The FTC continues policing business-to-business deception and its focus on small-business financing. On June 10, 2020, the FTC filed a Complaint in the Southern District of New York against two New York-based companies and several of their owners and officers for allegedly violating the FTC Act in connection with their business financing activities.

According to the Complaint, the defendants targeted small businesses, medical offices, non-profit organizations, and religious organizations. Since 2015, defendants allegedly deceived these consumers by misrepresenting terms of the merchant cash advances (MCAs) defendants provided, and subsequently used unfair collection practices to compel these entities to pay.

Continue Reading New York-Based Business Financing Companies Allegedly Deceive and Threaten Business Consumers

Financial services advertising and marketing occurs in an increasingly regulated and evolving legal landscape.  This quick hit with attorneys from Venable LLP explored the latest legal trends and developments in financial services advertising and marketing. Topics included:

  • COVID-19 impact on consumer and business lending advertising;
  • lead generation, influencer, and other emerging marketing methods;
  • regulatory outlook at the FTC, CFPB, banking agencies, and states;
  • emerging trends in government investigations, competitor challenges, litigation defense, and more.


Two recent decisions by the National Advertising Division (NAD) provide a helpful reminder to companies that material connections must be disclosed on their seemingly independent websites — so-called native advertisements. Notably, one of the cases arose from the NAD’s routine monitoring program, but both serve as a good reminder that without proper disclosures, consumers may not be aware that they are reading a potential advertisement as opposed to editorial content.

Last month, Amerisleep, LLC was challenged by Casper Sleep, Inc. for failing to adequately disclose that two mattress-ranking and review websites, and, were owned by Amerisleep. According to the NAD, the websites conveyed the message that the sites were independent through their use of a “.org” domain name, zero Amerisleep branding, and text and images that implied an unbiased and independent site. The NAD found Amerisleep’s contradictory disclosure inadequate to negate that impression. The disclosure merely stated that “we may receive financial compensation” and the websites are “owned by Healthy Sleep, LLC, which is affiliated with Amerisleep, LLC.” Furthermore, according to the NAD, the disclosure was obscured when a consumer clicked on a drop-down menu, was in very small type size, and was occasionally sandwiched between prominent large-type headlines and a prominent header displaying the site’s name.

As was the case above, the NAD is often used to adjudicate advertising-related competitor challenges (a tool recently made quicker with the launch of the NAD Fast-Track SWIFT process); however, the NAD also independently reviews advertisements and brings challenges on its own. Such was the case last week when the NAD, based on its independent review, determined that L’Oréal-owned websites,, and failed to make clear that the sites’ content was written by or on behalf of L’Oréal. The websites provide general information on makeup, skin care, and hair, and each sells various products relating to its content, but the NAD found that the references to L’Oréal generally appeared at the bottom of the webpages, too far from the website logos and content.

According to the NAD, advertisers have an obligation to inform consumers when they are advertising — an obligation that is particularly important when advertising appears in editorial-like formats. Both Amerisleep and L’Oréal agreed to modify their disclosures to better convey the material connection to consumers, but the L’Oréal decision highlights that challenges may come not just from competitors. Advertisers will undoubtedly sleep better knowing that their material connections are disclosed in a clear and conspicuous manner.

The perfect addition to any project is music. Whether you are making a video advertisement for your product; including music in your posts on your company website, TikTok, or YouTube; posting an at-home workout video for your clients; using music at corporate events; or playing music at your bar or restaurant – music is a vital part of society. Music is also the most common reason your content may be muted or taken down from social media, in addition to being exposed to potential liability for copyright infringement and related monetary damages. When you use someone’s music without their permission, absent a few extremely limited exceptions, you are infringing on their copyright.1

For the vast majority of music uses, you will first need to obtain permission. In this article, we lay out some fundamentals to assist in determining the type of license an average company would need and some potential alternatives. Bottom line: when you are planning and budgeting for music in a project, make sure you get the proper rights and permissions in place before pressing “Play.”

