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