On November 10, the Federal Trade Commission (FTC) released an aggressive new Policy Statement outlining the current FTC’s view on what constitutes “unfair methods of competition in or affecting commerce” under Section 5 of the FTC Act. Section 5 of the FTC Act covers conduct that violates other federal antitrust laws but also other methods of unfair competition. How broadly that “penumbra” of Section 5 should be interpreted has been the subject of debate for years. Consistent with her stated intent to increase broadly the reach of the antitrust laws, FTC Chair Lina Khan has used the Policy Statement to advocate for an exceptionally aggressive view of the conduct that the FTC may challenge under its antitrust authority, eschewing economics-based analysis for conduct that the Commission believes is coercive, exploitative, or abusive. The Statement also dismisses past litigation setbacks where the FTC has asserted Section 5 authority but has been rebuffed by the courts, explaining that even when courts find against the agency on factual grounds, they have still generally affirmed the FTC’s broad and robust authority under Section 5.

FTC Commissioner Christine Wilson issued a detailed and scathing critique of the Policy Statement, citing the legal and policy problems she believes the Statement causes.

Continue Reading What the FTC’s Aggressive New Policy Statement on Unfair Methods of Competition Means for Advertisers

Last week, the Federal Trade Commission and state attorneys general in Arizona, California, Georgia, Illinois, Massachusetts, New York, and Texas settled with advertising giants Google and iHeartMedia for deceptive advertising and endorsements under Section 5 of the FTC Act.

The FTC and states allege that Google paid iHeartMedia to record and broadcast ads featuring “radio personalities” endorsing Google’s phone, the Pixel 4. In the ads, the radio personalities lavished praised on the Pixel 4, using first-person language to describe the Pixel 4’s functionalities and calling it their favorite phone.

The ads aired over 11,200 times between October and December 2019. The problem? The Pixel 4 had not been released for sale, and Google was unable to provide the phones to the radio personalities before the ads aired. In essence, the radio personalities were extolling the Pixel 4 without ever having used one.

Continue Reading FTC Sues Advertising Behemoths Google and iHeartMedia for Deceptive Endorsements by Radio Personalities

On November 17, 2022, the FCC issued new broadband labeling rules that require Internet Service Providers (ISPs) to publish broadband “nutrition labels” in a standardized format informing customers of the pricing, performance, fees, data allowances and other details of each of their currently available broadband offerings offered to mass market residential and small business customers. The required labels, which apply to both fixed and mobile broadband services, must be disclosed to customers at the point of sale.

The new standardized label is designed to resemble a food nutrition label.

Continue Reading FCC Requires Consumer Broadband Labeling

Just weeks after President Biden and Chinese leader Xi Jinping met face-to-face to restore dialogue between the two countries, the Federal Communications Commission adopted new rules that could limit national security threats posed by Chinese-made communications and electronic devices. The FCC said last week it adopted the new rules “to further secure our communications networks and supply chains from equipment that poses an unacceptable risk to national security.”

The rules will prohibit market access of certain equipment in the United States by banning the authorization of items the FCC believes pose national security concerns. The agency said it will do this by expanding the devices, communications equipment, and entities placed on its “Covered List” and require those seeking equipment authorization to state that they are not putting those items into the market.

Continue Reading U.S.-China Relationship: Assessing the Risk of Marketing Electronics Made Outside the United States

At its most recent open meeting, the Federal Trade Commission voted unanimously to issue an Advance Notice of Proposed Rulemaking, seeking public comment on whether to modify or expand its Business Opportunity Rule.

The Business Opportunity Rule, first adopted in 2012, requires sellers of “business opportunities” to be able to substantiate any earnings claims they make, and to make certain enumerated disclosures pertaining to the potential transaction. These disclosures include:

  • The seller’s identifying information
  • Whether the seller is making earnings claims and, if so, substantiation for those claims
  • Whether the seller, affiliates of the seller, or its leaders have been involved in legal actions concerning misrepresentation, fraud, securities law violations, or unfair or deceptive practices in the previous 10 years
  • The terms of the seller’s cancellation or refund policy, if it has one
  • A list of people who have purchased the business opportunity in the previous three years
Continue Reading Proposed Rulemaking: FTC Dials in on Business Opportunities

Recent trends indicate that consumers and the U.S. government are paying more attention to where products are sourced from.  

