Last week, the Supreme Court heard oral argument in AMG Capital Management v. FTC. As we’ve previously discussed, the Supreme Court is set to decide whether Section 13(b) of the FTC Act, which expressly grants the FTC the right to obtain “a permanent injunction,” also grants the FTC the authority to obtain “equitable monetary relief.” During oral argument, certain Justices expressed doubt that the plain language of Section 13(b), when viewed in the context of the entirety of the FTC Act, authorized the FTC to obtain “equitable monetary relief” when proceeding under Section 13(b). While none of us can predict the future, after last Wednesday’s oral argument, we can’t help but wonder: What will happen if the FTC loses? Below, we have outlined the potential avenues for the FTC if the decision doesn’t go its way.

First, Congress could revise the language of Section 13(b) to allow the FTC to seek equitable monetary relief, a request the FTC made in October 2020. There’s precedent for such a move. After the Supreme Court significantly curtailed the SEC’s calculation of equitable monetary relief in Liu, Congress codified the SEC’s authority to seek disgorgement in federal district court as part of the 60th annual National Defense Authorization Act in January 2021, by amending the Securities Exchange Act of 1934. Congress could pass a similar amendment to the FTC Act to unambiguously allow the FTC to obtain equitable monetary relief under Section 13(b) or otherwise. Whether that potential authority would come with a statute of limitations, allow for joint and several liability, or be subject to other restrictions will be important in assessing any potential legislation.


Continue Reading So…What If the FTC Loses AMG Capital Management v. FTC?

On January 11, 2021, the Federal Trade Commission (FTC or the “Commission”) announced it reached a proposed settlement with Everalbum, Inc. (“Everalbum”), a developer of a photo app, to resolve allegations that the company deceived consumers about its use of facial recognition technology.

The settlement highlights the FTC’s focus on biometric data and increased scrutiny regarding facial recognition technology. Specifically, in announcing the settlement, the FTC stated that facial recognition technology can turn photos into “sensitive biometric data” and emphasized that ensuring companies keep their promises regarding the use of biometric data will be a “high priority for the FTC.” Additionally, while the proposed settlement was approved by all five FTC Commissioners, Commissioner Rohit Chopra issued a separate statement criticizing facial recognition technology and expressing support for a moratorium or restrictions on the use of such technology.

Everalbum provides a photo storage and organization app called “Ever,” which allows users to upload photos and videos to be stored and organized using the company’s cloud-based storage service. Starting in 2017, Ever launched its “Friends” feature, which uses facial recognition technology to group users’ photos by the faces of people appearing in the photos. Initially, the feature was automatically enabled for all users and could not be turned off, although the company later allowed users located in Illinois, Texas, Washington, and the EU to choose whether to turn on the feature. However, according to the FTC’s complaint, Everalbum’s website represented that Everalbum was not using facial recognition technology unless a user affirmatively enabled or turned on the technology. As the technology was instead enabled by default for users located outside of Texas, Illinois, Washington, and the EU, the FTC alleged that this representation was deceptive, in violation of Section 5(a) of the FTC Act.


Continue Reading FTC Takes Aim at Facial Recognition Claims in Latest Deception Settlement

Last week the FTC announced it had settled with mobile advertising platform Tapjoy regarding allegations that it failed to provide in-game rewards that users were promised for completing advertising offers. Commissioners Rohit Chopra and Rebecca Kelly Slaughter also issued a Joint Statement on the settlement, criticizing mobile app “gatekeepers” for excessive “rent extraction” from mobile gaming apps, which they believe has forced developers to adopt alternative – and often harmful – means of generating revenue, such as loyalty offers and loot boxes. The settlement, and particularly the separate concurrence written by Democratic Commissioners Rohit Chopra and Rebecca Slaughter, highlights the increased scrutiny over the entire mobile gaming ecosystem and the various businesses that operate within it.

Tapjoy operates a mobile advertising platform, acting as a middleman between advertisers, gamers, and game developers. The platform integrates “offers” into mobile games, promising users in-game currency and other rewards for completing the offers and promising developers a percentage of Tapjoy’s advertising revenue. Advertisers pay Tapjoy for each consumer who is induced to complete an offer, which often requires users to submit personal information or spend money, for example, by purchasing a product, enrolling in a continuity program, or completing a survey. Other offer requirements may include downloading an additional app or watching a short video.


