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Last month, the Federal Trade Commission (FTC) announced an enforcement action against Evolv Technologies, alleging that the company made deceptive claims about the capabilities of its AI-powered security screening system, including in school settings. Among other allegations, the complaint alleged that Evolv advertised that its systems could reliably detect all weapons, but the systems consistently failed to detect guns and knives and routinely gave false alarms.

The FTC also announced a proposed settlement. Interestingly, the two sitting Republican commissioners, one of whom will likely be the acting chair after January 20, disagreed on the scope of the proper remedy under Section 13(b) of the FTC Act. While commissioners Andrew Ferguson and Melissa Holyoak both supported the FTC’s settlement with Evolv, they disagreed on the FTC’s authority to provide relief in the form of contract cancellation for school customers.Continue Reading The Dueling Views of FTC Commissioners Ferguson and Holyoak on the Scope of Agency Authority

The Federal Trade Commission (FTC) isn’t the only regulator in town when it comes to endorsements and testimonials. The Securities and Exchange Commission (SEC) regulates investment adviser marketing under its “Marketing Rule.” The rule states that an “advertisement may not include any testimonial or endorsement, and an adviser may not provide compensation, directly or indirectly, for a testimonial or endorsement” unless accompanied by clear and prominent disclosures.

According to an SEC cease-and-desist order, Wahed Invest LLC ran afoul of the Marketing Rule when it disseminated advertisements on its public website, social media, and emails containing endorsements from several professional athletes without the required disclosures. In one instance, a soccer player was paid in stock in Wahed’s parent company, worth about $500,000, and MMA athletes were paid around $30,000 monthly for appearing in the advertisements. The endorsements included statements such as:Continue Reading Foul! SEC Faults Investment Adviser for Inadequate Disclosures on Professional Athlete Endorsements

Join us as we spotlight select chapters of Venable’s popular Advertising Law Tool Kit, which helps marketing teams navigate the legal risk of campaigns and promotions. Click here to download the entire Tool Kit, and tune in to the Ad Law Tool Kit Show podcast, to hear the authors of this chapter dive deeper into the issue of green claims in this week’s episode.

Protecting the planet against climate change is a social movement—and big business. The Federal Trade Commission (FTC) has issued detailed and specific guidance for marketers about how to substantiate so-called green claims. Unsubstantiated green claims have been, and will continue to be, an enforcement priority. The FTC has sought comments on updates to the Green Guides, and new Guides are likely to be issued in 2024. State laws have also been passed that regulate specific “green” claims, which regulators have begun aggressively enforcing. Furthermore, plaintiffs’ class action lawyers are focusing on green claims across a variety of industries, from transportation to cosmetics.Continue Reading Green Claims: An Excerpt from the Advertising Law Tool Kit

As we previewed last week, industry and trade groups wasted no time in filing challenges against the Federal Trade Commission’s (FTC) Final Negative Option Rule.

The Michigan Press Association and the National Federation of Independent Businesses filed a petition challenging the rule in the Sixth Circuit Court of Appeals, while a separate petition was filed by multiple trade associations in the Fifth Circuit. Both cases have asked federal courts of appeals to determine whether the FTC’s issuance of the rule exceeded the agency’s authority and if the FTC’s processes were arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act. The petitions also ask the courts to determine if the FTC complied with the agency’s Magnuson-Moss rulemaking requirements, claiming the rule was “unsupported by substantial evidence” and based on determinations that did not allow for consideration of “disputed material facts.”

The petitions request that the courts vacate and set aside the rule. If either petition is granted, the FTC will not be able to enforce its Negative Option Rule.

Additional challenges to the FTC’s Negative Option Rule might continue. And similar challenges against FTC rules have found success; for example, the FTC’s Non-Compete Rule was set aside and ruled unenforceable nationwide. That decision is currently on appeal at the Fifth Circuit.Continue Reading Business Groups Rush to File Federal Court Challenges to the FTC’s Negative Option “Click-to-Cancel” Rule

Episode 4 of Venable’s Ad Law Tool Kit Show, Season 2,is now available. Listen to “Green Claims” here, or search for it in your favorite podcast player.

Protecting the environment and practicing social responsibility not only benefit the planet, but also provide a compelling value proposition. The Federal Trade Commission (FTC) has issued detailed guidance for marketers about how to substantiate green claims, and states are increasingly passing laws governing environmental advertising.

