The latest edition of the FTC’s recent practice of holding open meetings brings a potential rule regarding earnings claims to the forefront. During the FTC’s open meeting, the Commission unanimously approved issuing an Advance Notice of Proposed Rulemaking with respect to earnings claims. As the Commissioners pointed out in their comments (additional information below), the motivation for this rulemaking is to repair the FTC’s ability to recover monetary relief for consumers after the Supreme Court’s decision in AMG Capital Management.

Prior to the vote, the Commissioners allowed Melissa Dickey from the Division of Marketing Practices to give a presentation on the FTC’s historical experience with earnings claims and the Division’s recommendation. Ms. Dickey recommended that the Commission move forward with the rulemaking process, and pointed to two primary reasons. First, the Division views false, misleading, and unsubstantiated earnings claims as especially problematic to consumers who, as Ms. Dickey postulated, ultimately rely on these assurances and, as a result, end up in significant debt. Second, the Bureau believes that these earnings claims are widespread, and impact almost every community, especially during the pandemic era, where purported bad actors target those who are seeking to earn extra income while working remotely.

Continue Reading FTC Approves Rulemaking Process for Earnings Claims

With several new state laws effective in 2022, it is becoming increasingly difficult for businesses to develop baseline compliance protocols across federal and state automatic renewal laws.

Against this backdrop, federal and state regulators continue to examine the sales practices of companies that sell products and services on an automatically renewing basis; states continue to pass new laws—and strengthen existing laws—that further embolden private plaintiffs and class action lawsuits; and the card brands have imposed increasingly strict requirements on companies offering products and services on a negative option basis.

Here we break down the compliance challenges posed by varying state laws addressing automatic renewal programs (also known as continuous service, continuity, subscription, or negative option programs), how newer card brand rules further stir the pot, and the low-hanging fruit that law enforcement agencies and private plaintiffs are going after for monetary redress and injunctive relief.

Continue Reading State Automatic Renewal Laws Are Starting to Look Like a Patchwork Quilt as the FTC Expands Enforcement of ROSCA

The explosion in Buy-Now-Pay-Later (BNPL) has caught the eyes of lawmakers and regulators, who are taking a closer look at this booming industry.

BNPL payment offers allow consumers to purchase goods or services now and pay for them over time, often through a short series of installments (for example, four payments spaced two weeks apart). Industry researchers have found that Gen Z consumers increased their use of BNPL products from 6% in 2019 to 36% in 2021. However, with this growth, lawmakers and regulators have voiced concerns about BNPL, including that consumers may easily spend more than they can afford and rack up multiple BNPL purchases with varying payment schedules and payment terms.

Read our 360 Degree Analysis of Buy-Now-Pay-Pater Products

The list of consumer protection concerns raised by lawmakers and regulators is long. Consumers may face late fees, fees for failed payments, payment rescheduling fees, early payoff fees, account reactivation fees, or other fees charged by BNPL providers that may not be readily apparent.

Continue Reading The Buy-Now-Pay-Later Boom Gets Consumer Protection Attention

It might be hard for some to imagine, but the Federal Trade Commission (FTC) is feeling groovy. This month, the agency released two guidance documents that track best practices to prevent consumers from being misled when marketers solicit and pay for online reviews and when review platforms feature online customer reviews.

The new documents are like two sides of an old-school vinyl album. Side A is for online retailers and marketers, while Side B is for review platforms (i.e., consumer review websites). The lyrics might be slightly different, but the tunes make for a pretty good mash-up.

Continue Reading Federal Trade Commission Releases Online Customer Review Guidance

The Federal Trade Commission (FTC) recently issued Notices of Penalty Offenses regarding for-profit education, endorsements and testimonials, and money-making opportunities. Prior to this year, the FTC had used its Penalty Offense authority only once in this century. So why the sudden rebirth? In this webinar, Venable attorneys examined the FTC’s authority in this area, the substance of the notices, and their broad implications.

What Is a Penalty Offense?

Under the Penalty Offense authority, the FTC can seek civil penalties against a company or individual if it proves that they had actual knowledge that the FTC had already issued a written decision (after an administrative trial) against another entity that the same conduct was unfair or deceptive in violation of Section 5(m)(1)(b) of the FTC Act. Section 5 enables the FTC to hold the person, partnership, or corporation liable for a civil penalty of up to $43,792 per violation.

In the last few weeks, the FTC has sent out three different notices. The purpose of these notices was to allow the FTC to argue that the recipients had actual knowledge that the FTC had previously ruled certain acts or practices to be unfair or deceptive. Each of the letters specifies that the FTC is not singling out recipients or suggesting recipients are violating the law, which signifies that this is part of an effort to effect broad changes in industry behavior.

Continue Reading FTC’s Notice of Penalty Offenses: What Do They Mean for You?