Continue Reading FTC Cracks Down on Mobile Gaming Middlemen Offering In-Game Rewards and Offers

The FTC has deemed claims made by CBD marketers to be humbug, announcing on December 17, 2020, a law enforcement crackdown on six companies that sell CBD and make allegedly deceptive and unsubstantiated claims that their products can treat serious health conditions including cancer, heart disease, hypertension, and Alzheimer’s disease. CBD is a naturally occurring substance that comes from the marijuana plant. While the claims brought by the FTC are similar to claims brought against marketers of other products making similar claims, the dueling statements by Commissioners Chopra and Wilson are noteworthy.

The six companies entered into settlement agreements that prohibit these companies from making false claims about their products in the future. Specifically, the proposed orders prevent these companies from prevention, treatment, or safety claims unless they have the human clinical testing to substantiate the claims. Additionally, the orders require the companies to have competent and reliable scientific evidence when making claims on any health-related product, and require the companies to pay the FTC $75,000 each and notify their consumers of the FTC complaint and order.


Continue Reading FTC a Scrooge on CBD Claims

The FTC routinely pursues dietary supplement makers for making allegedly deceptive or unsubstantiated claims, and most of those investigations are resolved through settlements. The FTC’s recent unsuccessful efforts to bring a contempt action regarding one of those settlements and its decision to then challenge the alleged contemptuous conduct in an administrative proceeding provide interesting insights into FTC settlements and the FTC’s relentless pursuit of companies that fall into disfavor.

On November 20, 2020, the FTC approved an administrative complaint against dietary supplement marketer Health Research Laboratories (HRL), its owner and officer Kramer Duhon, and Whole Body Supplements (WBS), alleging the respondents engaged in deceptive marketing and advertising of their supplements. According to the complaint, respondents are allegedly making unsubstantiated claims that four of their supplements prevent or treat cardiovascular and other diseases.

This is not the first legal challenge that respondents HRL and Duhon have faced with the FTC. In January 2018, a stipulated order permanently banned the defendants from making weight loss claims, joint-related disease claims, and other unsubstantiated health claims regarding defendants’ products and imposed a collective monetary judgment of approximately $3.7 million. The order defined “Covered Products” as “any Dietary Supplement, Food, or Drug, including BioTherapex and NeuroPlus.” Some prohibited weight-loss claims include representations that any Covered Product: (1) causes substantial weight loss no matter what or how much the consumer eats; (2) causes permanent weight loss; or (3) causes substantial weight loss when a product is worn on the body or rubbed into the skin. The order also banned joint-related disease, cognitive performance, and health claims that a product treats or cures arthritis, relieves joint pain, or improves memory concentration or represents a product’s health benefits, safety, performance, or efficacy.


Continue Reading Third Bite at the Apple – FTC Administrative Proceeding Signals a Relentless Pursuit Against Supplement Marketers

On November 30, 2020, the Federal Trade Commission (FTC) announced that it had taken action against a debt collection company, Midwest Recovery Systems (“Midwest”), alleging that an alleged “debt parking” scheme caused more than $24 million in harm to consumers. While the complaint and settlement themselves are not that remarkable, the dissent filed by Commissioner Chopra is. Commissioner Chopra challenges the FTC’s approach to debt collection, suggesting the FTC refer such cases to the Consumer Financial Protection Bureau (CFPB) and that the FTC focus on other things. We have written previously about Commissioner Chopra’s other ideas for reshaping FTC approaches and priorities, and if Commissioner Chopra were to become the next Chair under President-elect Biden, things could get interesting at the agency.

First, a few words about the case. Also known as “passive debt collection,” debt parking is the practice of placing fake or questionable debts onto consumers’ credit reports to coerce them to pay. The “parked” bogus debt is often not discovered by a consumer until his or her credit report is accessed in connection with buying a car or home, opening a credit card, or seeking employment. Thus, although the debts may not be valid, consumers often feel pressured to pay them off—hence the millions of dollars allegedly hauled in by Midwest.


