Tractor maker Kubota North America Corporation will pay a $2 million civil penalty for falsely labeling its replacement parts as “Made in USA,” the largest civil penalty ever in a Federal Trade Commission (FTC) Made in USA case.

In its complaint, released last week, the FTC alleges that since at least 2021, Kubota has labeled thousands of replacement parts as Made in USA when, in fact, they were wholly imported. After shifting production of some of its products overseas, the company failed to update its package designs that included the Made in USA labels, resulting in the sale of millions of replacement parts with the false label.  Making matters worse, at least in the FTC’s eyes, Kubota was previously sued by the FTC in 1999 for falsely claiming that a line of lawn tractors it manufactured was Made in USA and was subject to an FTC order in that case that expired in 2019. Continue Reading FTC Issues Record-Breaking Civil Penalty in “Made in USA” Case

Earlier this week, the Federal Trade Commission (FTC) held its informal hearing on the proposed amendments to the Negative Option Rule. Clearly on display was not only industries’ concern about the impact of the proposed rule, but also concern about the FTC’s haste toward implementing the rule changes.

As a refresher, the FTC generally must promulgate rules under the Magnuson-Moss Warranty Federal Trade Commission Improvements Act (Mag-Moss) instead of the less-stringent Administrative Procedures Act. Under Mag-Moss, the FTC must first issue an advanced notice of proposed rulemaking (ANPR) seeking public comment, issue a notice of proposed rulemaking (NPRM), have reason to believe that the conduct at issue is “prevalent,” conduct informal hearings allowing parties to present their views and finally publish the final rule with a “statement of basis and purpose” accompanying the rule.Continue Reading Unpacking the FTC’s Negative Option Rule Informal Hearing

This week, the Federal Trade Commission (FTC) announced a Proposed Stipulated Order with lead generator Response Tree LLC and its president, resolving allegations that the company violated the Telemarketing Sales Rule (TSR) and Section 5 of the FTC Act. The complaint alleged that the company operated “consent farm” websites that misled consumers into providing their telephone numbers, falsified lead data, and obtained leads without requisite consent, resulting in unlawful prerecorded calls and calls made to telephone numbers on the Do Not Call Registry.

First, the complaint alleges that defendant’s websites duped consumers into providing their telephone numbers by misrepresenting that they were consenting to receive calls about home mortgage financing quotes. According to the complaint, the defendant sold the lead to partners who marketed products or services completely unrelated to home mortgages or lending.Continue Reading FTC Bans Lead Generator from Participating in Robocalls in $7 Million Settlement

Last week, the Fifth Circuit handed down an across-the-board rejection of four constitutional challenges raised by gene sequencing company Illumina in defending against the Federal Trade Commission’s merger challenge. Bah! Humbug!

In previous years around the holiday season, we’ve had better news to report to those under the FTC’s thumb. With our coverage of the panoply of constitutional challenges that the FTC has been facing recently, there was a chance that tradition would continue. Alas, that is not the case with the Fifth Circuit’s decision in Illumina v. FTC.

First the Fifth Circuit rejected Illumina’s argument that Congress impermissibly delegated legislative authority by allowing the FTC to choose whether to bring enforcement actions in federal court or in an administrative proceeding. Specifically, the Court based its reasoning on the fact that the FTC’s authority under Section 13(b)—providing for federal action to obtain injunctive relief—and its authority under Section 5(b)—providing for administrative action, after which the FTC can obtain monetary relief such as damages—are two separate and distinct enforcement mechanisms.Continue Reading FTC Constitutional Challenge Update: Fifth Circuit Delivers Illumina a Stocking Full of Coal

If your business offers a loyalty program in conjunction with a gift card, you likely already know that Section 520-e of New York’s General Business Law took effect December 10, 2023. This new law gives consumers a set grace period to use their credit card reward points when certain changes (e.g., modification, cancellation, closure, or termination) are made to a “reward, loyalty, or other incentive program.”

Specifically, under the new law, “[i]f any credit card account or rewards program is modified, cancelled, closed or terminated,” the issuer must provide notice to the card holder as soon as possible, but no later than 45 days of the action. Then, unless the customer has engaged in fraud or misuse of the account, starting with the date on which the notice is sent, the holder shall have 90 days to redeem, exchange, or otherwise use any accumulated credit card points, subject to the availability of rewards.