The Biden administration, for example, has made efforts to raise federal procurement standards for products “Made in America.” Specifically, the administration in March announced a final rule that outlined gradual increases to the “Made in America” requirement. As of October 25, the rule requires that federally procured products under the Buy American Act must have 60% of the value of their component parts manufactured in the United States. Under the prior rules, the Buy American Act only required that products contain 55% component parts manufactured in America in order to qualify for federal procurement. The threshold will further increase to 65% in 2024 and 75% in 2029.

Continue Reading An Update to “Made in USA” for Federally Procured Products and FTC’s “Made in USA”

Last week, the Federal Trade Commission (FTC) issued a press release, announcing a $100 million settlement with Vonage, an internet-based telephone service company, for alleged violations of the Restore Online Shoppers’ Confidence Act (ROSCA). The action underscores the FTC’s continued focus on “dark patterns” and illustrates the agency’s efforts to require companies to go beyond the plain requirements of ROSCA in enforcement settlements.  

The FTC’s complaint alleged that Vonage offered free trials to business and residential customers for telephone plans. Unless the customer took affirmative action to opt out before the trial ended, Vonage would enroll the customer in an autorenewing monthly phone plan.

Continue Reading Vonage, Autorenewals, and the FTC’s Ever-Expanding Interpretation of ROSCA

Cybersecurity is a growing concern for all organizations, especially those that store, process, and transmit sensitive data. As commercial mailing and publishing continue to digitize, business operations rely on sharing growing volumes of data. This includes, for example, sharing subscriber and mailing information with the U.S. Postal Service (USPS), data aggregators, and other partners.

Increasingly, federal and state laws require that such information be protected with cybersecurity safeguards and require notification to consumers in the event of unauthorized access or breach. Liability and loss of consumer confidence are important risks that organizations often manage by updating their legal and technical processes to better reflect the modern cyber threat environment.

Continue Reading Evaluating the Cybersecurity Risk of Mailing and Publishing Partners

Supply chain disruptions and accompanying inflation for raw materials have challenged many businesses. A recent case involving paint retailer Sherwin-Williams shows how not to deal with these challenges. In a putative class action, plaintiffs accused Sherwin-Williams of surreptitiously adding a hidden “Supply Chain Charge” to every sales transaction. On October 24, the U.S. District Court for the Northern District of New York said the claims may proceed.

The plaintiffs allege they suffered economic injury as a result of a “deceptive bait-and-switch scheme” perpetrated by Sherwin-Williams. They asserted claims of deceptive acts or practices under New York General Business Law § 349, breach of contract, and unjust enrichment. On Sherwin-Williams’ motion to dismiss, the Northern District of New York tossed the unjust enrichment claim, but held that the Section 349 claim and breach of contract claim were plausibly alleged.

Continue Reading Supply Chain Surcharges? Plaintiffs Say You Better Not Conceal Them

Last week at its monthly open meeting, the Federal Trade Commission (FTC) unveiled two new rulemaking proceedings: the first deals with deceptive customer reviews and endorsements and the second with so-called junk fees. 

Both rulemakings are in their nascent stages. Last week’s actions—the issuance of two advance notices of proposed rulemaking (ANPRs)—simply request information from the public on the consumer harms caused by fake and paid reviews and junk fees. The road from ANPR to final trade rule is a long and winding one, particularly given the number of new rulemakings upon which this FTC has embarked, which Commissioner Christine Wilson has termed “Ruleapalooza.”

Continue Reading FTC Issues New Rulemaking Proceedings on Customer Reviews and “Junk Fees”