In a lawsuit that will likely be closely watched, Xlear, Inc.—a Utah-based manufacturer of xylitol-based hygiene products—has filed a federal lawsuit against the Federal Trade Commission (FTC) and its chairman, Andrew N. Ferguson. The suit, filed June 18 in the U.S. District Court for the District of Utah, seeks declaratory relief challenging the FTC’s long-standing requirement that advertisers have substantiation to prove the claims made in their advertising.

Xlear’s central argument is that the FTC’s “substantiation” standard, particularly as it applies to health-related claims, exceeds the agency’s statutory authority under Sections 5(a) and 12 of the FTC Act. The company contends that the Act prohibits only false or deceptive statements—not unsubstantiated ones—and that requiring marketers to possess substantiation effectively imposes a standard not found in the text of the statute. The complaint points to the FTC’s requirement that health-related claims be backed by randomized controlled trials (RCTs) as particularly onerous.

Continue Reading Xlear v. FTC: Utah Company Files Challenge to Long-standing FTC Substantiation Requirements Post-Loper

On June 23, 2025, Judge Alsup in the Northern District of California issued an order in Bartz et al. v. Anthropic PBC, granting in part and denying in part Defendant Anthropic’s motion for summary judgment on the sole issue of whether its use of Plaintiffs’ books as training data for Anthropic’s large language models (LLMs) was “quintessential” fair use.

Central to its mixed holding, the court acknowledged that Anthropic used the works in various ways and for varying purposes, such that each “use” must be identified and assessed separately. Ultimately, the court held that while the use of textual works to train LLMs was “exceedingly transformative” and thereby was protected as fair use when considered against the remaining factors, the separate use of the works to create a central library was only fair use with respect to works purchased or lawfully accessed—i.e., the use of pirated copies to create the central library was not protectible fair use. This decision makes clear that the source of content is a key element in evaluating fair use.

Continue Reading Court Holds That Anthropic’s Training of AI Using Legally Obtained Books Is Fair Use, but Storage of Pirated Books Is Not

In a development that underscores the Federal Trade Commission’s (FTC) growing scrutiny of the “merchant of record” model, the commission announced a $5 million settlement with UK-based Paddle.com Market Limited (Paddle), which processed payments for multiple businesses that allegedly sold deceptive tech support software subscriptions to U.S. consumers. The Paddle settlement, which follows a series of earlier actions involving merchants of record, suggests that the FTC has expanded its focus from the traditional payments industry to more novel models that support merchant aggregation and related services. The settlement also presents another novel use of the FTC’s authority under the Restore Online Shoppers’ Confidence Act (ROSCA), which has become a favored tool of the FTC in policing sales and recurring billing practices that the commission deems unfair or deceptive.

FTC Allegations and Merchant of Record Concerns

Over the past decade, global e-commerce has grown dramatically, with merchants selling goods and services to consumers around the world. Given the complexity of cross-border sales, many e-commerce merchants have partnered with payments companies that process sales for the merchant as the “merchant of record,” and which may provide other ecommerce services, such as sales fulfillment and tax remittance. Although the merchant of record model has grown in popularity, the concept is not expressly recognized by the card network rules, which generally require merchant aggregators to register as payment facilitators.

Continue Reading FTC Targets “Merchant of Record” for Unlawful Payment Processing, TSR, and ROSCA Violations

In a decision underscoring the complexity and risks of making environmental marketing claims, the National Advertising Division (NAD) issued a decision in a challenge brought by the International Bottled Water Association (IBWA) against Boxed Water is Better® (Boxed Water). In the case, the NAD addressed a slew of claims touching on recyclability, renewability, life cycle impact comparisons, puffery, and more.

Recyclability and the Green Guides

NAD substantiated Boxed Water’s claims that its cartons are “recyclable” and “100% recyclable,” finding that the claims were consistent with the Federal Trade Commission’s (FTC) Green Guides, which permit such statements if a substantial majority (defined as 60% or more) of consumers have access to appropriate recycling facilities. Despite the multilayered structure of the cartons and industry challenges separating materials, NAD determined that the key threshold was access—not actual practice.

Continue Reading Recyclable, Renewable, Regulated: NAD Pokes Holes in Boxed Water’s Green Pitch

At its May open meeting, the Federal Communications Commission (FCC) implemented three distinct regulatory measures aimed at protecting domestic communications networks and equipment from threats posed by hostile foreign nations and identifying security vulnerabilities in the communications supply chain. The actions impact telecommunications carriers, service providers, and equipment manufacturers, as well as stakeholders in related industries.

In concert, these oversight and transparency actions are designed to reduce the influence of foreign adversaries on the telecommunications industry’s critical infrastructure and supply chain and mitigate vulnerabilities that enable cyberattacks, espionage, and surveillance by foreign adversaries.

Continue Reading FCC Adopts Several National Security Measures

Federal Trade Commission (FTC) chairman Andrew Ferguson has promised vigorous law enforcement under his leadership. Consistent with that promise, on June 10, 2025, the Commission announced a $1.9 million settlement with Florida-based Evoke Wellness and two of its corporate officers, resolving allegations that the company engaged in deceptive advertising and telemarketing practices targeting individuals seeking substance use disorder treatment.

