Consumer Protection

Subscribe to Consumer Protection

Last week, the Arizona Attorney General filed a complaint against telemarketer Valley Delivery LLC and affiliated companies Next Day Delivery LLC and My Home Services LLC, and an individual defendant, Mathew Willes, for allegedly distributing fake missed package slips to homeowners to collect their personal information in a “delivery slip scheme.” While the conduct here seems particularly egregious, the case serves as a good reminder that the State AGs remain focused on consumer protection issues especially involving personal data and telemarketing.

The complaint alleged that since January 2017, Valley Delivery gathered new homeowners’ addresses from the county recorder’s office and then dispatched “delivery drivers” to those addresses to post fake delivery slips, with the caption “Sorry We Missed You” on the door of each home. The delivery slips contained a callback telephone number, purportedly for consumers to reschedule the delivery. However, when consumers dialed the callback number on the slips, representatives allegedly collected consumers’ information for telemarketing purposes by affiliated companies and third parties. In addition, according to the complaint, the defendants created websites with false information about the company meant to induce consumers to contact the companies about their “missed delivery.” The defendants allegedly failed to provide sufficient disclosure to consumers concerning their business practices, both on the companies’ websites and on the delivery slips themselves. Even though, there was a purported disclaimer on the back of the slip that any contact information customers provide may be used by the companies or any of its partners for marketing purposes, many homeowners did not see this less conspicuous language placed in a smaller font than the language on the front of the slip.

…
Continue Reading

Last week, the Federal Trade Commission (“FTC”) announced a settlement with Neurometrix, the makers of the Quell electrical nerve stimulation device. In the complaint, the FTC alleged that the company made false claims about Quell’s ability to treat chronic and severe pain throughout the body, even though the device is only placed below the knee, and allegedly false claims that the device is clinically proven and cleared by the Food and Drug Administration (“FDA”) to treat full body pain. The case provides a good reminder that the FTC remains focused on health claims and the standards that the FTC requires for marketing products making health claims.

The FTC’s complaint also challenged advertising claims about Quell users’ results from using the device, including that 81% of people achieve significant pain relief with Quell, and that Quell relieves chronic or severe pain throughout the body caused by a wide range of conditions, including osteoarthritis, nerve damage, sciatica, shingles, and fibromyalgia.

…
Continue Reading

Last week, the FTC entered into a settlement with Teami, LLC, a marketer of teas and tea-based skincare products that the FTC alleges promoted its products with deceptive, unsubstantiated health claims and endorsements by social media influencers who did not adequately disclose their material connections to (i.e., monetary payments from) the company. The action highlights the FTC’s continued focus on both health claims and influencer marketing.

According to the FTC’s two-count complaint, Teami and its individual owners claimed, without reliable scientific evidence, that their products would treat cancer, clear arteries, significantly decrease migraines, treat colds, prevent flus, cause “rapid and substantial” weight loss and burn body fat.

The defendants also allegedly misrepresented that social media posts by influencers reflected the views of ordinary users of Teami products, failing to adequately disclose that the influencers were paid for their endorsements. According to the FTC, such disclosures must be clear and conspicuous—and, in this context, because consumers’ Instagram feeds typically display only the first few lines of a longer post followed by an option to read more, that means that endorsers must disclose any material connections above the “more” link.

…
Continue Reading

Last week, the FTC entered into a settlement with LendEDU, a lead generation website that compares and ranks student loan and other financial products, and three of its officers. According to the FTC, LendEDU heavily promoted its website to consumers as offering “objective,” “accurate,” and “unbiased” product information, when, instead, it offered higher rankings and ratings to companies that paid for placement — a practice known as “pay-to-play.” The FTC uncovered multiple emails between LendEDU’s employees and advertisers demonstrating the advertiser’s ranking was clearly based on the amount it paid LendEDU per click.

The FTC also alleged that company employees, family members, friends, associates or others affiliated with LendEDU posted fake positive reviews of the company’s website on third-party platforms. The FTC described the extent of the fake reviews, noting that 90% of the company’s reviews on the website, trustpilot.com, were created by a person affiliated with the company.

