deceptive FDIC Claims

In recent years, independent agencies have continued to face a number of constitutional and statutory challenges before the Supreme Court. AMG Capital Management struck down the Federal Trade Commission’s authority to obtain equitable monetary relief under Section 13(b). Seila Law severed the Consumer Finance Protection Bureau (CFPB) commissioner’s for-cause removal protections. This term, the Supreme Court will determine whether the CFPB’s funding structure is constitutional in CFPB v. CFSA. And, as we’ve previewed earlier this year, the Court will weigh three constitutional challenges to the SEC in SEC v. Jarkesy.

A quick primer: The Supreme Court will review three constitutional infirmities that the Fifth Circuit determined that the SEC suffered. First, the Fifth Circuit held that when the SEC brought claims for civil penalties in administrative proceedings, it deprived Jarkesy of its Seventh Amendment right to a jury trial. Second, the Fifth Circuit held that Congress unconstitutionally delegated legislative powers to the SEC without an “intelligible principle” by providing it with the discretion to choose whether to bring an enforcement action for monetary penalties in Article III courts or before an administrative law judge (ALJ). Finally, the Fifth Circuit determined that the statutory removal restrictions for SEC ALJs are unconstitutional.

Continue Reading Tracking the Impact of <em>Securities and Exchange Commission v. Jarkesy</em> and Other Constitutional Challenges Against the FTC

This week, the Federal Trade Commission (FTC) released a Proposed Rule, “Rule on Unfair or Deceptive Fees.” The Proposed Rule comes after the FTC solicited comments through its Advance Notice of Proposed Rulemaking in November 2022. The Proposed Rule would cover any business selling in physical locations and online. There is one exception for motor vehicle dealers, which is addressed in a separate rule. The below requirements apply to businesses regardless of whether they are providing the goods or services themselves (e.g., an online travel agent advertising for a hotel chain).

The FTC broadly identified two practices that it intends to regulate: (1) omitting mandatory charges and fees from advertised prices; and (2) misrepresenting the nature and purpose of the charges or fees.

Continue Reading FTC Releases Proposed Rule Targeting “Junk” Fees

On October 3, the Supreme Court heard oral argument in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited, where the Court is reviewing the Fifth Circuit’s opinion that struck down the Payday Lending Rule because the Fifth Circuit found that the Consumer Financial Protection Bureau’s (the “Bureau”) funding structure is unconstitutional. While the Fifth Circuit decision was limited to the Payday Lending Rule, a ruling upholding the Fifth Circuit’s decision would have severe ramifications for the Bureau and could potentially lead to the demise of the agency without congressional action.

As a refresher, the Fifth Circuit held that the Bureau’s “unique” funding structure violates Article I of the Constitution—vesting Congress with appropriation power—because the agency is not funded through congressional appropriations. Rather, the Bureau receives its funding from the Federal Reserve, which is funded through bank assessments. In short, the Fifth Circuit found that Congress had abdicated its “power of the purse” and had run afoul of the nondelegation doctrine where it has no involvement in the CFPB’s ongoing funding.

Continue Reading C[FPB] You Later? Agency’s Future Hangs in the Balance After Oral Argument

Last week, the Federal Trade Commission (FTC) won a large battle in its extended war with Intuit, the makers of TurboTax tax-preparation software. An administrative law judge (ALJ) issued a lengthy initial decision, ruling that Intuit’s advertisement of a TurboTax offering as “free” was deceptive, ordering Intuit to cease and desist future advertising related to “free” claims. Specifically, Intuit is prohibited from representing that any good or service is “free,” unless it is free for all consumers and the advertisement clearly and conspicuously discloses any terms that would limit the offer. The ALJ’s ruling is subject to appeal to the full commission.

Here are some key takeaways for advertisers from the more than 200-page opinion:

Robust Disclosures Are Needed for Any “Free” Claims

Advertisers that want to make “free” claims, while minimizing their risk of FTC attention, need to include clear and conspicuous disclosures highlighting any applicable conditions that impact the availability of the “free” offer.

In the Intuit proceeding, the FTC argued that Intuit’s “free” claims were deceptive because most consumers did not qualify for the “free” program, and Intuit failed to clearly and conspicuously disclose that to consumers. According to the FTC, the “free” tax return program was free to consumers only if their tax return qualified as “simple”—a standard only one-third of taxpayers satisfied. Intuit responded that any “free” claims were sufficiently disclosed. Ultimately, the ALJ agreed with the FTC, finding that any disclosures Intuit included were “virtually lost” in the surrounding information and were therefore inadequate.

Avoid Relying on Boilerplate Language to Alter a Message Taken from an Advertisement

Advertisers should be wary of relying on boilerplate disclosures linked to disclaimers such as “see details” and “find out more.” The FTC rejects such schemes as failing to meet the clear and conspicuous disclosure requirement in most instances.

Intuit had contended that its repeated use of links to “find out more” in its advertising campaigns sufficiently communicated that the “free” product offering was conditional. The ALJ held these statements were not enough to counter the broader “free” messaging and reasoned that boilerplate language in general is unlikely to ever be sufficient to alter the broader message of an advertisement.