With Halloween just days away, it is perhaps fitting that the FTC has issued a new enforcement policy statement warning companies not to employ dark patterns to trick customers into a subscription plan. As we covered previously, the FTC has identified dark patterns—or website design features used to deceive consumers—as a priority for both rulemaking and enforcement actions. The timing of the announcement is a bit curious as the FTC is in the middle of a rule making on negative option marketing. More below from Commissioner Wilson on that.

The enforcement policy statement in many ways reflects the requirements of the Restore Online Shoppers Confidence Act (ROSCA) and established FTC precedent regarding negative option marketing. The FTC has been active against companies who hide their subscription programs behind links, have made customers undergo several attempts to cancel their subscription, or companies who failed to disclose that the benefits of their subscription did not exist anymore.

Continue Reading FTC Issues Dark Forecast for Dark Patterns in Subscription Auto-Renewal

With the complexity of product safety requirements, the changing regulatory environment, and the ferocious plaintiffs’ bar, it is more important than ever for importers, manufacturers, and retailers to understand their obligation to comply with product safety laws and standards. In this recent webinarMelissa L. Steinman, a partner in Venable’s Advertising and Marketing practice, explored current developments in product safety and warranty laws and examined common issues and pitfalls that organizations need to be aware of relating to product standards and safety. She also addressed some follow-up questions.

Continue Reading You Asked, We Answered – Consumer Product Safety and Warranties

In the latest example of its creative use of different enforcement tools to obtain monetary relief in the wake of the Supreme Court’s AMG opinion, the FTC has resurrected a dormant authority to hold companies accountable, via significant financial penalties, for unfair and deceptive business practices.

This week the FTC announced that it has put 70 for-profit higher education institutions—including some of the largest for-profit colleges and vocational schools across the country—on notice that the agency is scrutinizing false promises made about graduates’ job opportunities, earnings prospects, and other career outcomes.

The FTC is resurrecting its Penalty Offense Authority, found in Section 5(m) of the FTC Act, “to deter wrongdoing and hold accountable bad actors who abuse students and taxpayers,” according to FTC Chair Lina M. Khan. Under this section of the statute, the FTC can obtain penalties against other entities not party to the original proceeding if it can show the entity had actual knowledge that the act had been found to be unfair or deceptive.

Continue Reading FTC Invokes Penalty Offense Authority to Crack Down on For-Profit Education Industry

On September 22, 2021, FTC Chairperson Lina Khan published a memorandum to FTC staff urging the agency to unite behind her vision and priorities for the agency, and announcing that the elite vanguard leading Khan’s effort will be acting Bureau Directors Sam Levine and Holly Vedova, both of whom will become permanent directors of the Bureau of Consumer Protection and the Bureau of Competition, respectively. Khan has previously indicated that the FTC needs to throw off its bureaucratic chains of past approaches and practices and be more aggressive in enforcing both consumer protection and competition laws. Given the implicit and explicit criticism in her prior communications, the memorandum appears to be an effort to gather support among FTC staff for her approach. An overarching theme of the memorandum is that the FTC may be blurring the lines between the FTC’s consumer protection and competition missions by increasing collaboration between the Bureau of Consumer Protection and the Bureau of Competition. While many prior chairpersons have expressed this ambition, Khan appears ready to make that aspiration operational.

Chairperson Khan starts her strategic discussion by announcing that the agency will be taking a “holistic approach to identifying harms.” In elaborating on this “holistic approach,” she frequently combines references to individual consumers and businesses, and highlights nontraditional harms of anti-competitive activity, many of which are familiar to consumer protection, for example, disparate impact, privacy violations, and asymmetrical bargaining power. Her message is clear: the distinction between antitrust and consumer protection will no longer be as defined as it was in the past. Also clear are the consequences: once this boundary is eliminated, the FTC can use the merger review process to conduct discovery on consumer protection violations, perhaps hoping the cost and threat of that inquiry will deter merger activity.

Continue Reading The Khan Manifesto

On July 21, 2021, and in response to President Biden’s Executive Order calling on the FTC to address repair restrictions, the FTC unanimously adopted the Right to Repair Policy Statement related to manufacturer and seller restrictions to product repairs. In the policy statement, the FTC announced its plans to prioritize enforcement against unlawful repair restrictions, including promoting possible updates to state and federal legislation. Manufacturers and sellers should ensure compliance with current consumer protection and antitrust laws and monitor potential rulemaking, a path the FTC is careening toward.

The FTC expressed concern that repair restrictions make it more difficult for competitors, local businesses, and consumers to repair products. In a May 2021 report to Congress, Nixing the Fix: An FTC Report to Congress on Repair Restrictions, the FTC detailed manufacturer-created restrictions, including limiting the availability of parts, software, and telematics information and access to authorized repair networks; designing products to make self-repairs less safe; asserting trademark and patent rights in an overbroad manner; and implementing restrictive end-user license agreements and software locks. The FTC also warned that repair restrictions drive up repair costs, repair wait times, and electronic waste; reduce competition; and have an especially large impact on communities of color and lower-income Americans.

Continue Reading FTC Turns Focus to Repair Restrictions in New Policy Statement