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Last week, the U.S. Department of Justice (DOJ), on behalf of the Federal Trade Commission (FTC), and the Illinois attorney general filed a federal lawsuit in the Northern District of Illinois against Premium Home Service (PHS) and its owner. The complaint alleges that the defendants created thousands of online business listings for purported home repair companies and posted fabricated five-star customer reviews associated with those businesses.

On the same day, the Minnesota attorney general filed a parallel action in state court based on similar alleged conduct, underscoring the potential for overlapping federal and state enforcement.

Continue Reading FTC and State AGs Target Reviews and Deceptive Business Listings in Home Services

Last month, the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ) jointly hosted a public meeting of the interagency “Strike Force on Unfair and Illegal Business Practices.” The meeting was a continuation of an effort, initially announced by President Biden in March, to “strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices,” according to a press release.

The August 1 meeting brought together a number of different agencies to discuss their actions to lower prices for Americans, including the FTC and the DOJ, the Consumer Financial Protection Bureau (CFPB), the U.S. Department of Transportation, the U.S. Department of Agriculture (USDA), the U.S. Department of Health and Human Services (HHS), the U.S. Securities and Exchange Commission (SEC), and the U.S. Federal Communications Commission (FCC).

Continue Reading Federal Agencies Increase Focus on Pricing Enforcement

The Federal Trade Commission’s recent settlement with Dalal A. Akoury and AWAREmed Health & Wellness Resource Center provides a good overview of how today’s FTC approaches medical claims it believes are unsubstantiated. The case also serves as a reminder that if medical claims sound too good to be true, they probably are.

According to the complaint, filed by the Justice Department on behalf of the FTC, defendants, under Khoury’s leadership, engaged in deceptive acts or practices in violation of Sections 5 and 12 of the FTC Act and the Opioid Addiction Recovery Fraud Prevention Act (OARFPA). The complaint states that defendants deceived reasonable consumers into believing that the medical clinic’s treatments could cure cancer, chronic diseases such as Alzheimer’s and Parkinson’s, and a range of addictions, including to opioids, sex, food, and gambling.

The FTC had previously warned defendants on numerous occasions that making unsubstantiated addiction treatment claims is against the law. Khoury and AWAREmed, a set of companies Khoury controls that operate as a medical clinic, apparently ignored such warnings, causing the Justice Department to try and permanently halt defendants’ deceptive advertising and recover civil penalties. With this complaint the FTC continues its aggressive use of the Opioid Act to fill the hole in its remedial authority after AMG.

Continue Reading In AWAREmed Settlement FTC Says Opioid and Chronic Disease Ad Claims Must Be Backed by Science

Last week, the United States Department of Justice, acting on behalf of the Federal Trade Commission, took action against Twitter, Inc. for allegedly using private account security data to sell targeted advertisements without informing the platform’s users. To settle the matter, Twitter agreed to a stipulated order requiring the social media giant to pay $150 million in civil penalties, which the court entered a day after the complaint was filed.

Understanding the recent settlement warrants a quick history lesson on Twitter’s dealings with the FTC. In 2010, the FTC filed an administrative complaint against Twitter, asserting the company misrepresented the security measures it had in place to protect private user information from unauthorized access and to honor users’ privacy choices. This ultimately led to a 2011 FTC Order that barred Twitter from misrepresenting the extent to which it “maintains and protects security, privacy, confidentiality, or integrity of any nonpublic consumer information.”Continue Reading Twitter Will Pay $150 Million to Settle Charges That It Misrepresented Its Privacy and Security Practices

The regulatory framework for online gambling recently took a wild turn when the Department of Justice Office of Legal Counsel (“OLC”) announced its view that the Wire Act (18 U.S.C. § 1084) applies to all forms of gambling—not merely sports betting. This marked a 180-degree reversal from the stance the OLC took just seven years earlier. The OLC’s 2011 opinion—which itself departed from public positions the DOJ had previously taken—was the foundation upon which today’s state-regulated online gambling industry is built. Four states—Delaware, Nevada, New Jersey and Pennsylvania—currently allow online gambling, and Michigan came close to legalizing it at the end of last year, although outgoing Governor Snyder vetoed the bipartisan bill in a surprise move. The OLC’s follow-on announcement gives now-unlawful online gambling businesses 90 days to bring their operations into compliance with federal law before Wire Act enforcement will begin under this newly expanded view. Below, we contemplate what enforcement of the industry will look like in light of this recent announcement.