…
Continue Reading

Law enforcement, workshops, and reports from the Federal Trade Commission (FTC) have yielded five “lessons” for lead generation advertisers, according to an article that was published last month in Law360 by Andrew Smith, director of the FTC Bureau of Consumer Protection. In it, he suggests that companies that purchase lead generation advertising must manage lead generators responsibly, just like manufacturers that make supply chain management a top priority.

The article drew attention from members of the lead generation advertising sector and their lawyers and compliance departments. Some commentators called it a tutorial on how to reduce risk in using lead generation advertising. For others the article was a cautionary tale of recent enforcement actions taken against a buyer of lead generation advertising and the lead generators spotlighted in the article. In any event, the article was certainly reflective of the FTC’s work in the lead generation area and reminder of the importance of legal compliance in the lead generation ecosystem.

According to Smith: “The complexity of the lead generation ecosystem isn’t a shield against liability, nor does it exempt you from honoring fundamental consumer protection principles. Advertisers should take the lead in ensuring the leads they use weren’t the product of deception.”

…
Continue Reading

The Federal Trade Commission’s “Negative Option Rule” is up for review, and the FTC is steering toward stricter regulations for automatic renewal plans and subscription programs. The FTC completed its last regulatory review of the Negative Option Rule in 2014 and decided then to retain the rule in its current form. But, will this time be different?

The Rule Under Review

The rule under review is the “Rule Concerning the Use of Prenotification Negative Option Plans,” also referred to as the “Negative Option Rule.” However, the scope of the Negative Option Rule only covers prenotification plans, like book-of-the-month clubs, where the seller sends notice of a book to be shipped and charges for the book only if the consumer takes no action to decline the offer, such as sending back a postcard or rejecting the selection through an online account.

…
Continue Reading

The National Advertising Division (“NAD”) held its Annual Conference in New York yesterday. Andrew Smith, the head of the Bureau of Consumer Protection for the FTC, delivered the keynote address and provided attendees with an excellent overview of the past year’s landmark decisions in FTC jurisprudence. For those who frequent this blog, it comes as no surprise that the hottest discussions focused on the recent trend among courts to question the FTC’s broad interpretation of its enforcement authority under Section 13(b), concentrating on rulings in the Shire ViroPharma decision from the Third Circuit, the LabMD decision from the Eleventh Circuit, and the recent Seventh Circuit decision in Credit Bureau Center.

In Shire ViroPharma, the Third Circuit ruled that, pursuant to the plain language of Section 13(b), to obtain an injunction under Section 13(b), the FTC must plead facts sufficient to show that a defendant “is” violating or “is about to” violate the law. Essentially, the Shire decision means that the FTC cannot use Section 13(b) to address wholly concluded past harm—a profound finding that could dramatically affect how the FTC pursues cases. For more analysis, see our past blogs on both the district court‘s and Third Circuit’s opinions. The FTC chose not to seek Supreme Court review of the Shire ViroPharma decision and instead appears to be trying to limit that case to its facts.

…
Continue Reading

Last week, companies engaged in debt collection were not-so-gently reminded that making calls using an automated dialer to any number other than the one provided by the consumer is incredibly risky—and in Rash Curtis & Associates’ case, a $267 million risk.

Calls made to phone numbers with the consumer’s prior express consent are not prohibited…

Crowdfunding plays an important role in democratizing access to capital for small entrepreneurs, but as we’ve written before, entrepreneurs of every ilk need to remember that their representations to consumers need to be truthful, accurate and not misleading. Last month, the FTC filed a complaint against Douglas Monahan and his company iBackPack of Texas, LLC, alleging that Monahan and his company had violated Section 5 of the FTC Act by scamming consumers on crowdfunding sites Indiegogo and Kickstarter with four crowdfunding campaigns that together raised over $800,000, including a campaign to develop a bulletproof backpack that could recharge personal electronic devices and act as a mobile hot spot.

iBackPack ad

…
Continue Reading