Consumer Protection

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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

On March 23, Utah Governor Spencer Cox signed into law sweeping amendments to the state’s Business Opportunity Disclosure Act (BODA). The amendments expand the scope of the statute to cover a broad spectrum of business activity. The amendments apply to any seller of a “business opportunity” who represents to the buyer that the buyer will—or may—derive income from the business that exceeds the amount the buyer pays to buy the product, equipment, supply, or service.

How Do the Amendments Expand the Scope of BODA?

Prior to these amendments, BODA applied to sellers of “assisted marketing plans”—defined as the sale or lease of any product, equipment, supplies, or service to a buyer for an initial payment of $500 or more for the purpose of enabling the buyer to start a business—who also made one of four qualifying representations to buyers about the plan. The first three representations are largely unchanged in the new amendments, but the fourth, which has been the focus of litigation under BODA, has changed. The prior language covered representations: that upon payment by the buyer of more than $500 to the seller, the seller will provide a sales program or marketing program that will enable the buyer to derive income that exceeds the price paid.Continue Reading Biz Opps Stung, Once Again, by the Beehive State

We frequently post about negative option marketing in this blog, but our focus has been the FTC’s enforcement actions against businesses that utilize this marketing strategy. We haven’t written as much about a different risk: payment processors and financial institutions caught in the crosshairs of a court-appointed receiver for their relationships with companies engaged in allegedly unlawful “negative option” marketing. Recently, two FTC enforcement actions in the Central and Southern Districts of California highlight these risks.

In Federal Trade Commission v. Triangle Media Corporation et al. (the “Triangle Action”), the FTC sued Triangle for engaging in an alleged scheme to offer fake “free trials” of personal care products and dietary supplements to obtain consumers’ credit and debit card information.

According to the FTC, Triangle then applied recurring charges to consumers’ cards without authorization. In a later, unrelated action, the FTC brought charges against Apex Capital Group, LLC for essentially the same activity (the “Apex Action”). In both cases, the courts granted the FTC’s request and recommendation that a receiver be assigned to oversee, manage, and preserve the assets of both sets of defendants. In an interesting turn, the same receiver, Thomas McNamara of McNamara LLP (the “Receiver”), was recommended by the FTC, and accepted by the courts, as the Receiver for Triangle’s and Apex’s assets.

Subsequently, the FTC filed an amended complaint in the Apex Action that accused Apex’s credit card payment processor, Transact Pro, of credit card laundering and chargeback manipulation in violation of Section 5 of the FTC Act. Both Apex and Transact Pro entered into a settlement with the FTC requiring a stipulated judgment ordering the parties to pay monetary relief.Continue Reading How Negative Option Marketing Can Risk Entangling Third-Party Banks and Payment Processors

Last week, New York Attorney General Letitia James announced that online travel agency Fareportal Inc., which operates several travel-related websites and mobile platforms, including CheapOair.com and OneTravel.com, will pay $2.6 million to New York for misleading consumers with deceptive marketing tactics.

“Consumers wanted to land affordable tickets through Fareportal’s platforms, but were met with lies instead,” James said in a statement. “Fareportal used deeply deceptive tactics to trick millions of consumers into booking airline tickets and hotel rooms.”

The investigation into Fareportal revealed that, since at least 2017, the company created false urgency around the availability of airline tickets and hotel rooms to pressure consumers into making purchases on its platforms. The AG challenged these marketing tactics as “dark patterns,” referring to alleged misleading design features and methods used to manipulate consumers into buying goods and services. As we have covered previously, alleged “dark patterns” have become a priority in rulemaking and enforcement.Continue Reading New York Attorney General Secures $2.6 Million from Fareportal for Deceptive Marketing Tactics

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