The Federal Trade Commission (FTC) recently issued Notices of Penalty Offenses regarding for-profit education, endorsements and testimonials, and money-making opportunities. Prior to this year, the FTC had used its Penalty Offense authority only once in this century. So why the sudden rebirth? In this webinar, Venable attorneys examined the FTC’s authority in this area, the substance of the notices, and their broad implications.

What Is a Penalty Offense?

Under the Penalty Offense authority, the FTC can seek civil penalties against a company or individual if it proves that they had actual knowledge that the FTC had already issued a written decision (after an administrative trial) against another entity that the same conduct was unfair or deceptive in violation of Section 5(m)(1)(b) of the FTC Act. Section 5 enables the FTC to hold the person, partnership, or corporation liable for a civil penalty of up to $43,792 per violation.

In the last few weeks, the FTC has sent out three different notices. The purpose of these notices was to allow the FTC to argue that the recipients had actual knowledge that the FTC had previously ruled certain acts or practices to be unfair or deceptive. Each of the letters specifies that the FTC is not singling out recipients or suggesting recipients are violating the law, which signifies that this is part of an effort to effect broad changes in industry behavior.

Continue Reading FTC’s Notice of Penalty Offenses: What Do They Mean for You?

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.

Continue Reading You Asked, We Answered – State AGs and Consumer Protection: An Update and Outlook

Venable attorneys Eric Berman and Dan Blynn hosted a virtual fireside chat with attorney advisors to four current Federal Trade Commission (FTC) commissioners. Touching on each commissioner’s background and enforcement priorities, the FTC attorney advisors offered insights into best practices and insider perspectives on interacting with the FTC through a series of questions and answers, posed by the Venable team and submitted by audience members. Each panelist spoke on their own behalf, and not on behalf of the FTC, but they provided our audience with unvarnished views on FTC practice and policy.

The panelists were:

  • Austin King, Office of Commissioner Slaughter
  • Sam Levine, Office of Commissioner Chopra
  • Eitan Levisohn, Office of Commissioner Phillips
  • Robin Spector, Office of Commissioner Wilson

This summary distills the broad takeaways and common themes of the discussion. A recording of the webinar with more detailed attorney advisor analysis is available here.

Continue Reading A Fireside Chat and Crystal Ball Readings with FTC Attorney Advisors

The past five years have seen a major uptick in FTC enforcement against alleged charity fundraising scams, along with increased multi-state coordination in this space. Regular readers of this blog already know that, by having read this, this, this, and this. On September 15, 2020, the FTC filed a complaint in the U.S. District Court for the Southern District of New York against fundraiser Outreach Calling, its owner and principal Mark Gelvan, two other related organizations, and three additional individuals. The attorneys general of New York, New Jersey, Virginia, and Minnesota joined the FTC as plaintiffs in the lawsuit. Alongside their complaint, the FTC and states filed proposed stipulated orders against each of the defendants.

The FTC and states allege that the defendants engaged in deceptive telemarketing campaigns on behalf of numerous (and now defunct) “sham” charities. According to the complaint, the Outreach Calling entities induced tens of millions of dollars in charitable donations by telling donors that the recipient charities provided assistance to particularly vulnerable populations, such as disabled and homeless veterans, breast cancer patients, law enforcement officers, and children. In fact, say the plaintiffs, the recipient charities spent very little of the money raised – in some cases only 1 or 2 percent of gross donations – on charitable programs. Instead, approximately 90 percent of the funds raised were paid to the Outreach Calling fundraisers; most of the remaining money funded the personal expenses of the charities’ principals.

The FTC and states brought causes of action under Section 5 of the FTC Act, the Telemarketing Sales Rule, and state charity and anti-fraud laws. To resolve the litigation, the parties have agreed to enter into stipulated orders that permanently ban the defendants from charity fundraising and that impose a collective monetary judgment of approximately $58 million. As is typical in cases like this one, the monetary judgment will be suspended because of the defendants’ inability to pay it; however, each of them must surrender certain assets, and Mr. Gelvan will have to sell two homes and grant the FTC a lien and mortgage on three of his properties in order to secure his payment obligations under the proposed order.

Continue Reading FTC Partners with State AGs in Latest Crackdown on Charity Fundraising

Times of national crisis tend to trigger an uptick in charitable solicitations and charitable giving. And for-profit businesses, including recognizable retail brands, want to do all they can to help as well. As the COVID-19 crisis unfolds, with its far-ranging economic and societal repercussions, many brands are engaging in coronavirus-related commercial co-venture (CCV) activities and cause marketing promotions, advertising to consumers that purchase or use of their product or service will benefit a charity or a charitable purpose.

