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On April 20, 2021, Acting Chairwoman Rebecca Kelly Slaughter and Commissioners Rohit Chopra, Noah Phillips, and Christine Wilson testified before the Senate Committee on Commerce, Science, and Transportation and provided an overview of the FTC’s consumer protection priorities. In addition, the hearing addressed the Commission’s imperiled consumer redress authority under Section 13(b) of the FTC Act and the agency’s continuous efforts to combat COVID-19-related scams.

As we have previously written, the Supreme Court is set to decide the scope of FTC’s Section 13(b) authority to obtain a permanent injunction and equitable monetary relief. At the hearing, the Commission emphasized that Section 13(b) authority is the FTC’s “bread and butter” and requested that Congress clarify that authority. Chair Maria Cantwell (D-WA) and Ranking Member Roger Wicker (R-MS) showed an interest to move quickly with a legislative fix if the Supreme Court decides against the FTC. Specifically, Senator Cantwell gave two examples of how the FTC has used its Section 13(b) power to get consumer redress. In 2019, the FTC returned more than $34 million to consumers who were allegedly tricked into buying computer repair products and services, and the FTC sent settlement payments of nearly $50 million to students allegedly lured by a university’s deceptive advertisements that it worked with reputable companies to create job opportunities.

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Continue Reading The Uncertainty Continues: Compromised Section 13(b) Authority, COVID-19 Scams, and the FTC’s Plans for Consumer Protection

The FTC has filed its first lawsuit under the COVID-19 Consumer Protection Act, charging St. Louis-based chiropractor Eric Anthony Nepute and his company, Quickwork LLC, with violating the Act by deceptively marketing nutritional supplements as scientifically proven to treat or prevent COVID-19.

According to the FTC, despite its May 2020 warning letter to Nepute regarding unsubstantiated COVID-19 efficacy claims he made in connection with other products, the defendants continued marketing their vitamin and mineral products—namely, their “Wellness Warrior” vitamin D and zinc supplements—as proven immunity boosters that effectively treat or prevent COVID-19. The FTC also accuses the defendants of routinely dismissing public health guidance and falsely representing that their products provide protection against the disease that is equal to or better than that provided by available vaccines. The FTC’s complaint seeks both monetary penalties and broad injunctive relief.

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Continue Reading FTC Files First Action Under COVID-19 Consumer Protection Act

On March 29, 2021, the FTC announced a settlement with Beam Financial Inc. (Beam) and its founder and CEO, Yinan Du, over allegations that the mobile banking app company deceived consumers about their access to funds and interest rates. The settlement included a far-reaching conduct ban. As the non-bank financial services continue to grow, the action and settlement underscore the role the FTC seeks to play in policing that sector.

By way of background, on November 18, 2020, the FTC filed a complaint against Beam, alleging that Beam and Mr. Du falsely promised users of their banking app that they would earn high interest rates on the funds maintained in their Beam accounts and have “24/7 access” to their funds. Beam was not a bank; rather, it promised to place funds at banks and provide consumers access to those funds through the app. The FTC alleged that Beam promised users would receive “the industry’s best possible rate”—at least 0.2% or 1%—when users actually received a much lower rate of 0.04% and stopped earning interest entirely after requesting that Beam return their funds. The FTC’s complaint also alleged that Beam misrepresented that consumers could easily move funds into and out of their accounts and that they would receive their requested funds within three to five business days. According to the FTC, users reported that their emails, texts, and phone calls to the company went unanswered; some users even allegedly waited weeks or months to receive their money, while others never received it. The FTC alleged that this was particularly difficult for consumers experiencing serious financial hardship during the COVID-19 pandemic.

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Continue Reading FTC Settlement Leads to a 24/7 Shutdown of a Mobile Banking App

For those who follow the Federal Trade Commission and are anxiously awaiting the Supreme Court’s decision in AMG Capital Management v. FTC, several recent developments at the Commission may foreshadow the enforcement road that lies ahead. In many ways, the future may look a lot like the past, especially the 1960s and 1970s, when the FTC pumped out rules regulating many aspects of economic activity, including frosted cocktail glasses.

First, earlier this month, President Biden nominated Lina Khan, an associate professor of law at Columbia Law School, to replace departing Commissioner Rohit Chopra, who has been nominated to lead the CFPB. At 32 years of age, Khan would be the youngest FTC commissioner in the agency’s history.

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Continue Reading Setting Some Ground Rules: Commissioner Nominee and a New Working Group May Steer the FTC Down a New (Actually an Old) Road

We’re sorry not to be meeting up with you in person, but we hope you can join us for our spring 2021 edition of “Not a Symposium, but a Virtual Ad Law CLE Bonanza.” Combining the experience and thought leadership of one of the nation’s largest advertising law practices with key figures in advertising regulation, these three CLE-packed sessions are designed to educate and innovate. Topics will cover broad trends and anticipated developments, as well as industry-specific hurdles, highlights, and more.

Register today for any or all sessions!

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Continue Reading Spring 2021 Edition: Not a Symposium, but a Virtual Ad Law CLE Bonanza

Last week the FTC announced it had settled with Chemence, Inc. (“Chemence”) and the company’s president over deceptive “Made in USA” claims. The company was required to pay $1.2 million to the FTC, which amounts to the highest monetary judgment ever for a Made in USA case.

By way of background, unqualified Made in USA claims require that all or virtually all of the product is made in the United States. Previous FTC guidance stemmed from a 1997 Enforcement Policy Statement, but last year the FTC announced a Notice of Proposed Rulemaking for the Made in USA Labeling Rule, which would codify much of the Enforcement Policy. Notably, the proposed Rule would allow the FTC to seek civil penalties for each violation. The Rule has not yet been made final, but the opportunity to comment ended in September 2020.

