FTC Defense Lawyer Discusses Recent Agency Enforcement Activity

Chairman Joe Simons, on behalf of the Federal Trade Commission recent provided testimony before the Senate Appropriations Subcommittee on Financial Services and General Government in an effort to set forth recent regulatory efforts and complex investigations to protect consumers.  See, here.

From unsubstantiated privacy and data security, to unsubstantiated health and IoT, the FTC’s mission is to protect consumers from unfair, deceptive and fraudulent practices in the marketplace.  It not only pursues enforcement actions, it also provides educational materials and anti-fraud programs.

FTC  Priorities

Consumer privacy enforcement remains a priority.  Mr. Simons confirms that ongoing work includes investigations of Facebook’s privacy practices and the Equifax data breach.  Financial privacy is also an area of particular emphasis for the FTC, as is children’s privacy.

Data security continues to be a crucial part of the FTC’s privacy work. 

To date, the Commission has brought more than 60 cases alleging that companies failed to implement reasonable safeguards for the consumer data they maintain.  For example, the Commission recently announced an expanded settlement with ride-sharing platform company Uber Technologies related to allegations that the company failed to reasonably secure sensitive consumer data stored in the cloud.  As a result, an intruder accessed personal information about Uber customers and drivers, including more than 25 million names and email addresses, 22 million names and mobile phone numbers, and 600,000 names and driver’s license numbers.  The FTC also reached a settlement with one of the world’s largest computer manufacturers related to allegations that the company pre-loaded software onto some of its laptops that compromised security protections in order to deliver ads to consumers.

The Commission has also reaffirmed its commitment to the success of the EU-U.S. Privacy Shield framework, a tool for protecting privacy and enabling cross-border data flows.  The agency has initiated enforcement actions to enforce it and is expected to continue to do so when participants fail to meet their legal obligations.

Testimony also included a recognition that Congress has long considered whether to adopt comprehensive data security legislation.  The FTC affirmed that it is ready, willing and able to work with Congress on that issue.

Of course, a core FTC mission is truthfulness in advertising, including online marketing and advertising.  Successfully defending FTC enforcement actions requires reasonable evidence to support all express and implied claims.  Recently, the Commission announced “Operation Tech Trap” – a nationwide and international sweep on tech support scams, matters involving consumers with serious medical conditions, and cases challenging cognitive health-related products.

It has also continued to enforce U.S. antitrust law by working closely with the U.S. Department of Justice to identify and halt anticompetitive conduct.  As per the testimony, since the beginning of fiscal year 2016, the Commission has challenged 45 mergers. Most matters were resolved via divestiture settlements.  In the last year, according to reports, the FTC initiated litigation to block seven mergers.

Business Coaching Enforcement

Just this week, the FTC announced an action against two individuals and their telemarketing operations, initiated to halt an alleged deceptive business coaching scheme.  According to the Commission, the defendants deceptively claimed that their business coaching services would assist consumers to start home-based businesses and earn them thousands of dollars a month.

In conjunction with the work-at-home programs, the FTC charges alleges that consumers are encouraged to contact an “expert consultant” or “specialist” to see if they qualify for an “advanced” coaching program. According to the FTC, consumers that speak with a specialist are routed to the defendants’ telemarketers.

The complaint states that the defendants charge up to $13,995 for information that is, to some extent, available for free online.  The defendants are also alleged to more other purported business development services. According to the Commission, the majority of those that purchase defendants’ services wind up in debt, do not develop a functioning business and do not earn much money.

A federal court has entered stipulated temporary restraining orders that have frozen the defendants’ assets and prohibit them engaging in the conduct in question..

Weight Loss Advertising Enforcement

The FTC also recently announced a refund claim process in its case pertaining to the NutriMost Ultimate Fat Loss System.  According to the Commission, NutriMost, LLC, and its owner deceptively marketed the weight loss system to consumers that claimed to use new technology that would allow users to safely lose substantial amounts of weight without following a restrictive diet.  The FTC also charged the defendants with using deceptive endorsements and requiring consumers to sign a non-disparagement agreement that prevented them from speaking or publishing truthful, negative reviews.

As per the settlement terms, the defendants are prohibited from making weight loss claims unless they are not misleading and are supported with competent and reliable scientific evidence.  They are also prohibited from misrepresenting that users do not need to follow a restrictive diet, using deceptive endorsements and from including gag clauses in their customer contracts.  The order imposes a $32 million judgment which is suspended upon payment of $2 million.

Contact the author at rnewman@hinchnewman.com to discuss recent FTC enforcement and investigation trends.

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.  

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

 

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