Although the COVID-19 pandemic has resulted in a delayed federal income tax filing deadline, mortgage relief programs, and other types of suspended governmental requirements, the regulations applicable to charitable sales promotions and the commercial coventurers who carry them on remain fully in place. In some ways, compliance with these rules—particularly disclosure requirements—is more important than ever given the increased desire to act now and do good. There is no “pandemic exception” for compliance with states’ CCV laws, or state and federal truth‑in-advertising laws. Indeed, while states may accommodate reasonable filing or registration delays caused by COVID-related business interruptions and the FTC similarly has acknowledged the strain on all businesses right now, these regulators will also crack down on marketing abuses that take advantage of consumers’ generosity or fear during the pandemic. For brands wanting to capitalize on the moment, keep in mind the following basics when it comes to conducting a compliant campaign:

Continue Reading Charitable Sales Promotion Rules and Best Practices: Be Sure to Cross Your T’s and Dot Your I’s During the Pandemic

We’ve all seen the COVID-19 fall-out in the past few weeks—indeed, we’ve all lived the fall-out.  But the promotions, events, and hospitality industry has been particularly hard-hit by the recent restrictions on public gatherings and travel. From Coachella to SXSW to the Olympics, events around the globe have been cancelled, rescheduled, or postponed —sometimes indefinitely—due to the pandemic.  These postponements and cancellations have put companies sponsoring promotions such as sweepstakes and contests, events, and ad campaigns linked to these postponed events in a difficult position.  How do companies protect themselves from potential liability associated with the postponement or cancellation of a sponsored event?  Can one change the terms and conditions of sweepstakes associated with an event to when the event is postponed or cancelled?  Those of us familiar with contract law understand how important a well-drafted Force Majeure clause can be in this situation.  But one doesn’t always have a well-drafted Force Majeure clause when dealing with a new pandemic.  And, as is often the case, sweepstakes and prize promotions rules (and related documents) are a form of contract, but they are a type of agreement that is regulated a bit differently from a standard commercial contract between sophisticated business entities that have negotiated in good faith.  Let’s unpack that.

Continue Reading Coronavirus Cancellations: How Do They Affect My Promotion?

Readers of this blog often learn how the government regulates modern instruments for customer engagement – social media, texting campaigns, e-commerce sites, the use of influencers, and more. Old habits die hard, however, and many marketers continue to use the U.S. Postal Service to connect with consumers. When those mailers want to reach a large audience, Marketing Mail (formerly known as Standard Mail) may be the answer. Mailers use USPS Marketing Mail to deliver catalogues, circulars, flyers, advertising, and both printed and non-printed merchandise designed to enhance the tactile experience of opening the mail and create a positive association with the sender.
Continue Reading USPS Proposal May Cause Direct Mail Advertisers To ‘Go Postal’

The Federal Trade Commission (FTC) continues its oversight of charitable fundraising conduct. This month, the FTC issued guidance for both donors who donate to charities through online giving portals and businesses that offer such portals. The agency also warned consumers to be wary of potential charity scams in the wake of recent natural disasters that

The Telephone Consumer Protection Act (TCPA) has been making news of late, with the U.S. Court of Appeals for the District of Columbia’s partial rejection of a Federal Communications Commission rulemaking grabbing most of the headlines. We reported on that here. It is understandable that the D.C. Circuit’s decision has captured the attention of telemarketers and TCPA practitioners. However, nonprofit organizations and for-profit companies that help nonprofits reach consumers via telephone and text message should also take note of a less publicized recent TCPA opinion.

For years, Anthem Foundation, Inc. has supported the American Heart Association (AHA) and its “Hands-Only CPR” campaign to help people respond to a cardiac arrest event. Anthem Foundation is a 501(c)(3) charitable organization that serves as the philanthropic arm of for-profit insurance company Anthem, Inc. The plaintiff in Reese v. Anthem, Inc. admitted that she had provided her cellular phone number to AHA in order to receive “monthly CPR reminders, healthy messaging information, and [questions from AHA].” According to her amended complaint, though, the plaintiff and unnamed class members allegedly were “bombarded” with unwanted text messages that contained only “vacuous” pieces of medical information. Moreover, because the text messages stated “AHA/Anthem Foundation” and because Anthem Foundation’s name and logo appeared on AHA’s Hands-Only CPR webpages, the plaintiff believed that the ostensibly informational text messages actually served as pretexts for an advertising campaign benefiting Anthem, Inc. and Anthem Foundation.

Continue Reading Another TCPA Decision Involving Nonprofits Results in Dismissal of Plaintiff’s Claims

The FTC’s Northwest Regional Office has, for decades, led federal law enforcement efforts to investigate and shut down alleged fraud in the charity fundraising industry (state attorneys general are even more active in this space, as we’ve noted in previous writings). While the Northwest Region was somewhat active in the 1990s and early 2000s, its appetite for policing fundraising telemarketers clearly received a boost from its collaboration with state regulators against several allegedly sham charities in 2015. Just last year, we reported that enforcement against perceived charitable fundraising fraud remained a top FTC priority. With the beginning of 2018 upon us, the trend continues.

On January 10, 2018, the FTC asked the Department of Justice to file a complaint against Ohio-based charity and political fundraiser InfoCision, Inc., alleging violations of the FTC’s Telemarketing Sales Rule (for a good primer on why the FTC may refer litigation to the DOJ when it alleges violations of the TSR or other FTC trade regulation rules, click here). According to the complaint, InfoCision misrepresented the purpose of calls it placed to consumers in some of its telemarketing campaigns. The DOJ alleges that InfoCision told consumers at the beginning of the call that the purpose of the call was not to ask for a donation; however, the company’s telemarketers would then ask consumers to mail or hand-deliver materials to family, friends, or neighbors, asking for money donations to InfoCision’s charity client. In some cases, according to the DOJ, telemarketers would also ask the call recipient to make a charitable donation in contradiction of the initial representation that the purpose of the call was not to seek such a donation.

Continue Reading Telemarketing by Charity Fundraisers Remains an FTC Enforcement Priority