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

The Consumer Financial Protection Bureau (CFPB) has once again been found to be unconstitutionally structured. The ruling is a win for CFPB critics and calls into question most actions taken by the agency.

A unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit held on Wednesday that the CFPB’s funding mechanism, funded by fees generated by Federal Reserve Board not through Congressional appropriations, is unconstitutional. According to the court, the CFPB’s funding is double insulated from Congress and, thus, is unaccountable to both Congress and the public. As such, the CFPB’s funding mechanism violates the Constitution’s separation of powers design and, specifically, the Appropriations Clause.

Continue Reading Federal Appeals Court Finds CFPB Unconstitutionally Funded, Structured

The FTC’s ears must have been burning. Yesterday, just hours after we finished a webinar discussing the latest developments in the FTC’s push for more rulemaking, the FTC announced an upcoming open meeting where it will propose issuing three advanced notices of proposed rulemaking (ANPR).

First, the FTC will consider whether to initiate rulemaking to address junk fees for goods or services that purportedly have “little or no added value to the consumer.” Second, the FTC will consider addressing fake reviews and other endorsements purportedly to protect “consumers and honest businesses alike.” Finally, the FTC will vote on whether to keep the Funeral Industry Practices Rule, and if so, to seek public comment on potentially modernizing the rule.

The open meeting will take place on Thursday, October 20 at 1:00 PM ET. Stay tuned to see which way the FTC’s winds blow. In the meantime, those of you who want to get up to speed on the FTC’s rulemaking authority, procedures, and recent trends can check out the slides from our recent webinar. A video recording of the webinar will also be available and published here next week.

Customer reviews and ratings are powerful, low-cost marketing tools. Technology now allows marketers to harness this power on a scale that was unimaginable even five years ago. The ability to solicit, capture, and post reviews and ratings is virtually seamless. But it is just as easy to seek shortcuts or abuse the system. In response, the Federal Trade Commission (FTC) has devoted resources to addressing consumer review fraud, including through public education. Early in the year, it issued nonbinding guidance for both marketers and online review platforms, warning against potentially deceptive acts, such as faking, manipulating, or suppressing online reviews, as well as paying for higher rankings from purportedly “independent” consumer ranking websites. Online reviews should reflect customers’ honest opinions. So how does the FTC suggest you get there?

Continue Reading A Sign of the Times: Federal Trade Commission Releases Guidance on Consumer Reviews

On Monday the U.S. Securities and Exchange Commission issued a cease-and-desist order to Kim Kardashian for failing to disclose that she received $250,000 to promote EthereumMax’s digital tokens, “EMAX tokens,” on social media.

The SEC considers the EMAX token to be an investment contract, a type of security under the SEC’s jurisdiction. EMAX tokens are available for public trading on cryptocurrency exchanges, and the SEC found that purchasers would have had a reasonable expectation of profits from their investment in EMAX tokens as a result of the efforts of the company behind the token.

Continue Reading Keeping Up with Disclosures: SEC Punishes Kim Kardashian for Crypto Promotion

Last week, the National Advertising Division (NAD) held its annual conference. The wide array of speakers covered a broad range of topics, from the metaverse to dark patterns, social justice, environmental claims, and (as always) substantiation and disclosures. Multiple speakers from the Federal Trade Commission also presented and gave insight into the FTC’s current priorities.

The regulators. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, made clear that the agency is closely tracking practices it believes result in consumer economic harm and consumer surveillance and privacy issues. He made clear that the Commission is not shying away from seeking big ticket monetary relief against national well-known advertisers, and intends to hold individuals and executives responsible for their companies’ advertising practices. In addition, Serena Viswanathan, FTC’s Associate Director in the Division of Advertising Practices, highlighted the Commission’s focus on disclosure issues as well as endorsements and reviews, such as review solicitation and aggregation, and product ranking websites.

Continue Reading Takeaways from NAD 2022: The FTC’s Enforcement Priorities, New Technologies, Dark Patterns, and the Usual Suspects

Last week, the Federal Trade Commission turned its attention to the mortgage relief industry once again. In its most recent enforcement action, the FTC joined forces for the first time with the California Department of Financial Protection and Innovation (DFPI).

On September 12, 2022, the agencies jointly filed a complaint in the U.S. District Court for the Central District of California against several companies alleged to have operated a mortgage relief scam. Two days later, the court issued a temporary restraining order (TRO) appointing a receiver and freezing the defendants’ assets until the parties can be heard on whether to issue a preliminary injunction.

The defendants consist of various corporate entities doing business as Home Matters USA, Academy Home Services, Atlantic Pacific Service Group, and Golden Home Services America, and two individual defendants who own the companies.

Continue Reading FTC Joins with California DFPI to Obtain Asset Freeze Against Mortgage Relief Business

By a unanimous 5-0 vote, the Federal Trade Commission last week released a staff report that sheds light on the agency’s enforcement positions and priorities regarding digital “dark patterns,” which the FTC defines as interface designs used to manipulate consumers into making decisions about purchases and personal data that they otherwise would not have.

Stemming from a public workshop the FTC hosted in April 2021, the report, “Bringing Dark Patterns to Light,” uses examples and illustrations to catalog and criticize numerous commonly seen practices in e-commerce, and includes an appendix describing types of dark patterns, while also stressing that dark patterns have a stronger effect, and by extension cause greater consumer harm, when they are used in combination, rather than in isolation.

Given Chair Lina Khan’s ambitious enforcement and policy goals for the agency, which we’ve previously discussed, anyone who engages with consumers online should consider the report both a reference and a warning.  

Continue Reading The FTC Brings More Light to Dark Patterns in New Staff Report

Last week, courts issued two new Florida Telephone Solicitation Act (FTSA) decisions. We’ve been covering the sprawl of FTSA cases filed since the statute was amended to allow for a private cause of action in July 2021. Both of last week’s decisions were on motions to dismiss.

First, on September 13, 2022, the Middle District of Florida gave FTSA defendants their first win in Davis v. Coast Dental Services, LLC. There, the plaintiff, using a form complaint that her attorneys often use in other FTSA cases, alleged that the defendant used a “computer software system that automatically selected and dialed” her telephone and sent a single marketing message to her (from a ten-digit phone number) about its dental services without her prior express written consent.

Continue Reading FTSA Dismissal Decisions Update: One Win, One New Loss

The buzz around gig economy protections continued as the Federal Trade Commission took yet another action to safeguard gig workers. Last week, the FTC adopted a policy statement asserting its authority to address unfair and deceptive practices and anticompetitive conduct that harms workers in the gig economy.

The statement highlights data from several studies concerning the gig economy, including that it is expected to generate $455 billion in annual sales by 2023, and that 16% of Americans report earning income through an online gig platform. The statement also reports that, while gig work has already established itself in food delivery and transportation, it is now expanding into healthcare, retail, and other segments of the economy. The FTC noted that the decrease in demand for transportation during the COVID-19 pandemic illustrates “the precarious nature of gig work.”

The FTC statement focuses on three features of the gig economy “that implicate the Commission’s consumer protection and competition missions:”

Continue Reading New FTC Policy Statement: Agency Continues to Ramp Up Gig Worker Protections