State attorneys general nationwide have continued to be aggressive consumer protection law enforcers. In the wake of April’s unanimous Supreme Court decision curtailing the Federal Trade Commission’s (FTC) ability to recoup equitable monetary relief from businesses accused of fraudulent or deceptive practices, state-level enforcement activity and state-federal coordination are expected to increase. In fact, just days after our recent webinar a coalition of state AGs wrote to Congress supporting legislation that would restore the FTC’s authority, while noting that “the states’ own enforcement efforts are fortified through collaboration with the FTC.” In that webinar, Venable partners Eric Berman, of our Advertising and Marketing Group, and Erik Jones, of our eCommerce, Privacy, and Cybersecurity Group, addressed state AG enforcement trends and strategies for responding to a state AG investigation.

Q: How do state AGs become aware of the issues or complaints that might drive an investigation?

A: Consumer complaints drive regulatory investigations, and state AGs may become aware of these complaints in a variety of ways. Consumers can file complaints directly with a state AG office, either online, via telephone hotline, or via “snail mail.” State AG staff may access the FTC’s Consumer Sentinel, a consumer complaint database that is free and available to any federal, state, or local law enforcement agency. State AG lawyers and non-lawyer investigators scour the Better Business Bureau (BBB) websites and so-called “gripe” sites, and may pose as consumers themselves to “secret shop” a targeted business. Finally, state AGs might become aware of your marketing practices through disgruntled former employees (or board members), competitor complaints, national and local media coverage, or referrals from other law enforcers.

Q: How do state AGs decide which cases to pursue?

A: State AGs don’t have unlimited resources to investigate every complaint they receive, so they have to prioritize. Regulators consider various criteria, such as:

  • Type of injury
  • Whether the conduct is causing significant monetary harm
  • Whether there is a risk to public health
  • The characteristics of the victims (i.e., seniors, children, other vulnerable populations)

Some industries or business models are generally considered to be at higher risk of scrutiny. Also, outside pressure to open an investigation, for example from Capitol Hill, an influential trade group, or the media can impact the likelihood of a state AG’s office opening a case.

Q: How do state AGs prioritize their work?

A: State AGs have broad authority and can focus that authority on different issues or marketing practices at different times. They will consider questions such as: What’s happening in the marketplace? What problems are clearly affecting a wide swath of consumers? What issues in the news is the country trying to understand? Given their jurisdiction, state AGs will be in the middle of those conversations. In the 1990s, state AGs were embroiled in litigation over tobacco advertising. In the 2000s, state AGs were very much involved in all of the suits and investigations related to the financial crisis. Today, antitrust is a priority, and there are a number of investigations relating to “big tech.” Healthcare – hospital mergers and opioid marketing – continues to be an issue. Price gouging has been a focus. So have privacy and data security, charity fraud, and countering hate and discrimination. Workers’ rights have become an increasing focus in some offices. The areas of interest are quite varied and impact numerous industries.

Q: How do state AGs organize among themselves?

A: Some argue that the 1990s tobacco litigation came to fruition when state AGs figured out that they can really be a force when working together. The National Association of Attorneys General (NAAG) provides training for AGs so that they understand how to use their authority. They also host conferences devoted solely to consumer protection. These are events where attendees can gain some insight into what the AGs are focused on and where they are heading. It’s an opportunity to engage with them, push back in areas where you think they are getting it wrong, or ask questions if you’re trying to better understand what it is they are doing or what their priorities are. Relationships with state AGs need not only be defensive (i.e., responding to an investigation); it is often beneficial to proactively develop relationships with these enforcers so that you can advocate directly for your position on important issues.

Q: I’ve noticed a trend of AGs going after second-tier entities such as consultants and ad agencies. Do you think this is something to look for in the future in other categories?

A: We have seen this trend at both the federal and state level. Federal regulators have for years looked beyond the alleged “fraudsters and scammers” to target entities that they believe support or facilitate fraud. The FTC has in several cases pursued banks and payment processors that it believed were facilitating fraudulent conduct (even though – outside of the Telemarketing Sales Rule – the FTC lacks aiding and abetting authority), and the DOJ famously engaged in similar tactics during “Operation Chokepoint.” As noted, this is something that we also see at the state level and would expect it to continue.

Want to know more? Click here to watch the full webinar, subscribe to our All About Advertising Law blog, or contact members of our Advertising and Marketing or eCommerce, Privacy, and Cybersecurity groups for help with addressing your unique needs.