Regulatory and Litigation Developments for Advertisers and Marketers
Alex Megaris focuses on complex regulatory investigations and government enforcement matters involving state attorneys general, the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), state regulatory agencies, and the U.S. Congress. Alex also works closely with Venable's government affairs team in advocating for clients before these agencies. She has extensive experience with consumer protection laws, such as state unfair, deceptive and abusive practices (UDAAP) laws, the FTC Act, the Consumer Financial Protection Act, the FTC's Telemarketing Sales Rule, and product-specific regulations, including those regulating credit reporting, loan servicing, and debt collection.
Venable partners Len Gordon and Alexandra Megaris will present “What You Need to Know About FTC’s Proposed Changes to Its Endorsement Guides.” The Endorsement Guides, first issued in 1980 and last amended in 2009, reflect the Commission’s interpretation of how the FTC…
Last week, the Federal Trade Commission filed a lawsuit in federal court in California against Gravity Defyer Medical Technology Corporation alleging the company made unsubstantiated claims that its footwear reduces knee, back, ankle, and foot pain and helps with conditions such as plantar fasciitis, arthritis, joint pain, and heel spurs.
But the FTC’s case is less about footwear than it is about the imaginative ways the agency continues to find ways to pursue monetary relief in the wake of AMG Capital Management LLC v. FTC. There are a few things here worth discussing.
First, the FTC is seeking civil penalties. How, you might ask? The complaint alleges that Gravity Defyer’s owner, Alexander Elnekaveh, violated a 2001 FTC consent order involving his former business, Gadget Universe, which sold an automotive aftermarket fuel-line magnet device. Under the order, Elnekaveh and Gadget Universe agreed to “not mispresent, in any manner, expressly or by implication, the existence, contents, validity, results, conclusions, or interpretations of any test, study or research.”…
The Federal Trade Commission’s May 2022 open meeting, Alvaro Bedoya’s first since being sworn in as the agency’s fifth commissioner on May 16, considered a request for public comment on proposed amendments to its Guides Concerning the Use of Endorsements and Testimonials in Advertising. After a staff presentation on commissioners’ proposed updates and statements, the agency unanimously approved the request for public comment.
The Endorsement Guides, first issued in 1980 and last amended in 2009, reflect the commission’s interpretation of how the FTC Act applies to endorsements and testimonials in advertising. Proposed updates to the guides include the following:…
Venable hosted another jam-packed session on the regulatory and litigation risks facing the lead generation industry today, and strategies for mitigating them. In the webinar, Daniel Blynn, Alexandra Megaris, and Jonathan Pompan covered federal and state law enforcement priorities; TCPA, legislative, licensing, and regulatory developments; and more.
Key takeaways:
…
A lawsuit filed by the CFPB last week against a national credit reporting agency provides some insight into the types of website features and designs that regulators like the Consumer Financial Protection Bureau and Federal Trade Commission will target. As we covered previously, digital dark patterns—or website design, features, and interfaces used to allegedly deceive, steer, and manipulate users—are a priority for both rulemaking and enforcement actions by the FTC. Although the focus has been on website features that “trick or trap” consumers into subscriptions, the potential for broad and arbitrary application of this concept is worrisome. What is the line between a website that is acceptably optimized for conversion and one that is illegally steering users to make purchases?
In the highly detailed complaint, the CFPB alleged, among other things, that the net impression of various advertising messages, combined with the design of the webpage where users landed when clicking on the ads, obscured the nature of the offer (a month-to-month subscription of a credit-monitoring service and credit score), the status of a user’s enrollment in the service, and the purpose of collecting a user’s payment information.
More specifically, the complaint described how call-to-action buttons, email subject lines, font color and size, text placement, and website flow were employed to confuse consumers who were seeking information about or copies of their annual free credit report and steer them instead into unwittingly purchasing a subscription for credit monitoring.…
Continue Reading Latest CFPB Lawsuit Sheds Light on Digital Dark Patterns
On March 23, Utah Governor Spencer Cox signed into law sweeping amendments to the state’s Business Opportunity Disclosure Act (BODA). The amendments expand the scope of the statute to cover a broad spectrum of business activity. The amendments apply to any seller of a “business opportunity” who represents to the buyer that the buyer will—or may—derive income from the business that exceeds the amount the buyer pays to buy the product, equipment, supply, or service.
