As we covered previously, courts are coming around to reading Section 19 of the FTC Act more narrowly than the Federal Trade Commission may hope. In the latest instance, on June 9, 2023, a magistrate judge in the Southern District of Texas issued a report and recommendation rejecting the FTC’s claim for consumer redress, even after finding there was consumer injury. The report and recommendation were adopted by the district judge on August 3.

In Federal Trade Commission v. Zaappaaz, LLC, the FTC argued at summary judgement, and the court agreed, that the defendants violated the Merchandise Rule by falsely advertising shipping speeds of personal protective equipment and refusing to offer refunds. For these rule violations, the FTC further argued that the appropriate measure of consumer redress under Section 19 was net revenue of the PPE sales—$37,549,472.14. In denying the FTC’s request for net revenue, the court distinguished between requiring the agency to demonstrate individual reliance as a means of proving consumer injury and the amount of compensation necessary to redress that consumer injury.Continue Reading Following Noland: Another District Court Tightens the Reins on the Scope of Consumer Redress

Last week, the Federal Communication Commission’s (FCC) issued a Notice of Apparent Liability for Forfeiture proposing a $20 million forfeiture, essentially a fine, against two telecommunications service providers for failing to properly authenticate customers’ identity before providing online access to Customer Proprietary Network Information (CPNI). CPNI includes sensitive data, such as called phone numbers, the length and time of calls, and service features. FCC rules mandate that companies handling such information use “reasonable measures” to guard access to CPNI.

Because it would be easy for third parties to impersonate customers and gain access to their CPNI, FCC rules prohibit the use of readily available biographical information or account information. “Readily available biographical information” includes “information drawn from the customer’s life history and includes such things as the customer’s social security number . . . mother’s maiden name; home address; or date of birth.” Account information is “information that is specifically connected to the customer’s service relationship with the carrier, including such things as an account number or any component thereof, the telephone number associated with the account, or the bill’s amount.” FCC rules thus requires service providers to authenticate customer identity without the use of the above information and then require a password.Continue Reading FCC Proposes $20 Million Forfeiture Against Telecommunications Service Providers for Failing to Protect User Data

With the end of the Supreme Court’s term in June, most eyes have been on the release of the last remaining merits decisions. In the midst of issuing the final opinions of the term, the Court also granted certiorari on a number of cases, one of which—Securities and Exchange Commission v. Jarkesy—might have implications for the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

In Jarkesy, the SEC sued talk radio host George Jarkesy and his two hedge funds (collectively, “the Jarkesy Parties”) through an administrative action before an SEC administrative law judge (ALJ). After an evidentiary hearing, the ALJ determined that the Jarkesy Parties committed securities fraud, and the Commission affirmed the ALJ’s decision, imposing a civil penalty, disgorgement of ill-gotten gains, and enjoining Jarkesy from various securities industry activities. The Jarkesy Parties proceeded to appeal the Commission’s decision to the U.S. Court of Appeals for the Fifth Circuit. The Jarkesy Parties appealed on several constitutional grounds previously raised and denied during the ALJ and Commission proceedings:Continue Reading Supreme Court Case Watch: Securities and Exchange Commission v. Jarkesy and Its Impact on Independent Agencies

It’s here! The 11th edition of Venable’s popular Advertising Law Tool Kit is now available for download. This annual resource compiles a broad spectrum of marketing-related topics, background information, and checklists into an easy-to-access guide, authored by some of the most experienced attorneys in the industry. Download this year’s Tool Kit or bookmark the link

Gather your W-2’s and call your CPAs! Tax season is upon us, and that means one thing for the FTC—another flurry of activity in its ongoing action against Intuit, Inc., one of the largest online tax-filing services. Recently, the FTC issued an order denying complaint counsel’s motion for summary decision in the case, concluding that the matter will proceed to a full evidentiary hearing—the FTC’s administrative version of a trial.

