Last week, the Federal Trade Commission (FTC) won a large battle in its extended war with Intuit, the makers of TurboTax tax-preparation software. An administrative law judge (ALJ) issued a lengthy initial decision, ruling that Intuit’s advertisement of a TurboTax offering as “free” was deceptive, ordering Intuit to cease and desist future advertising related
The Federal Trade Commission’s recent settlement with Dalal A. Akoury and AWAREmed Health & Wellness Resource Center provides a good overview of how today’s FTC approaches medical claims it believes are unsubstantiated. The case also serves as a reminder that if medical claims sound too good to be true, they probably are.
According to the complaint, filed by the Justice Department on behalf of the FTC, defendants, under Khoury’s leadership, engaged in deceptive acts or practices in violation of Sections 5 and 12 of the FTC Act and the Opioid Addiction Recovery Fraud Prevention Act (OARFPA). The complaint states that defendants deceived reasonable consumers into believing that the medical clinic’s treatments could cure cancer, chronic diseases such as Alzheimer’s and Parkinson’s, and a range of addictions, including to opioids, sex, food, and gambling.
The FTC had previously warned defendants on numerous occasions that making unsubstantiated addiction treatment claims is against the law. Khoury and AWAREmed, a set of companies Khoury controls that operate as a medical clinic, apparently ignored such warnings, causing the Justice Department to try and permanently halt defendants’ deceptive advertising and recover civil penalties. With this complaint the FTC continues its aggressive use of the Opioid Act to fill the hole in its remedial authority after AMG.Continue Reading In AWAREmed Settlement FTC Says Opioid and Chronic Disease Ad Claims Must Be Backed by Science
Gather your W-2’s and call your CPAs! Tax season is upon us, and that means one thing for the FTC—another flurry of activity in its ongoing action against Intuit, Inc., one of the largest online tax-filing services. Recently, the FTC issued an order denying complaint counsel’s motion for summary decision in the case, concluding that the matter will proceed to a full evidentiary hearing—the FTC’s administrative version of a trial.
As we previously reported, the FTC initially brought its case against Intuit in March 2022, alleging that the marketing of TurboTax as free was misleading because the free service applies only to those customers filing “simple” tax returns, while the service charges many other customers at the end of the filing process. Two months later, we wrote about the states’ investigation of Intuit, which overlapped with the FTC case, and the resulting $141 million settlement with all 50 states and the District of Columbia. Along with the restitution payment, Intuit was required to cease its “free” advertising campaign as part of the settlement.Continue Reading FTC’s Case Against Intuit Isn’t Won—Yet
Last week, the Federal Trade Commission turned its attention to the mortgage relief industry once again. In its most recent enforcement action, the FTC joined forces for the first time with the California Department of Financial Protection and Innovation (DFPI).
On September 12, 2022, the agencies jointly filed a complaint in the U.S. District Court for the Central District of California against several companies alleged to have operated a mortgage relief scam. Two days later, the court issued a temporary restraining order (TRO) appointing a receiver and freezing the defendants’ assets until the parties can be heard on whether to issue a preliminary injunction.
The defendants consist of various corporate entities doing business as Home Matters USA, Academy Home Services, Atlantic Pacific Service Group, and Golden Home Services America, and two individual defendants who own the companies.Continue Reading FTC Joins with California DFPI to Obtain Asset Freeze Against Mortgage Relief Business
By a unanimous 5-0 vote, the Federal Trade Commission last week released a staff report that sheds light on the agency’s enforcement positions and priorities regarding digital “dark patterns,” which the FTC defines as interface designs used to manipulate consumers into making decisions about purchases and personal data that they otherwise would not have.
Stemming from a public workshop the FTC hosted in April 2021, the report, “Bringing Dark Patterns to Light,” uses examples and illustrations to catalog and criticize numerous commonly seen practices in e-commerce, and includes an appendix describing types of dark patterns, while also stressing that dark patterns have a stronger effect, and by extension cause greater consumer harm, when they are used in combination, rather than in isolation.