Perhaps we will see a Cole memo-esque enforcement regime, where the feds will exercise discretion not to prosecute well-behaved online gambling businesses operated in accordance with robust state regulatory frameworks. After all, legal online gambling businesses and their service providers are already subject to extensive vetting, and in Delaware, online gambling is state-run. Regardless, we expect the DOJ to publish internal guidelines for how the feds should prosecute cases—this is a model that has been used in other areas, and would presumably outline the specific factors under which proposed enforcement would be reviewed and approved.Continue Reading DOJ Reverses Course on the Wire Act, Changing the Odds on the State-Regulated Gambling Industry

Deciding whether to voluntarily disclose information to the government is difficult. Any guidance from the government as to what it expects from organizations and how it will reward self-disclosures should thus be welcome.

In a recent appearance at a conference on the Foreign Corrupt Practices Act, Deputy Attorney General Rod Rosenstein announced several changes to DOJ’s corporate enforcement policy. Notably, his statements rolled back some of the requirements set forth in the eponymous “Yates Memo” from 2015. In this blog post, we’ll highlight two key policy differences between the Yates Memo and the updated DOJ policy.

First, DOJ is changing how companies may earn credit for cooperating with civil and criminal investigations. The Yates Memo advanced more of an “all or nothing” approach, where companies had to disclose the wrongdoing of all individuals involved in a corruption scheme. Failure to disclose information related to all individuals precluded companies from earning any cooperation credit.Continue Reading DOJ Signals Changes to Its Corporate Enforcement Policy

Deputy Attorney General Rod Rosenstein – the second-highest-ranking official at the Department of Justice – recently announced the formation of the Task Force on Market Integrity and Consumer Fraud. The announcement came at a widely publicized press conference, a signal that the Task Force ranks high on the list of the Department’s law enforcement priorities. Given the prominence of the Task Force, all businesses would be well served by understanding what it is and what it seeks to accomplish.

The Task Force has a strikingly broad mandate. According to the Presidential Executive Order that created it, the Task Force is to aid in the “investigation and prosecution of cases involving fraud on the government, the financial markets, and consumers, including cyber-fraud and other fraud targeting the elderly, service members and veterans, and other members of the public; procurement and grant fraud; securities and commodities fraud, as well as other corporate fraud, with particular attention to fraud affecting the general public; digital currency fraud; money laundering, including the recovery of proceeds; health care fraud; tax fraud; and other financial crimes.”

The membership of the Task Force further highlights the breadth of its mandate – and the importance that the Department places on it. The Task Force comprises a wide array of government officials from numerous government bodies. Its Chair is the Deputy Attorney General; its Vice Chair is the Associate Attorney General, the third-highest-ranking official at the Department. Other Department officials on the Task Force are the Assistant Attorneys General for the Criminal, Civil, Tax, and Antitrust Divisions; the Director of the FBI; and designated U.S. Attorneys. What’s more, the Task Force is to invite the participation of no fewer than eight Cabinet Secretaries, the Director of the Bureau of Consumer Financial Protection, the Chairman of the Federal Trade Commission, the Chairman of the Securities and Exchange Commission, and more than 10 other agencies, commissions, and boards.Continue Reading The Department of Justice Has a New Consumer Task Force – What Does It Mean for You?

busLegal history is replete with stories of persons or companies turning a manageable legal problem into a more serious one by trying to hide or destroy evidence, see Watergate and Arthur Anderson/Enron for two notable examples. A recent case involving a bus company executive provides a good case study in what not to do when facing a government investigation and the consequences of trying to hide or destroy evidence in an investigation.

Ralph Groen worked as a VP for Information Technology for Coach USA, a tour bus company. Beginning in 2009, the NY AG and the US DOJ began investigating Coach USA and another company forming a joint venture to corner the tour bus market in New York City and thereby drive up prices. The DOJ and NY AG sued the companies in 2012 and the companies settled in 2015 by agreeing to pay $7.5 million and breaking up much of the joint venture.Continue Reading When the Cover Up Is Worse Than the Crime