Last week, the FTC brought and settled enforcement actions against two manufacturing companies for allegedly limiting customers’ right to repair purchased products under unlawful warranty terms. The FTC alleged that the two companies, Harley-Davidson Motor Company Group, LLC (a motorcycle manufacturer) and MWE Investments, LLC (a Westinghouse outdoor generator maker), acted illegally when using voidable warranties that required customers to use manufacturer-supplied parts and service instead of allowing customers to use independent dealers to either supply parts or perform repairs. In the settlements, the FTC ordered both companies to remove these warranty terms, admit to customers what they did, and ensure fair competition between dealers and independent third parties providing repair services and parts.

According to the FTC’s complaints against Harley-Davidson and MWE Investments, the companies’ unlawful warranty terms violated the Magnuson-Moss Warranty Act for conditioning warranty coverage on using the companies’ respective parts or services without either seeking the FTC’s waiver or providing the parts or services free of charge under the warranty. The FTC also alleged the manufacturers acted deceptively in failing to disclose these conditions properly. The FTC alleged that Harley-Davidson also violated the FTC’s Rule Governing Disclosure of Written Consumer Warranty Terms and Conditions (“Disclosure Rule”) when it failed to provide a single document containing the warranty terms, so customers would need to contact authorized dealers to understand the full terms of their warranties.Continue Reading Repair Your Warranty Terms: FTC Takes Action Against Unlawful Repair Restrictions

Taking a page from Federal Trade Commission legend (and one of our mentors) Bob Pitofsky, the FTC recently announced that it plans to hold a series of public hearings modeled after the FTC’s 1995 “Global Competition and Innovation Hearings.” New FTC Chair Joe Simons said that the hearings will provide the FTC with an opportunity to engage in “self-examination and critical thinking” to ensure that the agency can keep pace with changes in the economy. Chairman Simons also recently told reporters that regardless of what the hearings may demonstrate, “Just in terms of priorities: our mantra is vigorous enforcement. That is what I did the last time I was here in the Bureau of Competition, and that is what I expect to do now not only in competition but also in consumer protection.”

Public comments may be submitted on any of the proposed topics until August 20 with hearings expected to take place in the fall and winter. Most of the topics are of more relevance to the Commission’s competition mission, but a few also relate to consumer protection. For example, the Commission is inviting comments on the state of consumer protection law and enforcement generally as well as consumer protection issues specific to the communications, information and media technology fields. Comments are also invited on the Commission’s investigation, enforcement and remedial processes as well as possible unfair or deceptive conduct in markets that feature “platform businesses.” Not surprisingly there are also a number of topics centered around data security including the extent of the Commission’s remedial authority.Continue Reading Upcoming FTC Hearings Include Several Topics Relating to Consumer Protection

hashtagWhat if the influencer you had been following on Instagram—an influencer whose style choices you admired, and who supported social causes that you believed in—turned out to be…a robot?

This is what happened to followers of Lil Miquela, a 19-year old model from California who launched an Instagram account in 2016.  For the past two years, she’s been posting photos of herself in designer clothing, eating at trendy restaurants, and pitching beauty products.  Along the way, she managed to amass over a million followers.  Then, in mid-April, after getting hacked by a fellow influencer named Bermuda who refused to return her account unless she “[told] the world the truth”— Miquela revealed that she wasn’t human.  She is a CGI creation.  And so is Bermuda.
Continue Reading The Rise of CGI Influencers

It’s Summer in the City and the back of my neck, and just about everything else, is getting dirty and gritty.  The FTC, however, just announced two cases reminding advertisers to keep it clean on claims that their products can sanitize.

The FTC sued Angel Sales, Inc. and Zadro Health Solutions, as well as the two companies’ principals, alleging that the companies’ claims that their ultraviolet light devices could kill everything from foot fungus to MRSA were unsubstantiated and therefore deceptive.  The companies settled the FTC’s charges by agreeing to substantial monetary judgments and injunctive relief prohibiting such claims in the future.  In 2011, the FTC settled similar charges against Oreck for its UV vacuum cleaner.Continue Reading FTC Reminds Marketers to Keep It Clean

The Magnuson-Moss Warranty Act (MMWA), is one of many vehicles that plaintiffs use to bring lawsuits over warranty claims.  It is a federal statute that governs warranties on consumer products.  The Federal Trade Commission has enacted regulations governing the disclosure of written consumer product warranty claims.

