On March 23, Utah Governor Spencer Cox signed into law sweeping amendments to the state’s Business Opportunity Disclosure Act (BODA). The amendments expand the scope of the statute to cover a broad spectrum of business activity. The amendments apply to any seller of a “business opportunity” who represents to the buyer that the buyer will—or may—derive income from the business that exceeds the amount the buyer pays to buy the product, equipment, supply, or service.

How Do the Amendments Expand the Scope of BODA?

Prior to these amendments, BODA applied to sellers of “assisted marketing plans”—defined as the sale or lease of any product, equipment, supplies, or service to a buyer for an initial payment of $500 or more for the purpose of enabling the buyer to start a business—who also made one of four qualifying representations to buyers about the plan. The first three representations are largely unchanged in the new amendments, but the fourth, which has been the focus of litigation under BODA, has changed. The prior language covered representations: that upon payment by the buyer of more than $500 to the seller, the seller will provide a sales program or marketing program that will enable the buyer to derive income that exceeds the price paid.

Continue Reading Biz Opps Stung, Once Again, by the Beehive State

Last month, love was not all lost for the owner of Tinder and OKCupid when a Texas federal district court in FTC v. Match Group, Inc. granted in part the online dating service provider’s motion to dismiss. Specifically, the court agreed with Match that the FTC could not seek equitable monetary relief under Section 13(b) of the FTC Act and barred two claims based on Match’s immunity under the Communications Decency Act (CDA).

To set the scene, here is a recap of the legal landscape. In recent history, the FTC under Section 13(b) brought “proper cases” directly in federal courts without needing to conduct administrative proceedings. The agency also pursued permanent injunctions and equitable monetary relief.

In the past few years, courts have become increasingly less enamored with the FTC’s interpretation of its authority under Section 13(b). The first blow was FTC v. Shire Viropharma, Inc., in which the Third Circuit concluded that under Section 13(b), the FTC cannot base claims on “long-past conduct” alone, but must affirmatively plead facts that a defendant “is violating” or “is about to violate” the law, i.e., that there is “existing or impending conduct.”

Continue Reading <em>FTC v. Match Group, Inc.</em>: Court Gets Cold Feet on the Standard Set Forth in <em>Shire</em>

The proliferation of wireless and other electronic devices brings not only great opportunities but also compliance risk. This is demonstrated by a recent Federal Communications Commission (FCC) consent decree with Rexing, Inc., a retailer of aftermarket vehicle dash cameras.

Most devices that radiate radiofrequency, or RF, energy, either intentionally or unintentionally, must be tested for compliance prior to marketing in the United States. Some also must receive grants of equipment authorization from the FCC. Many are subject to labeling requirements. These requirements apply not just to manufacturers, but also to parties that import and market electronic and wireless devices in the U.S.

Examples of products that are subject to these FCC requirements, and which can unintentionally create regulatory problems for manufacturers, distributors, and retailers, include lightbulbs, ultrasonic humidifiers, and anything with a chip in it, such as computers, video games, and similar consumer products.

Continue Reading FCC Fine Is a Warning to Retailers of Electronic Devices

In a bulletin published last week, the Consumer Financial Protection Bureau (CFPB) warned banks and other financial companies against impeding honest reviews of consumer financial products and services. Although it does not cite a specific study for financial products and services, the CFPB’s bulletin describes how online reviews impact other industries across the economy.

We have been covering the Federal Trade Commission’s (FTC) efforts to combat what it sees as rampant customer review fraud, and now the CFPB is preemptively addressing its growing concern with how online reviews will play into customers’ decision-making when they are choosing from among several financial providers.

At first glance, the CFPB’s foray into the deceptive use of online reviews might appear to come out of left field, but it reflects a more general theme of following the FTC’s playbook and scrutinizing financial service providers more holistically, including their marketing practices. The bulletin itself cites to several recent FTC settlements in this area as persuasive precedent for application of the CFPB’s UDAAP authority.

Continue Reading The CFPB Warns Companies Against Impeding or Manipulating Honest Customer Reviews

In its much-anticipated cryptocurrency executive order issued earlier this month, the Biden administration called for a coordinated interagency approach to the regulation of digital assets and to the study of their potential risks.

A significant part of this effort focuses on the nation’s primary consumer protection agencies, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB).

Historically, the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Financial Crimes Enforcement Network (FinCEN) have played the primary roles in regulating digital assets, with the FTC and CFPB largely taking a wait-and-see approach. But this has left open a regulatory gap for crypto activities that do not involve a security or a commodity derivative.

Continue Reading Biden Tasks Consumer Protection Agencies with Stepping Up Cryptocurrency Oversight

We frequently post about negative option marketing in this blog, but our focus has been the FTC’s enforcement actions against businesses that utilize this marketing strategy. We haven’t written as much about a different risk: payment processors and financial institutions caught in the crosshairs of a court-appointed receiver for their relationships with companies engaged in allegedly unlawful “negative option” marketing. Recently, two FTC enforcement actions in the Central and Southern Districts of California highlight these risks.