In this episode, Venable partner Claudia Lewis discusses how marketers can promote the environmentally conscious aspects of their products while avoiding so-called greenwashing.Continue Reading Listen to Venable’s Ad Law Tool Kit Show Podcast – “Green Claims”

By a 3-2 vote, the Federal Trade Commission (FTC) announced its Final Negative Option Rule that covers negative option programs for both consumer and B2B transactions in any media, including online, telephone, print, and in-person. The rule finalizes many of the requirements we previewed last year. Commissioner Melissa Holyoak’s dissent outlines many of the issues that those challenging the legality of the rule are likely to soon raise. 

Under the rule, companies selling goods or services with a negative option feature will be prohibited from:

  • Misrepresenting any material fact in advertising and marketing. The FTC expressly declined to limit this prohibition solely to elements of a negative option program and instead defined “material” to mean “likely to affect a person’s choice of, or conduct regarding, goods or services.” A non-exhaustive list of potential misrepresentations includes the cost, purpose, efficacy, and health or safety of the good or service.
  • Failing to disclose material terms clearly and conspicuously prior to obtaining the consumer’s billing information. The rule specifies that disclosures must be “unavoidable” and not contradicted or mitigated by, or inconsistent with, anything else in the communication.
  • Failing to obtain the consumer’s unambiguous affirmative consent before charging them. This must be done separately from any other portion of the transaction, and no other information may be included that detracts from, contradicts, or undermines the consumer’s ability to provide their express informed consent.
  • Failing to provide a simple mechanism to cancel and immediately stop charges

Continue Reading FTC Announces Final “Click-to-Cancel” Rule on Negative Options, Autorenewals, Free-to-Pay, and Subscription Services

The Federal Trade Commission (FTC) announced a “sweep” targeting AI-related conduct this week. The cases provide insight into how the agency may approach AI-related issues going forward and illustrate differences among the agency’s commissioners in how to approach issues raised by AI.

Three of the cases involved marketers making false earnings and business opportunity claims promising buyers income from AI-generated ecommerce locations. The FTC’s approach here was straightforward and consistent with how it has approached other money-making claims. Not surprisingly, both cases were voted out 5-0, and the FTC has obtained asset freezes against the companies and some principals.

The other cases were more novel and highlighted some of the challenges raised by AI.Continue Reading As FTC Begins Grappling with AI Issues, “Sweep” Signals Differing Approaches Among Commissioners

Not to be left behind by other regulators, the California Privacy Protection Agency (CPPA) recently issued an enforcement advisory on “dark patterns” in the context of the notice and consent required under the California Consumer Privacy Act (CCPA). As we’ve previously discussed, dark patterns are a subset of “deceptive marketing” and are also known as “deceptive design patterns.” The Federal Trade Commission (FTC) released a report in 2022 outlining the various methods companies employ, such as “making it difficult for consumers to cancel subscriptions or charges, burying key terms or junk fees, and tricking consumers into sharing their data.”

The scrutiny of dark patterns has only intensified since then, and states like California are jumping in. The CCPA defines dark patterns as “[u]ser interfaces or choice architectures that have the substantial effect of subverting or impairing a consumer’s autonomy, decision making, or choice” and says consumer agreement obtained through dark patterns does not constitute consent. The CPPA advises companies seeking to obtain consumer information to use language that is easy to understand and to avoid technical or legal jargon.Continue Reading California Privacy Protection Agency Warns Businesses Against “Dark Patterns” and Urges “Symmetry in Choice”

Last month, the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) jointly hosted a public meeting of the interagency “Strike Force on Unfair and Illegal Business Practices.” The meeting was a continuation of an effort, initially announced by President Biden in March, to “strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices,” according to a press release.

The August 1 meeting brought together a number of different agencies to discuss their actions to lower prices for Americans, including the FTC and the DOJ, the Consumer Financial Protection Bureau (CFPB), the U.S. Department of Transportation, the U.S. Department of Agriculture (USDA), the U.S. Department of Health and Human Services (HHS), the U.S. Securities and Exchange Commission (SEC), and the U.S. Federal Communications Commission (FCC).Continue Reading Federal Agencies Increase Focus on Pricing Enforcement

At this week’s National Advertising Division Annual Conference, FTC Commissioner Melissa Holyoak and FTC Bureau of Consumer Protection Director Samuel Levine presented starkly different perspectives of the agency.

On Monday, Levine provided a familiar list of the FTC’s accomplishments over the past year, including what consumers can expect from the BCP going forward:Continue Reading At NAD Conference Federal Trade Commission’s Holyoak and Levine Share Contrasting Perspectives on the Agency’s Role