As we previously reported, the FTC initially brought its case against Intuit in March 2022, alleging that the marketing of TurboTax as free was misleading because the free service applies only to those customers filing “simple” tax returns, while the service charges many other customers at the end of the filing process. Two months later, we wrote about the states’ investigation of Intuit, which overlapped with the FTC case, and the resulting $141 million settlement with all 50 states and the District of Columbia. Along with the restitution payment, Intuit was required to cease its “free” advertising campaign as part of the settlement.Continue Reading FTC’s Case Against Intuit Isn’t Won—Yet

The Consumer Financial Protection Bureau (CFPB) has moved to curb digital mortgage comparison-shopping platforms from receiving referral fees, issuing an advisory opinion that outlines how companies violate the Real Estate Settlement Procedures Act (RESPA) when “they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.” The advisory is a warning to digital marketing platforms of the potential consequences of business relationships with mortgage lenders. The CFPB has a direct sightline into the marketing activities of mortgage lenders though supervision and routine examinations, and has already put a target on digital marketing providers.

The CFPB’s advisory opinion describes how platform operations can violate Section 8 of RESPA by enhancing the placement of lenders or related service providers on the digital platforms, or by otherwise steering consumers to those lenders or service providers. in addition, the opinion provides illustrative examples.Continue Reading CFPB Warns Digital Mortgage Comparison-Shopping Platforms About Referral Fees and Pay-to-Play Advertising

On December 20th, 2022, the Federal Trade Commission published new guidance regarding claims about the benefits and safety of health-related products: Health Products Compliance Guidance. This guidance replaces the Commission’s previous guidance, Dietary Supplements: An Advertising Guide for Industry, issued in 1998. The new guidance expands the scope to include other health-related products, such as foods, over-the-counter drugs, and devices.Continue Reading FTC Announces Health Products Compliance Guidance

This week the Federal Trade Commission unveiled hefty settlements with Epic Games Inc.—the creator of the video game Fortnite—to resolve separate actions alleging violations of Section 5 of the FTC Act and the Children’s Online Privacy Protection Act (COPPA), respectively.

Epic Games will pay $245 million in consumer redress to settle the alleged Section 5 violations in an FTC administrative proceeding and will pay $275 million in monetary penalties to settle the COPPA action in federal court. The cases highlight two hot spots for the FTC—dark patterns and children’s privacy.

In its administrative complaint, the FTC alleges that Epic Games used dark patterns, making the gameplay interface confusing and tricking players into making in-game purchases, often when they did not intend to. Specifically, the complaint alleges that:Continue Reading Ready, Aim, Fire: FTC Scores Record-Breaking $520 Million Settlement with Fortnite Creator Epic Games

Last week, the Federal Trade Commission and state attorneys general in Arizona, California, Georgia, Illinois, Massachusetts, New York, and Texas settled with advertising giants Google and iHeartMedia for deceptive advertising and endorsements under Section 5 of the FTC Act.

The FTC and states allege that Google paid iHeartMedia to record and broadcast ads featuring “radio personalities” endorsing Google’s phone, the Pixel 4. In the ads, the radio personalities lavished praised on the Pixel 4, using first-person language to describe the Pixel 4’s functionalities and calling it their favorite phone.

The ads aired over 11,200 times between October and December 2019. The problem? The Pixel 4 had not been released for sale, and Google was unable to provide the phones to the radio personalities before the ads aired. In essence, the radio personalities were extolling the Pixel 4 without ever having used one.Continue Reading FTC Sues Advertising Behemoths Google and iHeartMedia for Deceptive Endorsements by Radio Personalities

At its most recent open meeting, the Federal Trade Commission voted unanimously to issue an Advance Notice of Proposed Rulemaking, seeking public comment on whether to modify or expand its Business Opportunity Rule.

The Business Opportunity Rule, first adopted in 2012, requires sellers of “business opportunities” to be able to substantiate any earnings claims they make, and to make certain enumerated disclosures pertaining to the potential transaction. These disclosures include:

  • The seller’s identifying information
  • Whether the seller is making earnings claims and, if so, substantiation for those claims
  • Whether the seller, affiliates of the seller, or its leaders have been involved in legal actions concerning misrepresentation, fraud, securities law violations, or unfair or deceptive practices in the previous 10 years
  • The terms of the seller’s cancellation or refund policy, if it has one
  • A list of people who have purchased the business opportunity in the previous three years

Continue Reading Proposed Rulemaking: FTC Dials in on Business Opportunities