It’s not often we see defendants win a resounding victory against the Federal Trade Commission (FTC) and/or state attorneys general, especially after trial. But a recent opinion out of the Eastern District of Pennsylvania provides us with just that. On March 29, 2024 the court issued a 55-page opinion following a 15-day bench trial on the FTC and Pennsylvania attorney general’s claims against American Future Systems, Inc. and its two co-defendants, finding in favor of the defendants on all six counts.

The FTC and Pennsylvania AG challenged telemarketing for print publications, claiming defendants deliberately misled consumers when defendants:Continue Reading Telemarketing Trial: Defendant Sweeps All Six Claims Against the FTC and Pennsylvania AG

In February 2024, a New York federal jury returned a split verdict in the New York attorney general’s lengthy battle against Quincy Bioscience, finding that certain of Quincy’s efficacy and establishment claims for a dietary supplement called Prevagen were materially misleading. Quincy advertises that Prevagen improves memory through an active ingredient derived from jellyfish.

The Federal Trade Commission (FTC) and the New York AG jointly brought the case against Quincy in 2017, alleging its marketing of Prevagen was unfair, deceptive, or false advertising in violation of Sections 5 and 12 of the Federal Trade Commission Act, and New York General Business Law Sections 349 and 350, and for repeated fraudulent acts under New York Executive Law section 63(12). The New York AG sought injunctive relief and restitution from Quincy, and the FTC sought injunctive relief. The FTC’s claim is still pending and was not a part of the New York jury trial. The FTC/AG tag team has become common after the AMG decision, and the FTC recently discussed this in its report to Congress on cooperation with AGs.Continue Reading Unraveling a Tangled Net of Claims: Jury Split on a Jellyfish-Derived Supplement Product

Historically, the Federal Trade Commission (FTC) has touted self-regulation as integral to consumer protection. This has included encouraging industries to work with the Better Business Bureau (BBB) in developing a self-regulatory body that can promote industry-wide policies and heightened compliance. However, late last month, the FTC criticized guidance promulgated by a self-regulatory body calling into question how much the current FTC values industry self-regulation.  

In 2023, the BBB National Programs’ Direct Selling Self-Regulatory Council (DSSRC), a self-regulatory agency for multilevel marketers (MLMs) and their members, released a guidance document on the use of Income Disclosure Statements (IDS). The purpose of IDS is to give prospective members information on the amount of income they can expect to earn in a business. Although these disclosures are not mandatory, if issued, they must comply with FTC regulations, as they are considered advertisements.Continue Reading Not So Fast: FTC Letter Rebukes Direct Selling Self-Regulatory Council Guidance

Last month, the Supreme Court of Maryland delivered a pivotal ruling defining the scope of the Maryland Telephone Solicitations Act (MTSA), holding that the act extended to inbound calls initiated by consumers who engaged with merchant advertisements. The Maryland Supreme Court also confirmed that the Maryland Public Service Commission can enforce the MTSA against covered entities.

The case, In the Matter of Smart Energy Holdings, LLC D/B/A SmartEnergy, originated in response to customer complaints to the Public Service Commission’s Consumer Affairs Division (CAD) alleging that their bills were excessive and that they were unable to cancel their service with SmartEnergy, a provider of 100% green energy. After proceedings before an administrative law judge, the Public Service Commission held:Continue Reading The Power of Customer Calls: Maryland Supreme Court Upholds Public Service Commission’s Interpretation of the Maryland Telephone Solicitations Act

In late January, the Federal Trade Commission (FTC) and Justice Department (DOJ) announced a collaborative effort to update their instructions regarding preservation of electronic communications to targets of pre-litigation information requests in antitrust investigations. The agencies’ new instruction makes clear that targets must preserve ephemeral messages and threatens civil or criminal sanctions for failure to do so.

A number of popular messaging platforms—both text and email—allow users to send messages that are erased and permanently disappear either immediately or shortly after the recipient reads the message. SnapChat and Slack are common examples of apps that give users the option of ephemeral messaging. Some of these apps use end-to-end encryption to prevent third-party providers from accessing the communications. For example, Signal and Proton Mail are prevalent messaging and email platforms used for their ephemeral messaging capabilities.Continue Reading The FTC’s and DOJ’s New Magic Act: Vanished Messages Will Reappear in Discovery

On February 15, 2024, the Federal Trade Commission (FTC) announced a two-step approach to tackling impersonation fraud. First, the FTC finalized a rule regulating the impersonation of businesses and government entities (the Impersonation Rule). Later that day, the FTC proposed a revision to the Impersonation Rule to extend liability to those impersonating individuals.