Given Chair Lina Khan’s ambitious enforcement and policy goals for the agency, which we’ve previously discussed, anyone who engages with consumers online should consider the report both a reference and a warning. Continue Reading The FTC Brings More Light to Dark Patterns in New Staff Report
Last week the Federal Trade Commission and six states sued rental listing platform Roomster, Corp. along with its owners for allegedly charging consumers for access to phony listings bolstered by fake reviews it had purchased. The agency also announced a separate settlement with the operator of AppWinn, which is an online review vendor that churned and posted thousands of 4- and 5-star fake reviews about Roomster’s platform.
Roomster, which is based in New York, operates a website and mobile app where users pay a fee to access housing, rental, and other living arrangements, such as sublet and roommate requests. According to the complaint, rather than the millions of “authentic” and “verified” listings it purported to offer, Roomster allegedly failed to verify listings or ensure their authenticity, and also used fake reviews to lure users to its platform to pay for access to listings that often turned out to be bogus. The FTC alleges Roomster and its owners made tens of millions of dollars off the backs of mostly low-income and student renters seeking reliable and affordable housing.Continue Reading Rental Review Roundup: FTC Targets Deceptive “Testi-phony-al” Scheme to Lure Renters to Paid Housing Platform
The Federal Trade Commission’s recent action against Credit Karma serves as a reminder to advertisers that optimizing consumer conversion is not—and cannot be—the be-all and end-all. Regardless of what split or A/B testing results show, claims must be truthful, substantiated, and not misleading.
Per the FTC’s administrative complaint, Credit Karma advertised third-party credit offers to Credit Karma members as “pre-approved,” but, in fact, the creditors had not pre-approved the credit offers and consumers were required to apply and go through the creditors’ underwriting process. The FTC’s investigation showed that about one-third of those customers were denied the advertised credit.Continue Reading FTC Action Against Credit Karma Underscores That Conversion Cannot Trump Compliance
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.”Continue Reading Tied Up with the FTC: Agency Dusts Off 20-Year-Old Settlement to Pursue Civil Penalties
“Free” must mean free?
Last week, the attorneys general for all 50 states and the District of Columbia announced a settlement with Intuit, Inc., the owner of TurboTax, which will require the company to hand over $141 million to consumers as restitution for allegedly tricking consumers into paying for tax-filing services when they qualified for free tax-filing services.
Recently, we wrote about the Federal Trade Commission’s legal action against Intuit for its advertisements regarding “free” tax-filing services. In that action, the FTC sought to definitively resolve that very question. As part of last week’s settlement agreement, Intuit will cease its advertising campaign promoting its “free, free, free” services in addition to paying the hefty restitution sum. The state settlement essentially ended the FTC action as well.
While the states’ investigation overlapped with the FTC’s action concerning Intuit’s alleged bait-and-switch advertising (i.e., representing the service is “free” but later requiring an upgrade to a paid version), their investigation also had another focus: “dark patterns,” which refers to a digital design feature that is intended to subtly influence a consumer’s online decisions.Continue Reading Intuit Will Pay $141 Million in State Attorneys General Settlement Over Deceptive TurboTax Advertising
Last week, the Federal Trade Commission filed a complaint in the Northern District of Illinois against the Saint James School of Medicine (SJSM), an Illinois-based for-profit medical school, claiming its Caribbean medical programs deceived consumers with fake student success rates and offers to finance students’ attendance with illegal lending contracts.
Over the last several years, the FTC has focused on for-profit higher education institutions and allegedly deceptive money-making claims, which the FTC challenges as flawed and costly get-rich-quick schemes. Its move last week suggests that the agency remains highly focused on alleged deception of any type involving paying money to make money, regardless of the format.
The FTC’s complaint alleges that SJSM advertises its Caribbean medical programs as an affordable alternative to American medical schools. However, SJSM also allegedly draws students into the program by advertising that more than 96% of its students pass the USMLE Step 1 exam—a critical standardized medical school test—the first time they take it. In fact, the FTC alleges that the passage rate for SJSM students since 2017 is 35%, and that is only for students who are allowed to take the exam after meeting prerequisites set by the school. The FTC claims that the true passage rates are disclosed to students only in hard-to-find areas of SJSM’s website and are buried in a student handbook that students receive only after SJSM has collected their reservation fees.Continue Reading The FTC Moves Its Attention to A For-Profit Medical School