Prior to these amendments, BODA applied to sellers of “assisted marketing plans”—defined as the sale or lease of any product, equipment, supplies, or service to a buyer for an initial payment of $500 or more for the purpose of enabling the buyer to start a business—who also made one of four qualifying representations to buyers about the plan. The first three representations are largely unchanged in the new amendments, but the fourth, which has been the focus of litigation under BODA, has changed. The prior language covered representations: that upon payment by the buyer of more than $500 to the seller, the seller will provide a sales program or marketing program that will enable the buyer to derive income that exceeds the price paid.…
Continue Reading Biz Opps Stung, Once Again, by the Beehive State
In a bulletin published last week, the Consumer Financial Protection Bureau (CFPB) warned banks and other financial companies against impeding honest reviews of consumer financial products and services. Although it does not cite a specific study for financial products and services, the CFPB’s bulletin describes how online reviews impact other industries across the economy.
We have been covering the Federal Trade Commission’s (FTC) efforts to combat what it sees as rampant customer review fraud, and now the CFPB is preemptively addressing its growing concern with how online reviews will play into customers’ decision-making when they are choosing from among several financial providers.
At first glance, the CFPB’s foray into the deceptive use of online reviews might appear to come out of left field, but it reflects a more general theme of following the FTC’s playbook and scrutinizing financial service providers more holistically, including their marketing practices. The bulletin itself cites to several recent FTC settlements in this area as persuasive precedent for application of the CFPB’s UDAAP authority.…
Continue Reading The CFPB Warns Companies Against Impeding or Manipulating Honest Customer Reviews
On Friday, March 11, the Federal Trade Commission (FTC) filed an administrative complaint against HomeAdvisor, Inc., charging it with using deceptive and misleading tactics to sell leads for home improvement projects to small businesses, including small “gig-economy” workers. The action underscores the current administration’s effort to protect workers, especially those engaged in the gig economy through large platforms.
The FTC alleges that since at least 2014, HomeAdvisor—a popular service that matches service providers with consumers seeking home improvements—made false, misleading, and unsubstantiated claims about the quality and source of leads it sells, and about the likelihood that the leads would result in actual jobs. According to the complaint:…
The latest edition of the FTC’s recent practice of holding open meetings brings a potential rule regarding earnings claims to the forefront. During the FTC’s open meeting, the Commission unanimously approved issuing an Advance Notice of Proposed Rulemaking with respect to earnings claims. As the Commissioners pointed out in their comments (additional information below), the motivation for this rulemaking is to repair the FTC’s ability to recover monetary relief for consumers after the Supreme Court’s decision in AMG Capital Management.
Prior to the vote, the Commissioners allowed Melissa Dickey from the Division of Marketing Practices to give a presentation on the FTC’s historical experience with earnings claims and the Division’s recommendation. Ms. Dickey recommended that the Commission move forward with the rulemaking process, and pointed to two primary reasons. First, the Division views false, misleading, and unsubstantiated earnings claims as especially problematic to consumers who, as Ms. Dickey postulated, ultimately rely on these assurances and, as a result, end up in significant debt. Second, the Bureau believes that these earnings claims are widespread, and impact almost every community, especially during the pandemic era, where purported bad actors target those who are seeking to earn extra income while working remotely.…
Continue Reading FTC Approves Rulemaking Process for Earnings Claims
It might be hard for some to imagine, but the Federal Trade Commission (FTC) is feeling groovy. This month, the agency released two guidance documents that track best practices to prevent consumers from being misled when marketers solicit and pay for online reviews and when review platforms feature online customer reviews.
The new documents are like two sides of an old-school vinyl album. Side A is for online retailers and marketers, while Side B is for review platforms (i.e., consumer review websites). The lyrics might be slightly different, but the tunes make for a pretty good mash-up.…
Continue Reading Federal Trade Commission Releases Online Customer Review Guidance
