Three weeks ago, we informed you that the Louisiana Public Service Commission (PSC) had declared a state of emergency in light of Hurricane Ida, which meant that callers could not place any “telephonic solicitations” into the state, regardless of whether the calls were with the recipients’ prior express written consent, pursuant to an established business
On July 21, 2021, and in response to President Biden’s Executive Order calling on the FTC to address repair restrictions, the FTC unanimously adopted the Right to Repair Policy Statement related to manufacturer and seller restrictions to product repairs. In the policy statement, the FTC announced its plans to prioritize enforcement against unlawful repair restrictions, including promoting possible updates to state and federal legislation. Manufacturers and sellers should ensure compliance with current consumer protection and antitrust laws and monitor potential rulemaking, a path the FTC is careening toward.
The FTC expressed concern that repair restrictions make it more difficult for competitors, local businesses, and consumers to repair products. In a May 2021 report to Congress, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, the FTC detailed manufacturer-created restrictions, including limiting the availability of parts, software, and telematics information and access to authorized repair networks; designing products to make self-repairs less safe; asserting trademark and patent rights in an overbroad manner; and implementing restrictive end-user license agreements and software locks. The FTC also warned that repair restrictions drive up repair costs, repair wait times, and electronic waste; reduce competition; and have an especially large impact on communities of color and lower-income Americans.
With a new leader at the Federal Trade Commission comes new rules of practice. Chair Lina Kahn convened a first-of-its-kind open Commission meeting, allowing for live public comments following the meeting. In addition to issuing the Made in the USA Final Rule at the meeting, the FTC revised the procedures for issuing Magnuson-Moss Rules. This carries out Commissioner Chopra and now-Chair Khan’s call for more rulemaking, and the next step to former Chair Slaughter’s creation of a rulemaking group within the Commission. The changes concentrate the rulemaking process in the Chair’s office and strip away many of the procedures that helped lead to rules based on bipartisan consensus among the commissioners and support from FTC staff.
By way of background, to pass a rule under the Magnuson-Moss Warranty Federal Trade Commission Improvements Act (“Mag-Moss”), the FTC must: (1) make a finding that the conduct at issue is “prevalent” and (2) conduct informal hearings allowing interested parties to cross-examine those making oral presentations. The FTC appears interested in applying Mag-Moss rulemaking in both the competition and consumer protection contexts. Though Mag-Moss has statutory requirements that the FTC must follow, such as publishing a notice of proposed rulemaking, allowing public comment from interested persons, providing the opportunity for informal hearings, and promulgating rules based on the final record, the FTC has enacted procedural rules to carry out these statutory requirements.
There’s a new sheriff – er, chairwoman – in town over at the FTC, and she’s planning to shake things up. During the Commission’s first open meeting in more than 20 years, Chairwoman Khan announced a new era of streamlined, widespread rulemaking, and increased public participation, transparency, and fairness. However, as every single vote broke along party lines, with the Democratic majority steamrolling Republican requests for increased dialogue, public comment periods, and expert input, the open meetings may be little more than political theater intended to cover a massive change in how the FTC operates. In fact, public comments were relegated to the end of the meeting, after votes were already cast, and the commissioners were given only five days, the bare minimum time, to consider the new rules and regulations. In the words of Commissioner Phillips, the Democratic majority wants to make regulating “easier, not better.” And after yesterday’s votes, it seems likely that the “new” FTC will look a lot like the FTC of the 1970s, which was widely criticized as a body of five unelected officials with broad, self-granted and oft-exercised power to regulate the economy badly. According to Commissioner Wilson, “if we don’t acknowledge the mistakes of the past, we are doomed to repeat them.”
Below are some highlights from the meeting.
Given all the tumult with natural disasters, COVID-19, and other goings on in Washington, a memorandum directing government agencies to reform how they operate may have gone unnoticed. It’s worth considering. On August 31, 2020, the Office of Information and Regulatory Affairs (OIRA), a subagency within the Office of Management and Budget (OMB), issued Memorandum M-20-31 (the “Memo”), which elaborates on and implements directives from a prior executive order to consider and adopt certain best practices and procedures to promote fairness in administrative enforcement and adjudication. The Memo directs federal agencies to adopt measures aimed at according greater due process to individual and company targets for investigations and enforcement actions, and to promote transparency and accountability in the initiation and pursuit of administrative actions. The Memo’s directives usher in the potential for long-overdue substantive and procedural revisions to the rules of practice for independent agencies.
By way of background, the President signed Executive Order 13924, “Executive Order on Regulatory Relief to Support Economic Recovery,” on May 19, 2020, in response to economic impacts due to the COVID-19 pandemic. EO 13924 directs federal agencies to “address this economic emergency by rescinding, modifying, and waiving or providing exemptions from regulations and other requirements that may inhibit economic recovery” as enumerated in Section 6. The OIRA Memo sets forth specific best practices for implementing changes for the ten principles in Section 6 and sets a deadline of November 26, 2020 for agencies to engage in any necessary rulemaking to implement them.
The guidance will apply to all federal government departments and agencies, such as the Federal Trade Commission, the U.S. Securities and Exchange Commission, the Federal Reserve Board, the Consumer Financial Protection Bureau, and many others.
An increasing number of celebrities and social media personalities are endorsing the use of cannabidiol (CBD) products through social media. Many of these “influencers,” however, fail to take into account and comply with the complex regulatory environment surrounding CBD advertisements, which can have consequences for CBD companies themselves. In the United States, the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) both limit the use of certain language in CBD endorsements. As these advertisements attempt to reach the broadest possible audience, possible violations are especially noticeable to regulators, who have stepped up their enforcement efforts in this area.