Avoid Treating Your Website Like a Safety Net

Advertisers should be wary of relying on disclaimers contained on one advertisement medium to cure arguable deception on another medium. In other words, if a television advertisement is considered deceptive, a website that provides all necessary and accurate information will not cure that deception.

Throughout the proceeding, Intuit relied heavily on the robust disclaimers on the TurboTax website to clarify any ambiguity regarding the “free” claims shown in television advertisements, highlighting the website’s color-contrasted hyperlinks, pop-up screens with various disclaimers, and other clarifying information. The ALJ rejected this cure argument for several reasons.  

One key reason was that customer survey evidence demonstrated that actual customers believed TurboTax was unconditionally free even after viewing the website, so the alleged deception was not actually cured.

The ALJ also ruled that Intuit’s television ads constituted a deceptive “door opener,” which cannot be cured by giving truthful information afterward. Intuit attempted to avoid the deceptive door opener argument by arguing that the complexity of online tax returns meant reasonable consumers did not expect to see an “information overload” of all qualifying details in every ad. The ALJ rejected this position, stating instead that companies concerned about information overload should simply avoid advertising claims that trigger the need for clarifying disclosures.

The ALJ also reasoned that the public is under no responsibility to investigate the truth of advertising claims, holding that correct information in some advertisements cannot be used to counter a deceptive claim contained in other advertisements.

Intuit has already stated that it intends to appeal the decision, which could include an appeal to the full commission and then to a Federal Court of Appeals. We’ll continue to monitor this matter as it moves through the appeals process.

To stay on top of these developments, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter. To learn more about Venable’s Advertising Law services, click here.

* The authors thank Micah Wallen, an associate in Venable’s Washington, DC office, for his assistance in writing this article.

On September 19, Sam Levine, the director of the Federal Trade Commission’s Bureau of Consumer Protection, outlined the agency’s priorities at the annual conference of the National Advertising Division. Here are the highlights:

Levine outlined three pillars of the enforcement agenda:

  • Focus on the practices that cause the most consumer harm
  • Obtain relief that not only halts the violative conduct but also changes incentives to engage in such conduct in the future
  • Use tools beyond case-by-case enforcement to change behavior (think rule making)

After also noting that the pace of enforcement at the FTC had increased, Levine then focused on some substantive areas of concern, starting with junk fees and dark patterns.

Continue Reading FTC Consumer Protection Chief Sam Levine Outlines FTC Priorities at the NAD Conference

The FCC has released an Order on Reconsideration resolving petitions that asked the Commission to reconsider or clarify certain broadband labeling requirements. Please see our summary of the original broadband labeling requirements. In the new Order, the FCC:

  • Affirmed Broadband Providers’ Obligation to Itemize Fees: The FCC affirmed that providers must itemize any fees added to base monthly prices, including any fees related to government programs they choose to pass through to consumers. Merely stating “additional fees may apply” or that “fees may vary by location” will not be sufficient. Note that if a provider does not itemize additional fees but just incorporates them into their monthly price, it can simply state “None” on the label.
  • Affirmed Broadband Providers’ Obligation to Fully Describe Data Allowances: The FCC affirmed that providers should keep their descriptions of data allowances simple, and only describe the details in their more complete service descriptions in advertising materials and on their websites. A request that providers be able to use multiple lines of data allowance descriptions on the label was denied. The FCC clarified that in disclosing charges for additional data or deductions in service for using data in excess of the amount on the plan, providers are required to associate the increments of additional data and additional charges with the data tier of the data cap on the label.
  • Affirmed That Enterprise Offerings Are Not Covered by the Labeling Requirement: The FCC affirmed that enterprise broadband offerings are not mass-market retail services covered by the labeling requirement.
  • Reconsidered the Documentation Requirement for Interactions with Consumers at Alternative Sales Channels: The FCC reconsidered the requirement that a broadband provider document every instance when they direct a consumer to a label at an alternative sales channel and retain such documentation for two years. This requirement will now be deemed satisfied if the provider (1) establishes the business practices and processes it will follow in distributing the label through alternative sales channels; (2) retains training materials and related business practice documentation for two years; and (3) provides such information to the Commission upon request, within 30 days.
  • Clarified Provider Flexibility in Identifying Taxes: The FCC clarified that a broadband provider has the flexibility to state “taxes included” when it has chosen to include taxes as part of its monthly base price.

Last week, the Federal Trade Commission (FTC) and six states permanently banned Roomster Corp. and its owners, John Shriber and Roman Zaks, from purchasing or incentivizing consumer reviews as part of a settlement over charges that they utilized fake reviews to lure consumers into paying for access to nonexistent rental listings. The settlement comes in the middle of a public notice and comment period for the proposed rule by the FTC on fake reviews that would cover much of the conduct alleged of Roomster.  

According to the complaint, Roomster allegedly bought tens of thousands of fake reviews that were used to funnel unwitting customers to the company’s rental listings, which often ended up being fake or nonexistent.

Continue Reading Bad News for Fake Reviews: FTC Issues Permanent Ban on Roomster