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In the wake of AMG Capital Management v. FTC and Liu v. SEC, uncertainty has loomed as to how courts should measure the consumer redress available to the FTC under Section 19 of the FTC Act. Earlier this month, a court in the District of Arizona squarely addressed this issue.

Before AMG, the FTC used its ability to obtain injunctive relief in federal court under Section 13(b) of the FTC Act for violations of Section 5 of the FTC Act to also obtain equitable monetary relief. As we’ve previously discussed, the Supreme Court’s decision in AMG put an end to that. As a result, the FTC turned to its authority under Section 19 to obtain redress for rule violations.

The Supreme Court’s decision in Liu, which we also previously covered, held that equitable monetary relief cannot exceed a defendant’s gains after legitimate business expenses. This results in the quandary of how to reconcile this with the text of Section 19, which provides for “such relief as the court finds necessary to redress injury to consumers.”…

Continue Reading Addressing the Redress: District Court Limits the Scope of FTC Consumer Redress for Rule Violations

Last week, the Federal Trade Commission issued a Notice of Penalty Offense regarding substantiation for product claims to 670 companies in the health-related marketing space. This new Notice is yet another signal from the FTC that it intends to aggressively pursue its enforcement agenda using all available tools, including previously long-dormant avenues, like its Penalty Offense Authority.

Using its Penalty Offense Authority, the FTC can seek civil penalties from a company or individual that engages in conduct the FTC has determined was unfair or deceptive in a litigated administrative enforcement proceeding, provided the FTC can prove they had actual knowledge that the conduct was unlawful. The purpose of the notice letter is to allow the FTC to argue that the recipients had the requisite “actual knowledge” to support civil penalties of up to $50,120 per violation.…

Continue Reading New Notice of Penalty Offenses: Are You in the Danger Zone?

The U.S. Supreme Court’s landmark decision unanimously reversing the Ninth Circuit in Axon Enterprise v. Federal Trade Commission is likely to represent a monumental shift in pre-enforcement challenges to administrative enforcement proceedings brought by federal agencies, including the FTC.

The decision held that agencies, including the FTC, are not empowered to decide whether their own enforcement procedures are constitutional, removing the thumb from federal agencies’ side of the scale. The Supreme Court emphatically ruled that such authority is reserved for the courts, and that collateral challenges to the constitutionality of administrative proceedings are appropriate.

As background, the FTC can elect to litigate a party’s alleged wrongdoing in an administrative proceeding overseen by an FTC-appointed administrative law judge (ALJ) or in a federal district court. Until the Supreme Court’s decision in AMG two years ago, the FTC’s favored enforcement path was to proceed straight to federal district court. With that avenue significantly constrained by AMG, the FTC is more frequently bringing enforcement actions in administrative proceedings before ALJs. Administrative proceedings, however, include several components that heavily favor the FTC. First, the fact finder in an FTC proceeding is appointed by the FTC. Second, the party subject to the enforcement proceeding is forced to wait until the proceeding ends to challenge the result in a federal appeals court. Moreover, the reviewing federal appeals court’s scope of review is limited to the record that the FTC produced.…

Continue Reading U.S. Supreme Court Justices Thomas and Gorsuch Skeptical of ALJ Proceedings in Axon Enterprise v. Federal Trade Commission Decision

Last week, the Federal Trade Commission announced that its proposed rule replacing its Prenotification Negative Option Rule would result in new, expansive requirements for all forms of negative option offers, including automatic renewals, continuity plans, and free-to-pay conversations, made in all media, including Internet, telephone, in-person, and printed material.

Still subject to another round of comments, the proposed Rule Concerning Recurring Subscriptions and Other Negative Option Plans also features a federal requirement to provide an online cancellation mechanism to consumers who enroll in the negative option program online. That requirement is already imposed by laws in California, New York, and other states, and may be the least consequential of the proposed changes.

If enacted, the proposed rule would reach far beyond the scope of usual disclosure, consent, and cancellation requirements. Among other things, it would prohibit misrepresentations related to the underlying product or services, impose restrictions on “save” efforts when a consumer attempts to cancel, and require annual reminders for negative option features not involving physical products.…

Continue Reading Click to Cancel: FTC Proposes New Rule Regulating Subscription Services and Negative Option Programs with Broad Implications

The Federal Trade Commission’s recent settlement with Dalal A. Akoury and AWAREmed Health & Wellness Resource Center provides a good overview of how today’s FTC approaches medical claims it believes are unsubstantiated. The case also serves as a reminder that if medical claims sound too good to be true, they probably are.

According to the complaint, filed by the Justice Department on behalf of the FTC, defendants, under Khoury’s leadership, engaged in deceptive acts or practices in violation of Sections 5 and 12 of the FTC Act and the Opioid Addiction Recovery Fraud Prevention Act (OARFPA). The complaint states that defendants deceived reasonable consumers into believing that the medical clinic’s treatments could cure cancer, chronic diseases such as Alzheimer’s and Parkinson’s, and a range of addictions, including to opioids, sex, food, and gambling.

The FTC had previously warned defendants on numerous occasions that making unsubstantiated addiction treatment claims is against the law. Khoury and AWAREmed, a set of companies Khoury controls that operate as a medical clinic, apparently ignored such warnings, causing the Justice Department to try and permanently halt defendants’ deceptive advertising and recover civil penalties. With this complaint the FTC continues its aggressive use of the Opioid Act to fill the hole in its remedial authority after AMG.…

Continue Reading In AWAREmed Settlement FTC Says Opioid and Chronic Disease Ad Claims Must Be Backed by Science

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

As the dust settles from the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021), which gutted the Federal Trade Commission’s authority to obtain equitable monetary relief in court, the contours of the FTC’s remedial authority continue to be shaped by the lower courts.

Most recently, the Eleventh Circuit weighed in on whether Section 19 of the FTC Act authorizes the FTC to obtain an asset freeze and impose a receiver. Prior to AMG, the FTC routinely obtained such preliminary relief against companies and individuals the FTC believed were engaging, or about to engage, in unfair deceptive business practices. In doing so, the FTC would rely on its authority under Section 13(b) of the FTC Act. However, after AMG, the FTC can only use Section 13(b) to obtain forward-looking injunctive relief.…

Continue Reading Eleventh Circuit Says FTC Can Seek Asset Freezes and Receivership Under Section 19

When it comes to negative options, the CFPB has strong opinions. As demonstrated in its new circular, these opinions generally align with those of the Federal Trade Commission (FTC), which has repeatedly targeted trial offers, subscription sales, and other programs involving recurring charges for enforcement. The circular reaffirms the CFPB’s focus—shared with the FTC—on combating digital dark patterns used to engage in unfair, deceptive, or abusive acts or practices, especially when those techniques are combined with negative option marketing.

In an upcoming webinar on March 1, 2023 (RSVP here), Venable will be presenting an in-depth analysis of the CFPB’s circular, as well as CFPB and FTC enforcement actions and private litigation based on purportedly unlawful negative option marketing. For those who can’t wait, we’ve summarized the highlights of the circular below.…

Continue Reading The CFPB Joins the FTC on Negative Option Marketing and Dark Patterns in New Circular