Disclosures

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The Magnuson-Moss Warranty Act (MMWA), is one of many vehicles that plaintiffs use to bring lawsuits over warranty claims.  It is a federal statute that governs warranties on consumer products.  The Federal Trade Commission has enacted regulations governing the disclosure of written consumer product warranty claims.

Just this month, the Federal Trade Commission completed a review of its Interpretations, Rules and Guides under the MMWA.  One of the revisions that the FTC made was to clarify that under the MMWA, warranty language that implies to a consumer that warranty coverage is conditioned on the use of select parts or service is deceptive.  The FTC wrote that “[g]enerally, the MMWA prohibits warrantors from conditioning warranties on the consumer’s use of a replacement product or repair service identified by brand or name, unless the article or service is provided without charge to the consumer or the warrantor has received a waiver.” 
Continue Reading FTC’s New Guidance on Implied Tying Claims Under the Magnuson-Moss Warranty Act

On March 31, 2015, the United States District Court for the District of Columbia issued an opinion, granting the Department of Justice’s (DOJ) motion for a final order providing injunctive relief, monetary relief, and civil penalties against Daniel Chapter One and James Feijo for making claims that Daniel Chapter One’s dietary supplements could treat, cure, or prevent cancer, inhibit tumors, and lessen adverse side effects of radiation and chemotherapy.  For those following this case, this final order is a long time coming, as the defendants repeatedly refused to comply with earlier cease-and-desist orders.  As a result, the FTC and DOJ have doggedly pursued enforcement against the defendants since the FTC first initiated an administrative proceeding for false and deceptive practices under the FTC Act in 2008.

The court granted summary judgment on liability for violations of the cease-and-desist order in September 2012, and finally, in 2014, the U.S. filed a motion for entry of final judgment. The recent opinion represents the culmination of a long battle between the supplement marketer and the government, and demonstrates the various penalties available to the court when orders are violated.  In particular, the opinion highlights the court’s authority under FTC Act Section 13(b), 15 U.S.C. § 53(b) to order equitable redress, and serves as a cautionary tale for how high civil penalties can become when a business fails to comply with an order. 
Continue Reading Tough Pill to Swallow: Court Imposes Over $3 Million in Civil Penalties on Dietary Supplement Company

Last week, the United States District Court for the District of Nevada granted partial summary judgment for the Federal Trade Commission (“FTC”) against Jeremy Johnson and a number of related corporate entities collectively referred to as “iWorks,” offering a glimpse into how the FTC and the courts analyze certain online advertising issues. The FTC first brought suit in 2010, alleging, in part, that Jeremy Johnson’s websites used misleading testimonials, failed to disclose that consumers would be entered into negative option plans, and failed to disclose that websites and positive articles about the products were created by the defendants.  While some defendants in this case settled with the FTC in 2014, the battle between Jeremy Johnson and the FTC has raged on, with the court’s most recent order constituting a significant victory for the FTC on some counts, but requiring the FTC to prove much of its case at trial.  The court’s opinion highlights the difference between alleging deception and proving it, as the court refused to imply that all of the thousands of websites that iWorks operated were deceptive based on the selected sample that the FTC provided the Court.

For our loyal readers, many of the advertising issues in the order may seem all too familiar, as negative options, testimonials, and forms of native advertising are frequent topics of the blog.  However, the order is worth a read, as it provides an analytical roadmap for advertising interpretation and disclosure issues in online advertising cases.
Continue Reading FTC Throws the Works at iWorks and Obtains Partial Summary Judgment on Online Advertising Issues

heavy fog in the foothills at night - CC-BY 2.0
Photo by Jeff Ruane

A recent Federal Trade Commission (“FTC”) settlement with BMW serves as a good reminder to take a fresh look at Mag-Moss compliance for all companies offering warranties. The FTC’s business guidance provides a helpful checklist to make sure your warranty program is all tuned up.

BMW for its MINI Coopers offered a 4-year or 50,000-mileage warranty. The car owner needed to take care of routine maintenance in order to enjoy the warranty coverage. For the first three years of car ownership, routine maintenance was free at BMW dealers.  After that, the owner needed to pay for such work on his/her own. The warranty said that routine maintenance had to be done at the dealer or the warranty would be voided. Mag-Moss has an anti-tying provision that says you cannot condition a warranty on the customer using your own parts and service unless you provide those parts and service for free. Because in year 4 a MINI owner had to pay for his/her own oil changes, BMW allegedly violated Mag-Moss to say that such paid for maintenance had to be done at the dealer. The settlement requires BMW to send notice to its customers telling them they can use other providers for routine maintenance. 
Continue Reading FTC Shines High Beams on Warranty Claims

The Federal Trade Commission (“FTC” or “the Commission”) has clearly subscribed to enforcing ROSCA recently.  On Tuesday, the FTC filed a complaint against DIRECTV’s negative option program and contract pricing structure under Section 5 of the FTC Act and ROSCA.

