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This week the Federal Trade Commission unveiled hefty settlements with Epic Games Inc.—the creator of the video game Fortnite—to resolve separate actions alleging violations of Section 5 of the FTC Act and the Children’s Online Privacy Protection Act (COPPA), respectively.

Epic Games will pay $245 million in consumer redress to settle the alleged Section 5 violations in an FTC administrative proceeding and will pay $275 million in monetary penalties to settle the COPPA action in federal court. The cases highlight two hot spots for the FTC—dark patterns and children’s privacy.

In its administrative complaint, the FTC alleges that Epic Games used dark patterns, making the gameplay interface confusing and tricking players into making in-game purchases, often when they did not intend to. Specifically, the complaint alleges that:…

Continue Reading Ready, Aim, Fire: FTC Scores Record-Breaking $520 Million Settlement with Fortnite Creator Epic Games

At its December 14, 2022 open meeting, the Federal Trade Commission announced it would publish a notice in the Federal Register seeking comment on potential updates or revisions to its existing Green Guides. The Green Guides are the agency’s guidance document intended to “help marketers avoid making environmental marketing claims that are unfair or deceptive under Section 5 of the FTC Act.” Earlier, the FTC had indicated that the guides would be revised this year, but that has apparently slipped to next year.

The pre-publication version of the notice, which will be published later in the Federal Register, indicates that the FTC is requesting comments on all aspects of the Green Guides, and in it the agency notes that in the 10 years since the last update, increased attention to environmental concerns has resulted in “the proliferation of environmental benefit claims [which] includes claims not currently addressed in the Guides.” In addition, the FTC wants to ensure that the guides respond to changes in consumer perception.…

Continue Reading FTC Seeks Public Comment on Possible Green Guides Revisions

FTC investigations require companies to act quickly. Failure to do so can have draconian consequences. Read more for recent case examples.
Continue Reading Spoliation and Failure to Disclose: What Gets Swept Under the Rug in FTC Investigations Lands in a Dangerous Pit

On November 10, the Federal Trade Commission (FTC) released an aggressive new Policy Statement outlining the current FTC’s view on what constitutes “unfair methods of competition in or affecting commerce” under Section 5 of the FTC Act. Section 5 of the FTC Act covers conduct that violates other federal antitrust laws but also other methods of unfair competition. How broadly that “penumbra” of Section 5 should be interpreted has been the subject of debate for years. Consistent with her stated intent to increase broadly the reach of the antitrust laws, FTC Chair Lina Khan has used the Policy Statement to advocate for an exceptionally aggressive view of the conduct that the FTC may challenge under its antitrust authority, eschewing economics-based analysis for conduct that the Commission believes is coercive, exploitative, or abusive. The Statement also dismisses past litigation setbacks where the FTC has asserted Section 5 authority but has been rebuffed by the courts, explaining that even when courts find against the agency on factual grounds, they have still generally affirmed the FTC’s broad and robust authority under Section 5.

FTC Commissioner Christine Wilson issued a detailed and scathing critique of the Policy Statement, citing the legal and policy problems she believes the Statement causes.…

Continue Reading What the FTC’s Aggressive New Policy Statement on Unfair Methods of Competition Means for Advertisers

Last week, the Federal Trade Commission and state attorneys general in Arizona, California, Georgia, Illinois, Massachusetts, New York, and Texas settled with advertising giants Google and iHeartMedia for deceptive advertising and endorsements under Section 5 of the FTC Act.

The FTC and states allege that Google paid iHeartMedia to record and broadcast ads featuring “radio personalities” endorsing Google’s phone, the Pixel 4. In the ads, the radio personalities lavished praised on the Pixel 4, using first-person language to describe the Pixel 4’s functionalities and calling it their favorite phone.

The ads aired over 11,200 times between October and December 2019. The problem? The Pixel 4 had not been released for sale, and Google was unable to provide the phones to the radio personalities before the ads aired. In essence, the radio personalities were extolling the Pixel 4 without ever having used one.…

Continue Reading FTC Sues Advertising Behemoths Google and iHeartMedia for Deceptive Endorsements by Radio Personalities

At its most recent open meeting, the Federal Trade Commission voted unanimously to issue an Advance Notice of Proposed Rulemaking, seeking public comment on whether to modify or expand its Business Opportunity Rule.

