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As COVID-19 becomes a more prevalent part of everyday life, federal and state regulators have made it clear that they will aggressively enforce consumer protection laws against companies that seek to take improper advantage of the COVID-19 pandemic.

In a March 26, 2020, statement, Federal Trade Commission Chairman Joe Simons strongly condemned businesses who engage in unfair and deceptive business practices during the COVID-19 pandemic. Chairman Simons stated that the FTC was working with federal and state law enforcers, consumer advocates, and business owners to protect consumers from companies who seek to take advantage of consumer fears regarding COVID-19. As we previously blogged, the FTC, along with the Food and Drug Administration, began taking action against these companies by issuing warning letters to seven sellers of unapproved or misbranded products which claimed that their products could treat or prevent COVID-19. In their respective statements regarding these warning letters, the FTC and FDA indicated that these warnings were only a first step and committed to aggressively pursuing companies who seek to take advantage of consumers during this national emergency. The FTC also published information about Coronavirus-related complaints from consumers, noting the significant number of Coronavirus-related complaints reported from consumers this year.

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When we think of superiority claims in advertising, we usually think of NAD or Lanham Act challenges.  When we think of brake pads, we usually think of Callaghan Auto Parts. Last  week, however, the FTC resolved an investigation regarding superiority claims for brake pads with Federal-Mogul Motorparts LLC (Federal-Mogul), a manufacturer and seller of after-market automotive parts.  According to the FTC, Federal-Mogul violated Section 5(a) of the FTC Act by disseminating a series of false and unsubstantiated advertisements concerning its Wagner OEX brake pads.   Specifically, Federal-Mogul claimed that (1) in an emergency Wagner OEX brake pads will stop a pickup truck, SUV, or crossover up to 50 feet sooner than competing brake pads; and (2) Wagner OEX brake pads would significantly reduce the risk of collisions compared with competing brake pads.…
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While the full economic impact of COVID-19 is unknown, the demand—and need— for jobs and work that can be performed from home certainly will increase. Companies offering opportunities to potentially earn income working from home are likely to see an influx in consumer interest—and, of course, likely to ramp up advertising. The FTC always has actively policed the industry, given the challenges inherent in substantiating earnings claims, and will continue to do so during the pandemic. Below are some common advertising pitfalls and general guidelines for avoiding them.

  1. Earnings Claims Must Be Substantiated and Typical

An earnings claim is a representation of how much money a consumer will make or the level of success a consumer will achieve. Such claims can be either express or implied, and all must be substantiated. This means you must possess information that sufficiently backs up every reasonable takeaway of the ad. In addition, any claim should be typical, which means the average person pursuing the offered opportunity is likely to achieve similar success. It may be tempting to advertise results achieved by the most successful students, but those advertisements are risky. From a regulator’s standpoint, atypical results may mislead consumers into thinking they too will achieve a similar level of success. At a minimum, in order to limit (but not eliminate) the risk, a well-drafted disclaimer should be present.

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Session #1: When It’s All Over but the Shouting: How to Identify and Avoid Ethical Pitfalls during Settlement Negotiations

11:00 a.m. – 12:00 p.m. ET

As more cases are resolved through settlement, it is important to understand how you can negotiate settlement without falling into an ethical quagmire. What can you say (or not say)…

Last week, the Arizona Attorney General filed a complaint against telemarketer Valley Delivery LLC and affiliated companies Next Day Delivery LLC and My Home Services LLC, and an individual defendant, Mathew Willes, for allegedly distributing fake missed package slips to homeowners to collect their personal information in a “delivery slip scheme.” While the conduct here seems particularly egregious, the case serves as a good reminder that the State AGs remain focused on consumer protection issues especially involving personal data and telemarketing.

The complaint alleged that since January 2017, Valley Delivery gathered new homeowners’ addresses from the county recorder’s office and then dispatched “delivery drivers” to those addresses to post fake delivery slips, with the caption “Sorry We Missed You” on the door of each home. The delivery slips contained a callback telephone number, purportedly for consumers to reschedule the delivery. However, when consumers dialed the callback number on the slips, representatives allegedly collected consumers’ information for telemarketing purposes by affiliated companies and third parties. In addition, according to the complaint, the defendants created websites with false information about the company meant to induce consumers to contact the companies about their “missed delivery.” The defendants allegedly failed to provide sufficient disclosure to consumers concerning their business practices, both on the companies’ websites and on the delivery slips themselves. Even though, there was a purported disclaimer on the back of the slip that any contact information customers provide may be used by the companies or any of its partners for marketing purposes, many homeowners did not see this less conspicuous language placed in a smaller font than the language on the front of the slip.