The new provision defines “modification,” as one that has the effect of “eliminating points, reducing the value of points, affecting the ability of a holder to accumulate points, limiting or reducing rewards availability, limiting a holder’s use of points or the credit card account, otherwise diminishing the value of the rewards program or the credit card account to the holder or changing the obligations of the holder with respect to the rewards program or credit card account.”Continue Reading Reminder: New York’s Credit Card Reward and Loyalty Program Law Is Now in Effect

In March, the Federal Trade Commission (FTC) asked for comments on a proposal to replace the Prenotification Negative Option Rule with a more expansive Negative Option Rule. Now that the FTC has had the chance to review those comments, the FTC has set an informal hearing to allow for testimony from six of the over 1,000 commenters.

Each presenter will be limited to ten minutes but can supplement their remarks with written content. The FTC has appointed Carol Fox Foelak, an administrative law judge at the Securities and Exchange Commission (SEC), to serve as presiding officer.Continue Reading New Year, New Rule: FTC to Review Updates to Negative Option Rule During January Informal Hearing

The Federal Trade Commission (FTC) continues to focus its attention on “Made in the USA” claims, and this time the agency has fixed its gaze on a Florida-based company and its principal, whose claims regarding patriotic and Second Amendment-themed gifts were out of bounds.

In a recent complaint, the FTC alleged that the business, ExotoUSA LLC d/b/a/ Old Southern Brass, specifically targeted servicemembers and veterans by falsely stating that Old Southern Brass was a veteran-operated business that donated 10% of all sales to military charities. The FTC also charged that Old Southern Brass falsely represented, through express and implied claims, that all of its products were made in the United States. Statements such as “All of our products are made right here in the United States of America” directly contradicted evidence that many of the company’s products were either wholly imported from China or contained a significant amount of imported content.Continue Reading Made in or Made up? The FTC Closely Reviews “Made in USA” Claims

The Federal Trade Commission (FTC) announced it has reached a settlement with the bankrupt crypto company Voyager over the company’s alleged deceptive crypto marketing practices. Specifically, the FTC’s complaint alleges that from at least 2018 until its declaration of bankruptcy in July 2022, Voyager enticed consumers with promises that their deposits were insured by the Federal Deposit Insurance Corporation (FDIC) and were “safe.” However, consumers’ deposits with Voyager were not eligible for FDIC insurance and were not protected in the event that Voyager failed.

The FDIC only insures deposits held by insured banks or savings associations, and only up to certain limits. Voyager, however, is not a chartered bank or savings association. While Voyager’s bank partner was FDIC-insured, FDIC deposit insurance protects deposits only in the event of the insured institution’s failure, not the failure of a non-bank partner in the event of that company’s failure. According to the FTC, Voyager’s false assurance lured customers into entrusting their funds to the company, resulting in significant losses for those affected by the company’s bankruptcy in July 2022.Continue Reading FTC Settles with Bankrupt Crypto Company, but Pursues CEO for Deceptive FDIC Claims

In recent years, independent agencies have continued to face a number of constitutional and statutory challenges before the Supreme Court. AMG Capital Management struck down the Federal Trade Commission’s authority to obtain equitable monetary relief under Section 13(b). Seila Law severed the Consumer Finance Protection Bureau (CFPB) commissioner’s for-cause removal protections. This term, the Supreme Court will determine whether the CFPB’s funding structure is constitutional in CFPB v. CFSA. And, as we’ve previewed earlier this year, the Court will weigh three constitutional challenges to the SEC in SEC v. Jarkesy.

A quick primer: The Supreme Court will review three constitutional infirmities that the Fifth Circuit determined that the SEC suffered. First, the Fifth Circuit held that when the SEC brought claims for civil penalties in administrative proceedings, it deprived Jarkesy of its Seventh Amendment right to a jury trial. Second, the Fifth Circuit held that Congress unconstitutionally delegated legislative powers to the SEC without an “intelligible principle” by providing it with the discretion to choose whether to bring an enforcement action for monetary penalties in Article III courts or before an administrative law judge (ALJ). Finally, the Fifth Circuit determined that the statutory removal restrictions for SEC ALJs are unconstitutional.Continue Reading Tracking the Impact of Securities and Exchange Commission v. Jarkesy and Other Constitutional Challenges Against the FTC

This week, the Federal Trade Commission (FTC) released a Proposed Rule, “Rule on Unfair or Deceptive Fees.” The Proposed Rule comes after the FTC solicited comments through its Advance Notice of Proposed Rulemaking in November 2022. The Proposed Rule would cover any business selling in physical locations and online. There is one exception for motor vehicle dealers, which is addressed in a separate rule. The below requirements apply to businesses regardless of whether they are providing the goods or services themselves (e.g., an online travel agent advertising for a hotel chain).

The FTC broadly identified two practices that it intends to regulate: (1) omitting mandatory charges and fees from advertised prices; and (2) misrepresenting the nature and purpose of the charges or fees.Continue Reading FTC Releases Proposed Rule Targeting “Junk” Fees