Continue Reading Conducting Your Way Through Music Licensing: The Most Common Issues

In a victory for plaintiffs bringing Lanham Act claims to protect their trademarks, the Supreme Court held on April 23, 2020, that a plaintiff is not required to show that the defendant “willfully” infringed its trademark in order to recover the defendant’s ill-gotten profits under the Act. The ruling favors Lanham Act false advertising plaintiffs as well.

In Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), Romag and Fossil signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag later discovered that the production factories Fossil hired in China were using counterfeit Romag fasteners while Fossil did little to stop them. Romag alleged that Fossil infringed on Romag’s trademark rights and falsely represented that Fossil’s fasteners came from Romag. The jury agreed and found that Fossil had acted “in callous disregard” of Romag’s rights. However, the jury also found that Fossil did not act willfully. Relying on Second Circuit precedent requiring a plaintiff seeking profits to prove that the defendant’s infringement was willful, the district court ruled that Romag could not recover Fossil’s profits. After the Federal Circuit affirmed, the Supreme Court agreed to resolve the circuit split on this issue.

Continue Reading Supreme Court’s Lanham Act Ruling Paves Easier Path to Profits for False Advertising Plaintiffs

Last week, the FTC put an end to a New York auto dealer’s discriminatory lending practices as the FTC brought its first Equal Credit Opportunity Act (“ECOA”) case in over ten years. Notably, two Commissioners are now calling for new rules to help further fight deception in the auto finance market. According to both Commissioners, this was the FTC’s first case alleging ECOA violations since the passage of the Dodd-Frank Act, which was signed into law July 21, 2010. ECOA prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, or age, or because someone gets public assistance.

On May 21, 2020, the FTC filed a Complaint for Permanent Injunction in the United States District Court for the Southern District of New York against Liberty Chevrolet, Inc. and its general manager, Carlo Fittanto, for allegedly violating the FTC Act, the Truth in Lending Act, and the ECOA. According to the Complaint, Defendants directed employees to charge higher interest rates and inflated fees in credit transactions to African-American and Hispanic customers. In addition, Defendants allegedly inflated costs, changed sales prices, and double-charged consumers for taxes and fees.

Continue Reading Where’s the FTC Headed? FTC Commissioners Call for Rulemaking Amid ECOA Settlement Approval

Despite what the “gurus” say, the FTC takes the position that there is no quick or easy path to success. Whether that is true or not, the FTC has sued several companies that purportedly taught consumers how to start a home-based Internet business—often advertising the potential to earn vast sums of money—and last week the FTC settled with a company allegedly helping newly formed Internet businesses market more effectively. However, despite ceasing new sales in 2017, it inevitably drew the FTC’s attention with a pitch that allegedly contained unsubstantiated earnings claims, high-pressure sales tactics, and elusive disclaimers, coupled with high chargeback rates and “gag clauses.”

On May 12, 2020, the FTC filed a Complaint for Permanent Injunction in the United States District Court for the Western District of Washington against Position Gurus, LLC for allegedly violating the FTC Act, the Telemarketing Sales Rule, and Consumer Review Fairness Act (“CRFA”). According to the Complaint, Defendants targeted consumers who had recently purchased purported business opportunities or had recently opened an account at Shopify or Volusian, both of which create, among other things, custom webpages that enable consumers to sell their products online. According to the FTC, after purchasing leads, Defendants called consumers, often misrepresenting an affiliation with the company that sold the original business opportunity, and offered products that would “substantially increase the visibility of and drive customer traffic to consumers’ e-commerce websites.” However, according to the FTC, this statement was false, and consumers rarely recouped the purchase costs of the marketing services.

As we have blogged about before, disclaimers may not eliminate the risk that the FTC finds a claim deceptive, and, in order to be effective, the disclaimers must be prominent. Here, the FTC found that the Defendants failed to highlight, or bring to consumers’ attention, disclaimers that qualified statements made during the sales calls. In addition, the FTC alleged that the Defendants’ form contracts violated the CRFA. Under the CRFA, form contracts must not contain “gag clauses” that prohibit consumers from writing or posting negative reviews. Defendants’ form contracts contained non-disparagement provisions that prohibited consumers from making any statement that “embarrass[es], criticize[s], or damage[s]” Defendants, and failure to abide resulted in liquidated damages. Moreover, the FTC frequently points to high chargeback rates as evidence of deceptive marketing. In this case, despite “vigorously defend[ing] chargebacks,” Defendants had a 38 percent chargeback rate.