At the heart of the FTC’s complaint filed in the waning days of the Biden administration is a classic bait-and-switch: Evoke allegedly purchased Google search ads that prominently displayed the names of competing treatment centers. When consumers clicked those ads—believing they were contacting the named facility—they were routed instead to Evoke’s internal call centers. According to the Commission, the representatives answering those calls were trained to reinforce the deception, often falsely stating that they were calling from or affiliated with the facility the consumer had originally searched for.

The FTC’s complaint alleged violations of both the FTC Act and the Opioid Addiction Recovery Fraud Prevention Act of 2018 (OARFPA). This settlement signals OARFPA remains a tool the Ferguson-led FTC is prepared to use.

Continue Reading Marketing in Sensitive Sectors: The FTC Prescribes a $1.9 Million Lesson to Evoke Wellness

As influencer marketing continues to dominate social media, the legal risks are catching up. In two recent class action lawsuits, companies and their social media influencers are facing allegations of deceptive advertising. Viewed in conjunction with a string of decisions coming out of the National Advertising Division (NAD), these cases reflect a trend of increasing scrutiny around influencer promotion and the question of whether consumers are being properly informed of these partnerships.

One class action complaint filed in California federal court, Dubreu v. Celsius Holdings, Inc. et al.,involves claims against an energy drink company. The complaint also names three of the brand’s influencers as defendants. The lawsuit alleges that the influencers violated federal and state law by promoting the company’s products on social media without properly disclosing that they were paid by the brand.

Continue Reading Paid Partnership Problems: Uptick in Influencer Class Actions and NAD Scrutiny

On May 15, Federal Trade Commission (FTC) chairman Andrew Ferguson testified before the House Appropriations Committee in support of the FTC’s budget request. His testimony provides insight into the agency’s downsizing and its strategic enforcement priorities moving forward.

Ferguson reported that the FTC is implementing a 10% reduction in its workforce, bringing its headcount to approximately 1,100 employees—the lowest level in a decade. This decision follows the departure of 94 employees earlier in the year, which left the agency with 1,221 full-time staff. Ferguson testified that these measures are essential for aligning the agency’s resources with its current budget and emphasized a return to the FTC’s foundational mission: enforcing laws as written, rather than creating new regulations and policy.

Despite the reductions, Ferguson expressed confidence that the FTC will effectively fulfill its mission of protecting consumers and promoting competition. He highlighted several key consumer protection areas the FTC will prioritize:

Continue Reading Cut to the Chase: FTC Trims Staff but Keeps Enforcement Focus

On May 19, 2025, President Trump signed into law the Take It Down Act. The new law imposes strict takedown obligations and creates new civil and criminal liabilities for individuals and platforms that distribute nonconsensual intimate images (NCII).

The Act makes it a federal crime for individual posters to knowingly share or threaten to share NCII, including AI-generated images that depict real people, and clarifies that consent to create an image does not mean consent to share it.

“Covered Platforms” must now provide a notice-and-takedown notification process allowing affected persons to request the removal of intimate visual depictions of an identifiable individual posted without consent. Covered Platforms include any website, online service, application, or mobile app that (1) serves the public and (2) either (a) provides a forum for user-generated content (e.g., videos, images, messages, games, or audio), or (b) in the ordinary course of business, regularly publishes, curates, hosts, or makes available nonconsensual intimate visual depictions. Covered Platforms do not include the following entities: (1) broadband internet access providers (ISPs); (2) email services; or (3) online services or sites with primarily preselected content, where the content is not user-generated but curated by the provider, and interactive features are merely incidental or directly related to the preselected content.

Under the statute, the FTC will enforce a Covered Platform’s obligations under the Act. With a failure to meet the Act’s takedown obligations subjecting a platform it to civil penalties, investigation, and injunctive relief. Note that the Act also provides “safe harbor” protection for good-faith removal efforts where a Covered Platform takes prompt action, prevents re-uploads, and complies with the Act’s recordkeeping and reporting requirements.

Compliance Recommendation – By May 19, 2026, a Covered Platform should provide on its platform a clear and conspicuous notice of its removal process, including an online submission process with identity verification. The Covered Platform must then put in place a procedure such that when it receives a valid request to remove content, it will take the following steps: (1) remove the reported content within 48 hours, (2) make reasonable efforts to locate and remove identical copies of the same image or video, and (3) ensure its systems detect and prevent attempts to re-upload the offending content. Finally, the Covered Platform should implement an internal system to log and document all takedown actions, as well as other efforts to demonstrate good-faith compliance and to meet the Act’s safe harbor.

On Friday, ​the Federal Trade Commission voted to defer the compliance deadline for the amended Negative Option Rule by 60 days. The Commission issued a statement on the new deadline.

The delay reflects the FTC’s response to various commenters who expressed concern that, “given the complexities” of these provisions, it would take a substantial amount of time to come into compliance. Thus, to ensure ample time for companies to conform their conduct to the Rule, the Commission stated it would exercise its enforcement discretion by further deferring the compliance deadline for 16 C.F.R. §§ 425.4–425.6 by 60 days. Starting July 14, 2025, regulated entities must be in compliance with the whole of the Rule because the Commission will begin enforcing it. The FTC states that, if that enforcement experience exposes problems with the Rule, the Commission would be open to amending the Rule to address any such problems.

If you have questions about complying with the updated rule, contact the authors or any VAST member.