FTC Act

FTC Acts to Enforce Non-Disparagement Provision Ban

May 10, 2019 by David Klein

May 10, 2019

The Federal Trade Commission (“FTC”) has settled its first Consumer Review Fairness Act (“CRFA”) violation investigations. Enacted in December of 2016, the CRFA prohibits businesses from offering provisions in form contracts that prevent customers from publicly expressing honest reviews about products or services, or penalizing those customers who have publicized such reviews. Complaints were filed against: 1) A Waldron HVAC, LLC and its owner; 2) National Floors Direct, Inc.; and 3) LVTR LLC and its owner (collectively, “Respondents”). In the complaints, the FTC alleged that Respondents violated Section 2(c) of the CRFA, by offering customers form contracts that contained non-disparagement provisions. In each case, the Respondents have accepted proposed consent agreements, and are awaiting public comment before a final order is entered.

Why were the non-disparagement provisions deemed invalid?

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Business Coaching Scheme Sunk by Deceptive Marketing

September 13, 2018 by David Klein

September 13, 2018

business-coaching — Business Coaching Settlement

On January 29, 2018, the Federal Trade Commission (“FTC”) filed a complaint against Digital Altitude LLC, et al. (“Digital Altitude”), for misrepresentations regarding potential earnings and the goods and services it provided. Earlier this month, one of the defendants, Sean Brown, agreed to settle with the FTC. On its face, the business coaching program appeared to be a pyramid scheme. However, the FTC’s complaint focused primarily on deceptive marketing practices which, it alleged, violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) (the “Act”).

How did Digital Altitude allegedly deceptively market to consumers? [Read More]

FTC Settles Work at Home Lawsuit

December 21, 2017 by David Klein

December 21, 2017

The Federal Trade Commission (“FTC”) announced that it recently settled a work at home lawsuit against a group of defendants that offered consumers business opportunities to earn money from working at home. The FTC alleged that defendants Bob Robinson, LLC, Mega Export 2005 Inc., Mega Export USA Inc., Netcore Solutions, LLC, and their representative principals (collectively “Defendants”) violated Section 5 of the FTC Act and the FTC’s Business Opportunity Rule by: (1) making false, misleading, and/or unsubstantiated claims regarding earnings that consumers could make working while at home; and (2) failing to provide required disclosure documents to consumers who purchased Defendants’ work at home opportunities. As part of the settlement, Defendants agreed not to offer business opportunities or business coaching services in the future.

What is the Business Opportunity Rule and how did Defendants violate it?

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All Natural Marketer Found to have Violated the FTC Act

December 14, 2016 by David Klein

December 14, 2016

On December 5, 2016, the Federal Trade Commission (“FTC” or “Commission”) issued an opinion finding that California Naturel, Inc. (“CNI”) had violated the FTC Act by falsely marketing its sunscreen products as “all natural,” despite the presence of a synthetic substance. CNI sought to avoid summary judgment by arguing that after the FTC had commenced the underlying investigation, CNI added disclaimers to its webpage which cured any alleged deceptive representations. However, the FTC noted that the disclaimers were posted on the bottom of the webpage, well below the product ingredients list, and even below the “Add to Cart” button. As a result, the FTC found the disclaimers to be insufficient to defeat a claim of misrepresentation.

Why did the FTC Find CNI’s All-Natural Claims Misleading?

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FTC Drops the Hammer on Jerk.com for Deceptive Trade Practices

March 26, 2015 by David Klein

March 26, 2015

This week, the Federal Trade Commission (“FTC”) issued an order against Jerk, LLC and Napster co-founder John Fanning, respectively, for deceptive trade practices in connection with the operation of Jerk.com, a social media site that invited users to create profiles of other individuals and rate those individuals as a “jerk” or “not a jerk.”

According to the Complaint, the FTC alleged that the violations of the FTC Act consisted of:

Falsely representing to consumers that the content appearing on Jerk.com was generated by users, when in fact the content had been harvested from Facebook by the respondents;
Falsely representing to consumers that through the purchase of a $30 membership, users would receive additional benefits, including the ability to dispute information posted on the site, and the ability to edit or delete a profile;
Making it difficult or impossible for its nearly 75 million users to lodge complaints, by charging consumers $25 just to email the customer service department and frequently ignoring requests that photos and other profile information be removed.

