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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

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

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

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Although the concept is not new, challenges to “dark patterns” are rising all over the country.  The Federal Trade Commission, Consumer Financial Protection Bureau, state attorneys general, and class action plaintiffs increasingly cite this phrase in such complaints as deceptively enrolling consumers…

Last week, the Federal Trade Commission filed a complaint in the Northern District of Illinois against the Saint James School of Medicine (SJSM), an Illinois-based for-profit medical school, claiming its Caribbean medical programs deceived consumers with fake student success rates and offers to finance students’ attendance with illegal lending contracts.

Over the last several years, the FTC has focused on for-profit higher education institutions and allegedly deceptive money-making claims, which the FTC challenges as flawed and costly get-rich-quick schemes. Its move last week suggests that the agency remains highly focused on alleged deception of any type involving paying money to make money, regardless of the format.

The FTC’s complaint alleges that SJSM advertises its Caribbean medical programs as an affordable alternative to American medical schools. However, SJSM also allegedly draws students into the program by advertising that more than 96% of its students pass the USMLE Step 1 exam—a critical standardized medical school test—the first time they take it. In fact, the FTC alleges that the passage rate for SJSM students since 2017 is 35%, and that is only for students who are allowed to take the exam after meeting prerequisites set by the school. The FTC claims that the true passage rates are disclosed to students only in hard-to-find areas of SJSM’s website and are buried in a student handbook that students receive only after SJSM has collected their reservation fees.…

Continue Reading The FTC Moves Its Attention to A For-Profit Medical School

A lawsuit filed by the CFPB last week against a national credit reporting agency provides some insight into the types of website features and designs that regulators like the Consumer Financial Protection Bureau and Federal Trade Commission will target. As we covered previously, digital dark patterns—or website design, features, and interfaces used to allegedly deceive, steer, and manipulate users—are a priority for both rulemaking and enforcement actions by the FTC. Although the focus has been on website features that “trick or trap” consumers into subscriptions, the potential for broad and arbitrary application of this concept is worrisome. What is the line between a website that is acceptably optimized for conversion and one that is illegally steering users to make purchases?

In the highly detailed complaint, the CFPB alleged, among other things, that the net impression of various advertising messages, combined with the design of the webpage where users landed when clicking on the ads, obscured the nature of the offer (a month-to-month subscription of a credit-monitoring service and credit score), the status of a user’s enrollment in the service, and the purpose of collecting a user’s payment information.

More specifically, the complaint described how call-to-action buttons, email subject lines, font color and size, text placement, and website flow were employed to confuse consumers who were seeking information about or copies of their annual free credit report and steer them instead into unwittingly purchasing a subscription for credit monitoring.…

Continue Reading Latest CFPB Lawsuit Sheds Light on Digital Dark Patterns

At the peak of tax-filing season, when millions of consumers are still considering their method of filing, the Federal Trade Commission has set its sights on Intuit, Inc., one of the largest online tax-filing services.

On March 28, 2022, the FTC filed an administrative complaint against Intuit, alleging that the company’s marketing of TurboTax as a free tax-filing service misleads consumers because the free service applies only to some, while many end up getting hit with charges at the time of filing.

In a press release, Samuel Levine, director of the Bureau of Consumer Protection at the FTC, stated that Intuit’s advertising is a “bait-and-switch” tactic that a court should immediately halt to protect tax-paying consumers. The FTC simultaneously filed a complaint for a temporary restraining order and preliminary injunction against Intuit in federal court in the Northern District of California, seeking to immediately enjoin it from advertising its tax-filing product and service, TurboTax, as free.…

Continue Reading “Free” Must Mean Free? FTC Seeks to Enjoin Intuit from Advertising TurboTax as a “Free” Service