Continue Reading FTC Commissioner Encourages Partnership with CFPB and “Systemic” Change Following FTC Action against Debt Collection Scheme

At the end of last month, FTC Commissioner Rohit Chopra and his attorney advisor, Samuel Levine, penned an article, “The Case for Resurrecting the FTC Act’s Penalty Offense Authority.” In the article, the authors posit that, because the FTC’s “ability to seek monetary relief through Section 13(b) is now in jeopardy,” the FTC should “resurrect one of the key authorities it abandoned in the 1980s”—the Penalty Offense Authority under Section 5(m)(1)(b) of the FTC Act. The authors argue that dusting off the FTC’s Penalty Offense Authority would “mitigate the ongoing gamesmanship around Section 13(b), showing the marketplace that the FTC has more than one trick up its sleeve.” Indeed, Commissioner Chopra’s laser focus on mitigating the potential impact of the Supreme Court’s forthcoming decision in FTC v. AMG Capital Management was on display twice last month, as we previously discussed. In related news, all five FTC commissioners recently asked Congress to “clarify” the FTC’s authority under Section 13(b) in light of the Shire, Credit Bureau Center, and AbbVie decisions.

So, what is the FTC’s Penalty Offense Authority? The FTC’s rarely used Penalty Offense Authority authorizes the FTC to seek civil penalties against a defendant in federal court where (1) the FTC has obtained a litigated cease and desist order against another party through an administrative proceeding pursuant to Section 5(b) of the FTC Act; (2) the cease and desist order identifies a specific practice as unfair or deceptive; and (3) a party on notice of the order (i.e., someone with actual knowledge that the practice is unfair or deceptive) then engages in that same violating conduct after the order is final.


Continue Reading FTC Commissioner Seeks to Resurrect Penalty Offense Authority

On October 19, 2020, the Federal Trade Commission issued its annual report to Congress regarding the FTC’s efforts to protect senior citizens from fraud and abuse. In the report, the FTC noted that adults over 60 are more likely to report losing money to certain types of alleged scams, including romance scams, imposter scams, and online shopping programs. Moreover, the FTC reports that seniors were more than six times more likely than younger consumers to report that they lost money because of tech support phishing activities, and three times more likely to report losing money because of lottery scams.

In a separate statement, Commissioner Rohit Chopra said the agency’s analysis suggests the need for two key actions. These actions, and Commissioner Chopra’s statement generally, indicate that the FTC is considering how to move forward in the face of the Supreme Court’s potential erosion of its favored enforcement tool—Section 13(b).  His comments also have important implications for payment processors and other financial intermediaries that are facing inquiries from the FTC.

First, he recommended that the agency focus its enforcement actions on “larger, established firms,” rather than “smaller-scale scammers.” As an example, he pointed to the FTC’s settlement with payment processor Fiserv (formerly known as First Data) as a “model[] for the entire agency.” Commissioner Chopra believes that such enforcement actions against larger corporations would be a “better use of resources” and “more likely to lead to effective relief and systemic impact.”
Continue Reading FTC Commissioner Warns Larger Companies and Payment Processors, Seeks Greater Financial Penalties

The COVID-19 crisis has spawned a new wave of predatory behavior toward consumers, with the marketing of coronavirus-related products and untested cures. Regulators have responded to these behaviors swiftly and in a variety of ways. Richard Cleland, assistant director – division of advertising practices at the Federal Trade Commission (FTC), and Venable attorneys Melissa Steinman and Kristen Klesh addressed the advertising enforcement trends stemming from the COVID-19 pandemic and offered their reflections on best practices for consumer protection.

How has the FTC addressed consumer complaints?

The FTC’s response to COVID-19-related violations has been a combination of education and enforcement. The agency recorded more than 130,000 complaints in approximately the first half of 2020; unsubstantiated health claims and health fraud are the main areas of concern. The FTC has issued more than 300 warning letters and has seen a high compliance rate (around 95%) with this course of action. These letters address claims that businesses are promoting the cure or treatment of COVID-19 through:

  • dietary supplements or treatment in medical or wellness clinics in the form of herbal teas, essential oils, vitamins, zinc, immunity boost IVs, chiropractic, homeopathic, other therapies, virus-killing “zappers,” and colloidal silver
  • anti-vaccine messaging

The FTC has also filed three federal court actions related to COVID-19 consumer fraud and the agency is conducting extensive consumer education campaigns related to health fraud and coronavirus scams. The FTC website examines various types of health and economic fraud related to the epidemic.


Continue Reading Ad Law in the Age of COVID-19 and Regulatory Reactions

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