The FTC has ordered the deletion of all personal and customer information collected from the operation of the website, which is now defunct, and prohibited the sale or disclosure of any of that information to third parties. Additionally, the respondents are prohibited from misrepresenting the benefits of joining any service that they operate or might operate in the future, as well as from misrepresenting the source of any content, including personal information, appearing on any website that they operate or might operate in the future. The FTC also concluded that Fanning was personally liable for the deceptive trade practices of Jerk.com because of his direct participation in, and control of, the subject acts.

Don’t Be a Jerk, Protect Your Business From Deceptive Trade Suits

As we have previously blogged, the FTC has been incredibly active in pursuing unscrupulous marketers, including online dating and social media websites. Using its enforcement powers under the FTC Act and other regulatory laws and rules, the FTC has been especially vigilant in its efforts to ensure regulatory compliance with respect to the collection, use and sharing of consumer data. In order to avoid a similar fate to that of Jerk.com, it is imperative to engage knowledgeable counsel to ensure that your practices are fully compliant with all applicable state and federal laws.

If you are interested in learning more about this topic or need to review your data collection or Internet marketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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FTC Sues Companies and Officers For Alleged Phony Debt Relief Scheme

June 6, 2014 by David Klein

The Federal Trade Commission (“FTC”) recently filed a complaint for permanent injunction and other equitable relief against multiple companies, including DebtPro123 LLC, and their officers, alleging that they engaged in a scheme aimed at defrauding consumers by marketing, promoting and/or selling purported debt relief services.

Details of Debt Relief Scheme

According to the Complaint, Defendants promoted and sold their debt resolution programs to consumers via telemarketing calls, Internet websites and information packets. Defendants represented that such programs would completely resolve consumers’ credit card and other unsecured debts, like medical bills and student loans, within 18-36 months and for 30%-70% of the amount owed.

The FTC further alleges that Defendants represented that they would improve consumers’ credit by having negative data about them completely removed from all three major reporting credit bureaus. Defendants charged non-refundable fees for their services, sometimes up to $10,000.00.

Upon signing up for the debt relief services, Defendants allegedly instructed consumers to stop paying their creditors and to cease all communications with them. Defendants allegedly falsely advised consumers that they had a legal department in house which would work with consumers’ creditors toward the reduction of their debt.

The FTC alleges that Defendants did not reduce the typical consumer’s debt as promised. To the extent that Defendants were successful in negotiating settlements with consumers’ creditors at all, the total amount of the resulting debt was often higher because the fees and interest on such debt had compounded after consumers had stopped paying their debts at the commencement of Defendants’ program. Ultimately, according to the FTC, many consumers were faced with lawsuits filed by their creditors and ended up deeper in debt because of Defendants’ acts and/or omissions.

A Disappearing Act: Defendants, Not Consumer Debt

According to the Complaint, when consumers learned that Defendants had not resolved their debts, they frequently requested refunds. In response, Defendants created many obstacles to receiving a refund. As a result, frustrated consumers turned to their respective state attorneys general and the Better Business Bureau for resolution, which ultimately led to the instant FTC acion.

The Complaint alleges nine separate counts for relief against Defendants, which include alleged violations of the FTC Act, the Telemarketing Sales Rule and the Credit Repair Organizations Act.

If you are interested in learning more about this topic, or if you are facing FTC litigation or other regulatory complaint, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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FTC Act Applies to Indian Tribes

March 24, 2014 by David Klein

The Federal Trade Commission (“FTC”) was awarded a significant victory against payday lender AMG Services, Inc. (“AMG”) on March 7, 2014, when the United States District Court for the District of Nevada ruled that the FTC has authority under the FTC Act to regulate Indian tribes and their associated organizations. As a reminder to readers of this blog, a payday loan is a small, short-term unsecured loan that usually carries with it a very high interest rate. In Federal Trade Commission v. AMG Services, Inc., et al., the defendants argued that the FTC lacked Constitutional and legal authority to apply the FTC Act to payday lenders associated with Indian tribes.