Just this month, the Federal Trade Commission completed a review of its Interpretations, Rules and Guides under the MMWA.  One of the revisions that the FTC made was to clarify that under the MMWA, warranty language that implies to a consumer that warranty coverage is conditioned on the use of select parts or service is deceptive.  The FTC wrote that “[g]enerally, the MMWA prohibits warrantors from conditioning warranties on the consumer’s use of a replacement product or repair service identified by brand or name, unless the article or service is provided without charge to the consumer or the warrantor has received a waiver.” 
Continue Reading FTC’s New Guidance on Implied Tying Claims Under the Magnuson-Moss Warranty Act

The Federal Trade Commission (“FTC” or “the Commission”) has clearly subscribed to enforcing ROSCA recently.  On Tuesday, the FTC filed a complaint against DIRECTV’s negative option program and contract pricing structure under Section 5 of the FTC Act and ROSCA.

In the complaint, the FTC alleged that DIRECTV required customers to agree to a mandatory 24-month contract to receive television programming; customers who canceled their subscriptions before 24 months were charged an early cancellation fee.  Although the rates were set at a specific monthly charge for the first year of a 2-year customer agreement, in the second year of the agreement, the FTC alleged that DIRECTV would increase the monthly charges by 50-70% higher than customers paid in the first year.  After the first year of the agreement, customers either had to pay significant cancellation fees or pay the higher monthly price.  
Continue Reading FTC Dishes Out ROSCA Complaint with Focus on Disclosures

Earlier this week, the Federal Trade Commission (“FTC”) sent warning letters to 20 manufacturers and marketers of dog waste bags because claims that the bags are “biodegradable,” “compostable,” and other green claims may be deceptive.

As we blogged about in last October, the FTC issued warning letters to companies about their claims that their plastic was biodegradable or “oxodegradable.”  The warning letters involved advertising that products were “biodegradable” when in fact, they would not degrade under normal conditions of disposal in landfills within a “reasonably short period of time,” as required under the Green Guides.  The most recent revisions of the Green Guides had warned that unqualified “biodegradable” claims were deceptive if the items customarily disposed of in landfills would not decompose within one year in such an environment.Continue Reading Marketers and Sellers of Animal Waste Bags May Be in the Doghouse for Biodegradable and Compostable Claims

The long running saga of the FTC versus POM Wonderful took a major turn today as the D.C. Circuit affirmed in part and reversed in part the FTC’s Order that POM had made deceptive claims about its pomegranate juice products.   In 2010, the FTC sued POM alleging it had made false and unsubstantiated claims about the ability of its product to prevent or ameliorate heart disease, prostate cancer and erectile dysfunction.  After an extended trial, the FTC’s Administrative Law Judge largely found for the FTC (not a huge surprise).  The FTC Commissioners largely affirmed that decision (another shocker).  However, Commissioner Ohlhausen, in what would turn out to be an ominous foreshadowing for the Commission as a whole (jump to the end of the blog if you can’t stand the suspense), and who wrote the Commission’s opinion,  disagreed with the majority’s view that two Randomly Controlled Clinical Trials (RCTs) should be required as part of the order. POM appealed to the DC Circuit challenging the factual and legal bases on which the FTC relied as well as the remedy imposed.  The DC Circuit affirmed on liability, but modified that part of the FTC’s order that required POM to have two RCTs to substantiate any disease claims going forward.  The revised order will require only one RCT for any disease claims.

The DC Circuit found that there was no basis for setting aside the FTC’s finding of what efficacy and establishment claims POM had made in its advertising, noting the careful record the ALJ had made and the thorough treatment the Commission had given the issues in its opinion.  The DC Circuit agreed with the FTC that the use of words such as “promising,” or “initial”  to describe certain studies referenced in POM’s advertising failed to adequately qualify the ad so that an establishment claim was not made. Regarding the level of substantiation necessary, the court noted the FTC’s special expertise in this area.  The court noted that its role was not to independently weigh the evidence but to determine whether there was substantial evidence to support the FTC’s findings.  The court decided there was.  The FTC had found that RCTs were necessary to substantiate the disease claims made.   The court found adequate evidence to support that finding noting that the controlled, random and double blind aspects of an RCT all serve important functions in evaluating the efficacy of a product or treatment. POM argued that applying the RCT standard to food products was too onerous and expensive.  The court agreed with the FTC that although there might be certain instances where it was not possible to conduct double-blind studies of food products, this was not such a situation.  Among other things, the court pointed to the fact that POM had done some RCTs on its products.  Regarding cost, the court displayed no sympathy for the marketer’s plight finding that if the claim was too expensive to substantiate then the claim should not be made.  Significantly, the court noted that marketers could make lesser health claims without an RCT including claims that accurately reflect the type and results of the science supporting a claim.Continue Reading The Saga of the Forbidden Fruit Part III