The Impersonation Rule deems it unfair or deceptive to falsely pose as or misrepresent affiliation with a government or business entity. This could include using government seals, business logos, or spoofed email addresses. Even more broadly, the rule prohibits using government or business lookalike insignias or marks without prior authorization. The rule will become effective 30 days after it has been finalized.Continue Reading Impersonation Rulemaking: FTC Takes Steps to Tackle AI

On Tuesday, February 13, the Federal Trade Commission (FTC) held an informal hearing regarding the Proposed Rule on the Use of Consumer Reviews and Testimonials. Three interested parties each had the opportunity to submit 30 minutes of oral commentary on the proposed rule and generally voiced concerns about the rule’s ability to address the issues surrounding consumer reviews.

The FTC’s proposed rule seeks to prohibit certain unfair or deceptive acts involving consumer reviews and testimonials. Specifically, it would prohibit buying positive reviews, selling or obtaining fake reviews, suppression of negative reviews, and selling fake social media indicators. Perhaps most importantly, if the rule becomes final, the FTC would be able to seek civil penalties against those engaged in violative review and testimonial practices. Previously, the FTC has only been able to obtain injunctive relief when combating fake reviews, and would have to rely on state attorneys general to join a suit to obtain monetary relief.Continue Reading FTC Contemplates Rule Aimed at Combating Deceptive Consumer Reviews

Earlier this week, the Federal Trade Commission (FTC) held its informal hearing on the proposed amendments to the Negative Option Rule. Clearly on display was not only industries’ concern about the impact of the proposed rule, but also concern about the FTC’s haste toward implementing the rule changes.

As a refresher, the FTC generally must promulgate rules under the Magnuson-Moss Warranty Federal Trade Commission Improvements Act (Mag-Moss) instead of the less-stringent Administrative Procedures Act. Under Mag-Moss, the FTC must first issue an advanced notice of proposed rulemaking (ANPR) seeking public comment, issue a notice of proposed rulemaking (NPRM), have reason to believe that the conduct at issue is “prevalent,” conduct informal hearings allowing parties to present their views and finally publish the final rule with a “statement of basis and purpose” accompanying the rule.Continue Reading Unpacking the FTC’s Negative Option Rule Informal Hearing

Last week, the Fifth Circuit handed down an across-the-board rejection of four constitutional challenges raised by gene sequencing company Illumina in defending against the Federal Trade Commission’s merger challenge. Bah! Humbug!

In previous years around the holiday season, we’ve had better news to report to those under the FTC’s thumb. With our coverage of the panoply of constitutional challenges that the FTC has been facing recently, there was a chance that tradition would continue. Alas, that is not the case with the Fifth Circuit’s decision in Illumina v. FTC.

First the Fifth Circuit rejected Illumina’s argument that Congress impermissibly delegated legislative authority by allowing the FTC to choose whether to bring enforcement actions in federal court or in an administrative proceeding. Specifically, the Court based its reasoning on the fact that the FTC’s authority under Section 13(b)—providing for federal action to obtain injunctive relief—and its authority under Section 5(b)—providing for administrative action, after which the FTC can obtain monetary relief such as damages—are two separate and distinct enforcement mechanisms.Continue Reading FTC Constitutional Challenge Update: Fifth Circuit Delivers Illumina a Stocking Full of Coal

In March, the Federal Trade Commission (FTC) asked for comments on a proposal to replace the Prenotification Negative Option Rule with a more expansive Negative Option Rule. Now that the FTC has had the chance to review those comments, the FTC has set an informal hearing to allow for testimony from six of the over 1,000 commenters.

Each presenter will be limited to ten minutes but can supplement their remarks with written content. The FTC has appointed Carol Fox Foelak, an administrative law judge at the Securities and Exchange Commission (SEC), to serve as presiding officer.Continue Reading New Year, New Rule: FTC to Review Updates to Negative Option Rule During January Informal Hearing