The Allegations

In its complaint, the FTC alleges that AMG, and other payday lenders who happen to be associated with Indian tribes, violated the FTC Act in connection with their payday lending activity. Specifically, the complaint alleges that the defendants represented to consumers that scheduled payments from the consumers’ bank accounts would be withdrawn by the defendants on specific dates. However, contrary to these representations, the payday lenders would instead initiate withdrawals on multiple occasions, resulting in multiple finance charges for the consumer. As a result, according to the FTC, “a consumer ends up paying significantly more to satisfy his loan than the ‘Total of Payments’ that [d]efendants conspicuously represent and in their loan disclosures.”

The Decision

The federal district court rejected the payday lenders’ arguments that the FTC Act did not apply to their businesses because they are associated with Indian tribes. While Indian tribes are recognized as sovereign entities, statutes of “general application” may nonetheless be used to regulate tribal activities. The court ruled that although the FTC Act contains certain specific exemptions, it is nevertheless a statute of “general application” and, as such, the FTC has the authority to enforce the FTC Act against payday lenders even if they happen to be connected, directly or indirectly, with Indian tribes.

Protect Yourself

As we have previously observed, the State of New York has been aggressively investigating payday lenders, resulting in substantial settlement awards (See New York State Reaches Settlement with Payday Lenders) and a revised focus on payday loan marketers (See New York Expands Payday Lending Industry Investigation to Focus on Marketers). The federal Consumer Financial Protection Bureau has also been targeting payday lenders. (See Major Payday Lender Settles Lawsuit). With federal and state regulators on the attack, payday lending is becoming an increasingly dangerous business proposition.

If you advertise or offer payday loans or if you have been served with legal process relating to payday lending, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

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Another FTC Lawsuit Brought Against Marketers

July 31, 2013 by David Klein

Over the past several months, the Federal Trade Commission (FTC) has been aggressively pursuing individuals and entities that it believes violated the FTC Act and the Amended Telemarketing Sales Rule (ATSR). On Tuesday, the FTC filed a complaint in the U.S. District Court for the Northern District of Illinois against 9 defendants: Acquinity Interactive, LLC; 7657030 Canada Inc., d/b/a Acquinity Interactive; Garry Jonas, an officer of Acquinity Interactive; Revenue Path E-Consulting Pvt Ltd; Revenuepath Ltd; Worldwide Commerce Associates, LLC, d/b/a WCA; Sarita Somani, an officer of the Revenue Path defendants and Worldwide Commerce Associates; Firebrand Group S.L., LLC; and Matthew Beucler, an officer of Firebrand. The complaint alleges that the defendants violated the FTC Act and the ATSR.

Details of the ATSR Violations

In its complaint, the FTC alleges that the defendants made a vast number of unauthorized robocalls to consumers promising “free” gifts or prizes if the consumers provided sensitive personal information, applied for credit or subscribed to the defendants’ / third parties’ advertised services. For those that are unaware, a “robocall” is a telephone call or text message that utilizes a computerized auto-dialer and/or delivers a pre-recorded message. Robocalls tend to receive a heightened level of scrutiny under various state and federal telemarketing laws.

Consumers who pursued the defendants’ offers were taken through a series of websites that required them to provide personal information and/or sign up for various services prior to receiving the promised gifts. The FTC claims that in many cases, the information was requested under the guise of being shipping information for the supposed gift cards. Also, as alleged in the complaint, the consumers’ information was then sold to third party advertisers, subjecting the consumers to further unwanted automated telemarketing calls.

Penalties

In addition to seeking monetary penalties and the disgorgement of the defendants’ allegedly ill-gotten gains, the FTC requested that the Court grant a preliminary injunction against the defendants, including freezing their assets, to avert the likelihood of consumer injury during the pendency of the case. Furthermore, the FTC requested that the defendants pay the costs of bringing the suit in court, as well as all associated attorneys’ fees.

How to Protect Your Business

The FTC’s most recent complaint is part of a larger trend of regulatory action within the telemarketing space and is not limited to the FTC. The Federal Communications Commission (FCC) has similar telemarketing regulations codified in its Telephone Consumer Protection Act (TCPA), which we have previously discussed in this blog. In light of this action, and the general regulatory trend (on a state and federal level), telemarketers should review their marketing practices (and those of their respective affiliates) to ensure compliance with FTC, FCC and state telemarketing regulations. As this case illustrates, individuals and businesses that fail to comply with state and federal deceptive marketing and telemarketing statutes may find themselves facing regulatory action from the FTC and/or state regulatory bodies, as well as consumer class action litigation.

If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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