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Continue Reading Superglue Manufacturer Stuck with $1.2 Million Judgment for Made in USA Violations

While we anxiously await the Supreme Court’s decision on whether the FTC can obtain equitable monetary relief pursuant to Section 13(b) of the FTC Act in the AMG case, a defendant’s challenge to the FTC administrative litigation process appears to be struggling. As administrative litigation may be used more frequently by the FTC if it loses the AMG case, the case is worth following.

Axon Enterprises makes body cameras for police use and in May 2018 purchased one of its competitors. The FTC investigated the consummated merger and had concerns that the merger reduced competition. In January 2020, Axon filed a lawsuit in the District of Arizona, and on the same day the FTC filed a complaint against Axon. In its complaint, Axon argued that the FTC’s in-house litigation procedure violates due process and equal protection rights because the FTC controls all aspects of the proceeding, effectively making the FTC judge, attorney, and jury in these cases. Additionally, the complaint disparaged the FTC for the clearance process by which the FTC and Department of Justice decide which agency should handle a merger, claiming that the process lacks transparency. In support of its claim that these proceedings violate constitutional rights, Axon alleged that the FTC has not lost a single case in its in-house proceedings in 25 years. The FTC did not contest this statistic.

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Continue Reading Ninth Circuit Rejects Challenge to FTC Administrative Proceedings

Last week, the Supreme Court heard oral argument in AMG Capital Management v. FTC. As we’ve previously discussed, the Supreme Court is set to decide whether Section 13(b) of the FTC Act, which expressly grants the FTC the right to obtain “a permanent injunction,” also grants the FTC the authority to obtain “equitable monetary relief.” During oral argument, certain Justices expressed doubt that the plain language of Section 13(b), when viewed in the context of the entirety of the FTC Act, authorized the FTC to obtain “equitable monetary relief” when proceeding under Section 13(b). While none of us can predict the future, after last Wednesday’s oral argument, we can’t help but wonder: What will happen if the FTC loses? Below, we have outlined the potential avenues for the FTC if the decision doesn’t go its way.

First, Congress could revise the language of Section 13(b) to allow the FTC to seek equitable monetary relief, a request the FTC made in October 2020. There’s precedent for such a move. After the Supreme Court significantly curtailed the SEC’s calculation of equitable monetary relief in Liu, Congress codified the SEC’s authority to seek disgorgement in federal district court as part of the 60th annual National Defense Authorization Act in January 2021, by amending the Securities Exchange Act of 1934. Congress could pass a similar amendment to the FTC Act to unambiguously allow the FTC to obtain equitable monetary relief under Section 13(b) or otherwise. Whether that potential authority would come with a statute of limitations, allow for joint and several liability, or be subject to other restrictions will be important in assessing any potential legislation.

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Continue Reading So…What If the FTC Loses AMG Capital Management v. FTC?

On January 11, 2021, the Federal Trade Commission (FTC or the “Commission”) announced it reached a proposed settlement with Everalbum, Inc. (“Everalbum”), a developer of a photo app, to resolve allegations that the company deceived consumers about its use of facial recognition technology.

The settlement highlights the FTC’s focus on biometric data and increased scrutiny regarding facial recognition technology. Specifically, in announcing the settlement, the FTC stated that facial recognition technology can turn photos into “sensitive biometric data” and emphasized that ensuring companies keep their promises regarding the use of biometric data will be a “high priority for the FTC.” Additionally, while the proposed settlement was approved by all five FTC Commissioners, Commissioner Rohit Chopra issued a separate statement criticizing facial recognition technology and expressing support for a moratorium or restrictions on the use of such technology.

Everalbum provides a photo storage and organization app called “Ever,” which allows users to upload photos and videos to be stored and organized using the company’s cloud-based storage service. Starting in 2017, Ever launched its “Friends” feature, which uses facial recognition technology to group users’ photos by the faces of people appearing in the photos. Initially, the feature was automatically enabled for all users and could not be turned off, although the company later allowed users located in Illinois, Texas, Washington, and the EU to choose whether to turn on the feature. However, according to the FTC’s complaint, Everalbum’s website represented that Everalbum was not using facial recognition technology unless a user affirmatively enabled or turned on the technology. As the technology was instead enabled by default for users located outside of Texas, Illinois, Washington, and the EU, the FTC alleged that this representation was deceptive, in violation of Section 5(a) of the FTC Act.

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Continue Reading FTC Takes Aim at Facial Recognition Claims in Latest Deception Settlement

Last week the FTC announced it had settled with mobile advertising platform Tapjoy regarding allegations that it failed to provide in-game rewards that users were promised for completing advertising offers. Commissioners Rohit Chopra and Rebecca Kelly Slaughter also issued a Joint Statement on the settlement, criticizing mobile app “gatekeepers” for excessive “rent extraction” from mobile gaming apps, which they believe has forced developers to adopt alternative – and often harmful – means of generating revenue, such as loyalty offers and loot boxes. The settlement, and particularly the separate concurrence written by Democratic Commissioners Rohit Chopra and Rebecca Slaughter, highlights the increased scrutiny over the entire mobile gaming ecosystem and the various businesses that operate within it.

Tapjoy operates a mobile advertising platform, acting as a middleman between advertisers, gamers, and game developers. The platform integrates “offers” into mobile games, promising users in-game currency and other rewards for completing the offers and promising developers a percentage of Tapjoy’s advertising revenue. Advertisers pay Tapjoy for each consumer who is induced to complete an offer, which often requires users to submit personal information or spend money, for example, by purchasing a product, enrolling in a continuity program, or completing a survey. Other offer requirements may include downloading an additional app or watching a short video.

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Continue Reading FTC Cracks Down on Mobile Gaming Middlemen Offering In-Game Rewards and Offers