The Business Opportunity Rule, first adopted in 2012, requires sellers of “business opportunities” to be able to substantiate any earnings claims they make, and to make certain enumerated disclosures pertaining to the potential transaction. These disclosures include:

  • The seller’s identifying information
  • Whether the seller is making earnings claims and, if so, substantiation for those claims
  • Whether the seller, affiliates of the seller, or its leaders have been involved in legal actions concerning misrepresentation, fraud, securities law violations, or unfair or deceptive practices in the previous 10 years
  • The terms of the seller’s cancellation or refund policy, if it has one
  • A list of people who have purchased the business opportunity in the previous three years

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Continue Reading Proposed Rulemaking: FTC Dials in on Business Opportunities

Recent trends indicate that consumers and the U.S. government are paying more attention to where products are sourced from.  

The Biden administration, for example, has made efforts to raise federal procurement standards for products “Made in America.” Specifically, the administration in March announced a final rule that outlined gradual increases to the “Made in America” requirement. As of October 25, the rule requires that federally procured products under the Buy American Act must have 60% of the value of their component parts manufactured in the United States. Under the prior rules, the Buy American Act only required that products contain 55% component parts manufactured in America in order to qualify for federal procurement. The threshold will further increase to 65% in 2024 and 75% in 2029.…

Continue Reading An Update to “Made in USA” for Federally Procured Products and FTC’s “Made in USA”

Last week, the Federal Trade Commission (FTC) issued a press release, announcing a $100 million settlement with Vonage, an internet-based telephone service company, for alleged violations of the Restore Online Shoppers’ Confidence Act (ROSCA). The action underscores the FTC’s continued focus on “dark patterns” and illustrates the agency’s efforts to require companies to go beyond the plain requirements of ROSCA in enforcement settlements.  

The FTC’s complaint alleged that Vonage offered free trials to business and residential customers for telephone plans. Unless the customer took affirmative action to opt out before the trial ended, Vonage would enroll the customer in an autorenewing monthly phone plan.…

Continue Reading Vonage, Autorenewals, and the FTC’s Ever-Expanding Interpretation of ROSCA

Last week at its monthly open meeting, the Federal Trade Commission (FTC) unveiled two new rulemaking proceedings: the first deals with deceptive customer reviews and endorsements and the second with so-called junk fees. 

Both rulemakings are in their nascent stages. Last week’s actions—the issuance of two advance notices of proposed rulemaking (ANPRs)—simply request information from the public on the consumer harms caused by fake and paid reviews and junk fees. The road from ANPR to final trade rule is a long and winding one, particularly given the number of new rulemakings upon which this FTC has embarked, which Commissioner Christine Wilson has termed “Ruleapalooza.”…

Continue Reading FTC Issues New Rulemaking Proceedings on Customer Reviews and “Junk Fees”

At a Federal Trade Commission (FTC) event last week, Chair Lina Khan said children are more susceptible than adults to deceptive or harmful practices, especially those that blur the line between advertising and entertainment.

The event, “Protecting Kids from Stealth Advertising in Digital Media,” included legal and child development experts, researchers, members of industry, and consumer advocacy groups. Together they discussed children’s development and ability to detect and understand advertising, the potential harms to children from blurred, deceptive, or manipulative advertising practices as well as the ways to mitigate them, and the significance of effective disclosures.

In her opening remarks, Khan said children often are unable to understand the difference between advertisements and organic content. Without realizing it they may end up engaging in commercial transactions or provide companies with their personal information without comprehending the privacy risks. Khan also noted that the FTC is considering whether to update its Children’s Online Privacy Protection Act (COPPA) Rule, which has not been updated since 2013, and requested comments on its advanced notice of proposed rulemaking related to commercial surveillance.…

Continue Reading FTC to Digital Media Advertisers: It’s Time to Protect Kids