Whether a business provides consumers with the ability to start an Internet-based business, or merely aids an established one, earnings claims must be substantiated, disclaimers must be prominent, and the number of chargebacks must reasonable. To do otherwise, can put you in a bad position.

First Data Merchant Services, LLC (First Data), and its former executive, Chi “Vincent” Ko, will pay $40.2 million to settle Federal Trade Commission (FTC) charges that they ignored obvious warning signs of fraud and processed transactions for an array of scams that caused tens of millions of dollars in harm to consumers.

This action serves as a powerful reminder that the FTC seeks to hold processors and their independent sales organizations (ISOs) financially responsible for facilitating the unlawful conduct of merchants by enabling merchants to access the payments system to allegedly defraud consumers and launder card transactions. Just as noteworthy, the settlement agreed to by First Data may propel new industry standards for processors to formally oversee the merchant onboarding activities of ISOs given responsibility for underwriting merchant accounts.

Continue Reading Latest FTC Payment Processing Case Results in $40 Million Proposed Judgment and ISO Oversight Requirements

We have written repeatedly about the FTC and various states’ efforts to clamp down on “negative option” offers to consumers (see blog posts here and here). Last week, consistent with a newly found focus on protecting small businesses, the FTC challenged negative option marketing aimed at business entities. The case underscores the FTC’s continued focus on negative option marketing as well as its new focus on protecting small businesses.

On May 13, 2020, the FTC brought a complaint in the Eastern District of Pennsylvania against American Future Systems, Inc. (“AFS”) and International Credit Recovery, Inc. (“IRC”) alleging that AFS would cold call businesses, speak to their employees, and offer free samples of books or newsletters to the organizations. If the employee agreed to accept the free sample, AFS allegedly enrolled the business, without its consent, into a negative option program for the publications, under which the businesses are automatically invoiced for annual subscriptions to the newsletters. The FTC alleged AFS would do this despite representations that AFS was not selling subscriptions, or without disclosing that the free sample offers were part of AFS’s attempts to sell such subscriptions.

According to the FTC, the defendants made matters worse by utilizing aggressive collection tactics. The FTC alleges that after six months, if business organizations did not pay the amounts invoiced for the subscriptions they never agreed to buy, AFS would then engage a third-party collection agency, IRC, to use false threats to collect the purported debt. IRC would tell consumers that failure to pay AFS’s bills would impact their credit rating or result in legal action. The FTC charged that such deceptive tactics violate the FTC Act and the Unordered Merchandise Statute.

Given the current economic disruptions caused by COVID-19, we can expect that the FTC will continue to attack both deception and improper debt collection aimed at small businesses. Sellers beware.

Last month, the National Advertising Division (NAD) launched its much-anticipated NAD Fast-Track SWIFT process (“Single Well-defined Issue Fast Track”). As we blogged previously, the Fast-Track SWIFT program reflects NAD’s plans to resolve advertising disputes more quickly and efficiently. The most significant aspect of Fast-Track SWIFT is its expeditious resolution process. Parties receive a NAD decision within 20 business days from the initiation of a challenge, i.e., the time that the advertiser receives the challenge.

Under the new rules, any person or entity may seek Fast-Track SWIFT review, but the Fast-Track SWIFT process is limited to issues in national advertising that do not require complex substantiation, such as clinical or technical testing or consumer perception evidence. Specifically, only the following three types of claims are eligible for fast-track review: the prominence or sufficiency of disclosures; misleading pricing and sales claims; and misleading express claims that do not require review of complex evidence or substantiation. NAD also provides hypothetical case examples it might find appropriate for fast-track determination.

Continue Reading NAD Launches Fast-Track SWIFT Process