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Growing concern over the coronavirus (COVID-19) has seeped into the regulatory and legal world. Agencies and plaintiffs’ attorneys are targeting companies that claim their products can treat or prevent COVID-19. As people search for health products to counter the growing threat of coronavirus, companies should keep in mind that any advertising claims made must be substantiated. Health claims trying to trade on the panic caused by the virus will be closely monitored and pursued by law enforcement and the plaintiffs’ bar.

A few days ago, the Federal Trade Commission (FTC) and U.S. Food and Drug Administration (FDA) issued seven joint warning letters to companies making allegedly unapproved and unsupported advertising claims related to their products’ ability to treat or prevent the coronavirus. The letters state that any advertising claims trumpeting a product’s ability to treat COVID-19 “are not supported by competent and reliable scientific evidence” — which is required under the FTC Act.

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Last week, the Federal Trade Commission (“FTC”) announced a settlement with Neurometrix, the makers of the Quell electrical nerve stimulation device. In the complaint, the FTC alleged that the company made false claims about Quell’s ability to treat chronic and severe pain throughout the body, even though the device is only placed below the knee, and allegedly false claims that the device is clinically proven and cleared by the Food and Drug Administration (“FDA”) to treat full body pain. The case provides a good reminder that the FTC remains focused on health claims and the standards that the FTC requires for marketing products making health claims.

The FTC’s complaint also challenged advertising claims about Quell users’ results from using the device, including that 81% of people achieve significant pain relief with Quell, and that Quell relieves chronic or severe pain throughout the body caused by a wide range of conditions, including osteoarthritis, nerve damage, sciatica, shingles, and fibromyalgia.

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Last week, the FTC entered into a settlement with Teami, LLC, a marketer of teas and tea-based skincare products that the FTC alleges promoted its products with deceptive, unsubstantiated health claims and endorsements by social media influencers who did not adequately disclose their material connections to (i.e., monetary payments from) the company. The action highlights the FTC’s continued focus on both health claims and influencer marketing.

According to the FTC’s two-count complaint, Teami and its individual owners claimed, without reliable scientific evidence, that their products would treat cancer, clear arteries, significantly decrease migraines, treat colds, prevent flus, cause “rapid and substantial” weight loss and burn body fat.

The defendants also allegedly misrepresented that social media posts by influencers reflected the views of ordinary users of Teami products, failing to adequately disclose that the influencers were paid for their endorsements. According to the FTC, such disclosures must be clear and conspicuous—and, in this context, because consumers’ Instagram feeds typically display only the first few lines of a longer post followed by an option to read more, that means that endorsers must disclose any material connections above the “more” link.

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The staff of the Federal Trade Commission’s (FTC) Bureau of Consumer Protection released a much-anticipated paper on small business financing that highlights enforcement dangers on February 26, 2020. The staff are sounding the alarm on FTC enforcement and its investigations of small business financing providers and their marketers, servicers, and collectors.

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Last week, the FTC entered into a settlement with LendEDU, a lead generation website that compares and ranks student loan and other financial products, and three of its officers. According to the FTC, LendEDU heavily promoted its website to consumers as offering “objective,” “accurate,” and “unbiased” product information, when, instead, it offered higher rankings and ratings to companies that paid for placement — a practice known as “pay-to-play.” The FTC uncovered multiple emails between LendEDU’s employees and advertisers demonstrating the advertiser’s ranking was clearly based on the amount it paid LendEDU per click.

The FTC also alleged that company employees, family members, friends, associates or others affiliated with LendEDU posted fake positive reviews of the company’s website on third-party platforms. The FTC described the extent of the fake reviews, noting that 90% of the company’s reviews on the website, trustpilot.com, were created by a person affiliated with the company.

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