Last week, the National Advertising Division (NAD) held its annual conference. The wide array of speakers covered a broad range of topics, from the metaverse to dark patterns, social justice, environmental claims, and (as always) substantiation and disclosures. Multiple speakers from the Federal Trade Commission also presented and gave insight into the FTC’s current priorities.

The regulators. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, made clear that the agency is closely tracking practices it believes result in consumer economic harm and consumer surveillance and privacy issues. He made clear that the Commission is not shying away from seeking big ticket monetary relief against national well-known advertisers, and intends to hold individuals and executives responsible for their companies’ advertising practices. In addition, Serena Viswanathan, FTC’s Associate Director in the Division of Advertising Practices, highlighted the Commission’s focus on disclosure issues as well as endorsements and reviews, such as review solicitation and aggregation, and product ranking websites.

Continue Reading Takeaways from NAD 2022: The FTC’s Enforcement Priorities, New Technologies, Dark Patterns, and the Usual Suspects

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

The buzz around gig economy protections continued as the Federal Trade Commission took yet another action to safeguard gig workers. Last week, the FTC adopted a policy statement asserting its authority to address unfair and deceptive practices and anticompetitive conduct that harms workers in the gig economy.

The statement highlights data from several studies concerning the gig economy, including that it is expected to generate $455 billion in annual sales by 2023, and that 16% of Americans report earning income through an online gig platform. The statement also reports that, while gig work has already established itself in food delivery and transportation, it is now expanding into healthcare, retail, and other segments of the economy. The FTC noted that the decrease in demand for transportation during the COVID-19 pandemic illustrates “the precarious nature of gig work.”

The FTC statement focuses on three features of the gig economy “that implicate the Commission’s consumer protection and competition missions:”

Continue Reading New FTC Policy Statement: Agency Continues to Ramp Up Gig Worker Protections

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

On August 30, the Federal Trade Commission announced a complaint and proposed order for Ohio-based Electrowarmth Products, LLC and its owner, alleging they improperly claimed that their heated fabric truck bunk mattress pads were made in the United States, when in fact, the textile products have been wholly imported from China since 2019.

The complaint alleges violations under the Textile Fiber Products Identification Act, the Textile Rules, and the FTC Act. The FTC alleges that after Electrowarmth moved production to China and stopped using U.S.-produced textiles as part an effort to cut costs in 2019, it continued to use claims such as “Made in USA,” “Made in the USA since 1939,” and “made-in-America products” in marketing for heated mattress pads.

According to the agency, Electrowarmth further misled consumers when it asked the Chinese manufacturer to produce and package the products in “exactly the same” way as they had previously been manufactured in the U.S.

Continue Reading FTC Debunks Claim That Trunk Bunk Pads Were Made in the USA

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

When the COVID-19 pandemic began, and consumers swarmed the stores for disinfectant sprays, masks, and household items, state price-gouging laws grew increasingly relevant as sellers sought to cash in on the heightened demand.

In May 2020, New York Attorney General Letitia James took action against Quality King Distributors, Inc., a wholesaler that, according to James, illegally increased its prices to sell Lysol disinfectant products to neighborhood grocery and discount stores in New York. A New York state court tossed the case a few months later, finding that Quality King did not “uniformly raise their prices on Lysol products to these customers.” This week, a New York appellate court disagreed.

Continue Reading The Pandemic May Be Over, but Price-Gouging Laws Live On

Through a new interpretive rule announced this week, the Consumer Financial Protection Bureau (CFPB) has declared that digital marketing providers can be held liable under the Consumer Financial Protection Act (CFPA) if they engage in or substantially assist unfair, deceptive or abusive practices in advertising financial products on behalf of banks and nonbanks covered by the CFPA.

While service providers to “covered persons” under the CFPA are already subject to the Act, Congress carved out an exception for service providers offering or providing to covered persons “time or space for an advertisement for a consumer financial product or service through print, newspaper, or electronic media.” The CFPB’s new rule limits the applicability of that exemption to digital marketing providers such that the “electronic media” prong is very nearly void.

Continue Reading CFPB Warning to Consumer Financial Services Digital Marketing Providers

At the height of the pandemic, the Federal Trade Commission took swift action to stamp out scammers and other actors looking to take advantage of—or simply make a buck off—the crisis. One of the early moves it made was to file separate lawsuits against a pair of companies that sold sanitizer, face masks, and other protective equipment gear (PPE), but failed to ship the products as promised.

As of this week, the FTC has won summary judgment in both cases, FTC v. QYK Brands LLC d/b/a Glowwy and FTC v. American Screening, LLC. The cases highlight the two following points.

Continue Reading When a Mail Order Rule Case Is Not Just About the Mail Order Rule