In the complaint, the FTC alleged that DIRECTV required customers to agree to a mandatory 24-month contract to receive television programming; customers who canceled their subscriptions before 24 months were charged an early cancellation fee.  Although the rates were set at a specific monthly charge for the first year of a 2-year customer agreement, in the second year of the agreement, the FTC alleged that DIRECTV would increase the monthly charges by 50-70% higher than customers paid in the first year.  After the first year of the agreement, customers either had to pay significant cancellation fees or pay the higher monthly price.  
Continue Reading FTC Dishes Out ROSCA Complaint with Focus on Disclosures

February 22, 2015, marked the 87th Academy Awards ceremony.  Some people tuned in because they love the movies, others for the fashion and celebrities, but, as for me, I watched it with my wife and was simply counting the minutes until “The Walking Dead” came on.  As I watched the celebrities work the red carpet, I did my best to feign interest in cut-away dresses, plunging necklines, jumpsuits matched with capes, and Emma Stone’s wardrobe malfunction, which caused her to accidentally flash the crowd (actually, I can’t lie, that gaffe did grab my attention).  I listened to the interviews that the A-listers gave, describing their dresses or tuxedos, and extolling the responsible designers’ brilliance, daringness, and/or overall fashion IQ.  They were effusive.  Heck, they made me feel like rushing out and buying a new trendy suit myself.

But, then, the advertising and marketing attorney side of me took over – did these actors, actresses, and the designers whose fashion they were shilling violate the Federal Trade Commission’s (“FTC”) Guides Concerning the Use of Endorsements and Testimonials in Advertising by not explicitly disclosing their relationships?  I started stepping through the issues.  First, were the celebrities even providing endorsements for their respective designers’ products?  Absolutely.  Under the Guides, an “endorsement” is broadly defined as “any advertising message . . . that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser[.]”Continue Reading And the Oscar Goes to . . . the FTC?

The Better Business Bureau (BBB), known for being the home of NAD, CARU and other advertising self-regulatory forums, is now also the proud owner of an updated advertising code.  The BBB announced earlier this month significant updates to its Code of Advertising for the first time since 1985 (when the number one single was “Careless Whisper” by Wham.)

In a press release, the BBB indicated that changes to the Code were made “to reflect the many new ways that advertisers reach consumers via websites, social media, texting and other channels.”
Continue Reading BBB Updates Advertising Code to Keep Pace with Technology

Looking back 2014 was a year of increased government scrutiny and compliance obligations for lead generators and online marketers, and so, for 2015, advertisers will need to ramp up compliance.  Avoiding banned terms, better use of disclosures, and other web and contact center compliance enhancements – with at least some reports of 66% of website URLs containing a potential compliance violation – should be a priority for the New Year.

At least, that’s what marketing compliance company PerformLine revealed last week in its infographic titled “Compliance Trends to Watch Out for in 2015.”  The infographic is part of its periodic overview of its research on websites and “contact centers” using “banned” compliance terms or missing “required” disclosures.  The infographic shows that 66% of credit monitoring sites, 72% of credit card sites, and 91% of finance sites contain potential compliance violations.  The company didn’t release more detailed breakdowns, but it did pinpoint certain keywords and disclosures as areas of concern.

One area that caught our attention was the identified a lack of required disclosures as one of its “Five Issues Causing Potential Violations.”  As we have written previously, the Federal Trade Commission (FTC) has placed renewed emphasis on clear disclosures in its Dot.com Disclosures Guides, and marketers’ ability to use fine print disclosures may be going the way of the dodo.  However, with high rates of non-compliance across all industries measured, it appears marketers may still be struggling with how to create clear and conspicuous online disclosures without detracting from the marketing message.Continue Reading Compliance Trends for Online Marketers

That’s perhaps exactly what the FTC tried to avoid by bringing two new auto disclosure enforcement actions late last week.  Both actions seek to enforce existing orders, though in the one instance the parties agreed to settle while in the other the parties will have their day in court.  The FTC has been coming down hard on auto dealers of late and these two cases are no exception.

Both cases focused on the need for and adequacy of disclosures regarding automobile sale, leasing, and rebate offers.  According to the FTC’s complaints, the defendants failed to adequately disclose certain terms and conditions including the following:Continue Reading FTC Puts More Governors on Auto Disclosures