On June 30, the FTC announced that it had issued a new notice of proposed rulemaking that addresses fake reviews and testimonials. The rule prohibits practices the Commissioners have identified as problematic in public statements for the past several years. For instance, when announcing the review of the Endorsement Guides over a year ago, Chair Khan noted that “consumers’ increasing reliance on online reviews can also incentivize advertisers to harness fake reviews, suppress negative reviews, and amplify positive ones.” The proposed rule covers a variety of topics including fake reviews, review hijacking, purchasing reviews, employee reviews, review suppression, and the use of fake indicators of social media influence. Several of the new provisions track principles set forth in prior FTC cases, or target specific practices previously identified in the Endorsement Guides. Below we’ve summarized the requirements in the proposed rule. The NPRM will be open for public comment for 60 days once it is posted in the federal register. As of today, it has not yet been posted.
John Graubert has more than 30 years of experience in a wide range of complex antitrust and consumer law matters. John came to the firm after serving for ten years as Principal Deputy General Counsel of the Federal Trade Commission. John is co-chair of the firm’s Advertising and Consumer Protection practice group, an Adjunct Professor at the Georgetown University Law Center, and a vice-chair of the Federal Civil Enforcement Committee of the ABA Antitrust Section.
From 1998-2008, John served as Principal Deputy General Counsel (including several stints as Acting General Counsel) at the Federal Trade Commission. In that position John managed all litigation, legal counsel, policy studies, and administrative functions within the Office of General Counsel. He also advised the Commission and agency staff on antitrust and consumer protection matters and administrative law. He was involved in dozens of litigated matters for the Commission, including FTC v. Swedish Match, et al. (D.D.C. 2000) and FTC v. Schering-Plough, et al. (11th Cir. 2005), and received the A. Leon Higginbotham Award and the Award for Distinguished Service.
On March 23, the Federal Trade Commission (“FTC”) announced a notice of proposed rulemaking that would significantly revise the legal framework governing automatically renewing subscriptions. The proposal would amend the FTC’s existing Negative Option Rule to provide specific disclosure, consent, and cancellation requirements applicable to all negative options in all media. The Rule would formalize many of the guidelines from the FTC’s October 2021 Enforcement Policy Statement Regarding Negative Option Marketing (“Policy Statement”) and incorporate new requirements not previously addressed at the federal level such as renewal reminders. …
On January 13, the FTC announced a settlement with WealthPress, an online service provider that recommends trades in financial markets. The settlement resolved allegations that WealthPress violated both the Restore Online Shoppers’ Confidence Act (ROSCA) and Section 5 by making false and misleading claims about how much consumers could earn with the company’s trading recommendation services. The action is noteworthy for two reasons. First, building upon the FTC’s prior MoviePass settlement, the FTC’s ROSCA allegations focus not on the terms of the subscription service offered, but rather on the failure to clearly disclose material information about the company’s services. Second, this is the FTC’s first settlement imposing civil penalties for alleged earnings claims violations predicated upon a Notice of Penalty Offenses issued in October 2021. The settlement provides for $1.3 million in consumer redress, $500,000 in civil penalties, and injunctive relief.…
On Wednesday, January 13, the Supreme Court heard arguments in AMG Capital Management LLC v. Federal Trade Commission. This case raises the question whether the Federal Trade Commission (FTC) has been properly using Section 13(b) of the FTC Act, the provision authorizing requests for preliminary and permanent injunctions where the FTC believes the defendant…
As consumers rely more and more on the “independent” reviews of their peers in choosing products and services, advertisers need to remain vigilant that their role (if any) in disseminating such reviews is fairly disclosed, accurate and not misleading. The pitfalls in this area were recently illustrated by a pair of enforcement actions brought by the Federal Trade Commission and the National Advertising Division of the Better Business Bureau. These actions, the latest in a series of similar enforcement efforts, confirm that review sites remain a hotbed of enforcement activity, and both actions serve as good reminders of the standards that review sites must observe to avoid similar actions.
The first of these actions is an FTC enforcement against LendEDU, which centered around the “objective,” “honest,” “accurate,” and “unbiased” rankings of financial products that LendEDU posted to its review site. The FTC alleged that, far from being objective and honest, these rankings were in fact determined based on compensation from the companies being ranked. In addition, the FTC alleged that over ninety percent of LendEDU’s “unbiased” positive reviews were in fact written by LendEDU employees and their friends and families.
Continue Reading FTC and NAD Actions Highlight Continued Scrutiny of Online Reviews
The Federal Trade Commission has traditionally responded forcefully to public health and economic crises, and it is doing so again in response to the coronavirus pandemic. The current crisis does present some additional complications, however, because of its impact on the operations of the agency itself. Three particular aspects of the FTC’s consumer protection-related response stand out: (1) continuation of the agency’s scrutiny of false and deceptive product claims that seek to capitalize on the fears of consumers, (2) signs that the agency will work with businesses to accommodate the special pressures of the crisis, and (3) continuation but postponement of other, non-enforcement activities.
The FTC’s first consumer protection priority in response to the coronavirus pandemic has been to focus on especially egregious marketing scams that target particularly vulnerable populations. The FTC has already issued a number of warning letters to sellers of supposed COVID-19 cures ranging from tea to edible silver and to voice over internet protocol (“VoIP”) service providers facilitating illegal coronavirus-related calls. Fraud reports continue to rise rapidly: the FTC has received 7,800 coronavirus-related complaints this year, and almost half of these were filed in the last week.
Continue Reading The FTC’s Response to the Coronavirus Pandemic: Consumer Protection Priorities and Initial Actions
You may have heard the phrase “dark patterns” as shorthand for various user interfaces designed to influence users’ decisions. They can range from the perfectly innocent to the unethical, and even illegal. Whatever the form, dark patterns have recently drawn attention from the mainstream press.
Dark patterns are coming out from the shadows. And when that happens, class action lawyers can’t be far behind.…
On Friday, November 13, Federal Trade Commission (FTC) Chief Administrative Law Judge Chappell issued an Initial Decision dismissing the FTC’s complaint against LabMD, on the ground that the Commission’s staff had failed to carry its burden of demonstrating a “likely substantial injury” to consumers resulting from LabMD’s allegedly “unfair” data security practices. While Judge Chappell’s decision represents a victory for LabMD as the first company to successfully challenge an FTC Section 5 data security enforcement proceeding, the ruling may prove short-lived, as staff likely will appeal the case to the full Commission, which will review the decision de novo. Nevertheless, the Commission’s eventual handling of this proceeding could articulate a more precise standard for likely substantial injury that could guide future Section 5 “unfairness” jurisprudence.
Continue Reading Administrative Law Judge Dismisses FTC’s LabMD Complaint, Finding Insufficient Evidence of “Substantial Injury” to Consumers