What is CBD?
With the passage of the 2018 U.S. Farm Bill, hemp-based CBD products were removed from the Drug Enforcement Administration’s list of scheduled substances, thereby decriminalizing the possession of such CBD products. The Farm Bill defines hemp as a strain of the Cannabis sativa plant species that does not contain more than 0.3% of the psychoactive component tetrahydrocannabinol (THC). Instead, hemp has significantly higher concentrations of CBD. The legalization of recreational and medicinal marijuana in certain states refers to the cannabis plant containing high levels of THC, which may also contain some CBD. Certain states, such as California, have stringent requirements regarding advertising cannabis products, but these rules do not apply to hemp-based CBD products.
In February, we highlighted constitutional challenges that Axon Enterprise, Inc. (“Axon”) brought against the FTC related to a merger challenge against Axon. To briefly recap: Axon brought a declaratory judgment action alleging that the administrative trial procedures and the structure of the FTC violated Axon’s due process rights and Article II of the Constitution. Last week, the District of Arizona dismissed Axon’s claims, finding the Court lacked subject matter jurisdiction over Axon’s declaratory judgment claims where the administrative proceedings before the FTC were still pending. The Court’s lengthy opinion, which was consistent with prior unsuccessful challenges to the FTC’s administrative trial process, demonstrates the importance of raising a constitutional challenge early in a proceeding, even if that is the very proceeding, before the very agency, being challenged.
As previously discussed, Axon makes two constitutional arguments. First, the procedures authorizing the FTC to bring an enforcement action before an FTC Administrative Law Judge violate Axon’s Fifth Amendment due process rights. Second, the structure of the FTC violates the president’s “at will” removal power under Article II because FTC commissioners and administrative law judges are not subject to such removal. Though the Court acknowledged in dismissing the case that Axon’s constitutional claims “are significant and topical[,]” the Court determined that it “is not the appropriate forum to address Axon’s claims.”
The FTC has issued a Proposed Notice requesting public comment on whether to make changes to its Endorsement Guides (“Guides”) as part of the agency’s periodic retrospective review. This review will serve as a key opportunity for industry participants to shape what happens next by showing what they are seeing in the marketplace when it comes to endorsements and testimonials, consumers’ understanding of them, and the effects of new technology and platforms.
While the FTC’s standard practice is to review its rules and guides every 10 years, this review promises to be anything but standard. This is particularly true considering that FTC Commissioner Chopra weighed in with a separate statement, noting that he hopes that the Commission will consider taking steps beyond the issuance of voluntary guidance, including codifying elements of the existing Endorsement Guides into formal rules that could trigger civil penalties and damages. He also suggested that the FTC develop requirements for technology platforms that facilitate and profit from influencer marketing and specify the requirements that companies must adhere to in their contractual arrangements with influencers. The Guides were first issued in 1980, and the Commission last sought public comment on them in 2007. Since that time, endorsement-related practices (and the media where they appear) have changed dramatically, with new platforms and apps emerging that provide new ways for companies and their endorsers to reach consumers. In an attempt to keep up with the changing times, the FTC issued an FAQ-type of document, Endorsement Guides: What People are Asking, and has modified it multiple times over the years.
On January 3, 2019, Axon Enterprise, Inc. (“Axon”), a manufacturer of body-worn cameras for law enforcement, filed a complaint against the Federal Trade Commission seeking a declaratory judgment in the District of Arizona. In the complaint, Axon alleges that the FTC’s administrative procedures and structure are unconstitutional, and seeks to enjoin the FTC from pursuing an administrative enforcement action against Axon. Although an antitrust case, the matter provides interesting issues that also involve the FTC’s consumer protection mission.
A little background: On June 14, 2018, the FTC opened an investigation into Axon’s attempted acquisition of Vievu, which also sells public safety camera systems. Axon contends that it cooperated with the FTC’s investigation over an 18-month period, only to result in the FTC threatening to sue in an administrative proceeding unless Axon “surrender[ed] a ‘blank check’ divestiture.” Axon protested that it did not violate the Clayton Act or any other antitrust laws in its acquisition of Vievu and filed the pending lawsuit, arguing that the FTC’s structure and administrative adjudication procedures violate the U.S. Constitution.
As for the constitutional challenges, Axon first argues that the FTC’s administrative procedures — whereby it acts as prosecutor, judge, and jury — violate Axon’s Fifth Amendment due process rights. Essentially, Axon asserts that when the FTC brings an administrative proceeding against a party, it infringes on that party’s right to a fair trial before a neutral judge in accordance with the Fifth Amendment. Accordingly, subjecting Axon to an FTC administrative proceeding will force it to “submit to a hearing process with a preordained result.” As Judge Posner noted years ago, “It is too much to expect men of ordinary character and competence to be able to judge impartially in cases that they are responsible for having instituted in the first place.” Remember, however, that Axon is not the first company caught in the FTC’s crosshairs to raise this argument, and these prior challenges have failed.
As part of the 2019 year-end congressional appropriations wrap-up free-for-all, Congress adopted a new Section 642 of the Communications Act that significantly changes how a cable operator advertises and bills video subscribers. The law applies to both stand-alone video programming packages and the video portion of bundled plans that combine video programming with broadband Internet service.
Under the law, cable operators must change their billing practices as follows by June 20, 2020.