In Federal Trade Commission v. Triangle Media Corporation et al. (the “Triangle Action”), the FTC sued Triangle for engaging in an alleged scheme to offer fake “free trials” of personal care products and dietary supplements to obtain consumers’ credit and debit card information.

According to the FTC, Triangle then applied recurring charges to consumers’ cards without authorization. In a later, unrelated action, the FTC brought charges against Apex Capital Group, LLC for essentially the same activity (the “Apex Action”). In both cases, the courts granted the FTC’s request and recommendation that a receiver be assigned to oversee, manage, and preserve the assets of both sets of defendants. In an interesting turn, the same receiver, Thomas McNamara of McNamara LLP (the “Receiver”), was recommended by the FTC, and accepted by the courts, as the Receiver for Triangle’s and Apex’s assets.

Subsequently, the FTC filed an amended complaint in the Apex Action that accused Apex’s credit card payment processor, Transact Pro, of credit card laundering and chargeback manipulation in violation of Section 5 of the FTC Act. Both Apex and Transact Pro entered into a settlement with the FTC requiring a stipulated judgment ordering the parties to pay monetary relief.

Continue Reading How Negative Option Marketing Can Risk Entangling Third-Party Banks and Payment Processors

Last week, New York Attorney General Letitia James announced that online travel agency Fareportal Inc., which operates several travel-related websites and mobile platforms, including CheapOair.com and OneTravel.com, will pay $2.6 million to New York for misleading consumers with deceptive marketing tactics.

“Consumers wanted to land affordable tickets through Fareportal’s platforms, but were met with lies instead,” James said in a statement. “Fareportal used deeply deceptive tactics to trick millions of consumers into booking airline tickets and hotel rooms.”

The investigation into Fareportal revealed that, since at least 2017, the company created false urgency around the availability of airline tickets and hotel rooms to pressure consumers into making purchases on its platforms. The AG challenged these marketing tactics as “dark patterns,” referring to alleged misleading design features and methods used to manipulate consumers into buying goods and services. As we have covered previously, alleged “dark patterns” have become a priority in rulemaking and enforcement.

Continue Reading New York Attorney General Secures $2.6 Million from Fareportal for Deceptive Marketing Tactics

On Friday, March 11, the Federal Trade Commission (FTC) filed an administrative complaint against HomeAdvisor, Inc., charging it with using deceptive and misleading tactics to sell leads for home improvement projects to small businesses, including small “gig-economy” workers. The action underscores the current administration’s effort to protect workers, especially those engaged in the gig economy through large platforms.

The FTC alleges that since at least 2014, HomeAdvisor—a popular service that matches service providers with consumers seeking home improvements—made false, misleading, and unsubstantiated claims about the quality and source of leads it sells, and about the likelihood that the leads would result in actual jobs. According to the complaint:

Continue Reading Burning Down the House: FTC Accuses HomeAdvisor, Inc. of Deception in Selling Leads for Home Improvement Projects

We’ve previously detailed the problem with the Florida Telephone Solicitation Act (FTSA), which, on its face, expansively prohibits the use of “an automated system for the selection or dialing of telephone numbers or the playing of a recorded message when the connection is completed” without the recipient’s prior express written consent. Fla. Stat. § 501.059(8)(a) (emphasis added).

Thus, arguably, even if a live human manually presses each digit in a ten-digit telephone number to place a telemarketing call or to send a marketing text message, if a system automatically selected those numbers for the representative to dial, it might be considered “autodialing” under the FTSA. (We have our doubts but, then again, no one refers to us as “Judges Blynn and Rinehart” . . . yet(?).) By comparison, the federal Telephone Consumer Protection Act’s (TCPA) definition is more restrictive and industry-favorable, requiring that telephone numbers be randomly or sequentially generated and called without human involvement. Dialing from a stored list of telephone numbers is not autodialing under the TCPA, as long as those numbers themselves are not pulled out of thin air.

Continue Reading “Indefinitely Postponed and Withdrawn From Consideration”: Florida Telephone Solicitation Act Amendments Wait for Another Day

There have been scores of Florida Telephone Solicitation Act (FTSA) class actions filed since July 1, 2021, when the statute was amended to provide for a private right of action; the Florida legislature thinks that number may be more than 100. As might be expected, there are a number of motions to dismiss pending in FTSA litigations. Many make arguments regarding the constitutionality of the statute and/or that the law is preempted by its federal counterpart (the Telephone Consumer Protection Act (TCPA)). A couple of defendants also have argued lack of standing, i.e., that the receipt of one or two allegedly unsolicited, autodialed text messages does not constitute a sufficiently concrete injury to confer standing on the plaintiff.

Continue Reading First Florida Telephone Solicitation Act Dismissal Decision Issues, and It Has Virtually Nothing to Do with the Statute