COVID-19 Consumer Protection Act Shows Alternative Path to Monetary Remedies

A recent Federal Trade Commission (FTC) action demonstrates how the FTC has pivoted toward enforcement actions based on specific acts of Congress and rules in light of the Supreme Court’s ruling in AMG Capital. Congress passed the COVID-19 Consumer Protection Act in December 2020, which made deceptive acts or practices involving the treatment, cure, prevention, mitigation, or diagnosis of COVID-19 unlawful. Since the pandemic began, the FTC has sent hundreds of warning letters to companies allegedly making deceptive or scientifically unsupported claims regarding their products’ ability to treat or prevent COVID-19.

Despite the hundreds of warning letters, the FTC did not file its first complaint under the COVID-19 Consumer Protection Act until April 15, 2021. In United States v. Nepute et al., the FTC and Department of Justice alleged that Quickwork and its chiropractor CEO, Eric Nepute, deceptively advertised that its vitamin D and zinc products are scientifically proven to treat or prevent COVID-19. Notably, the FTC had previously sent Nepute a warning letter in May 2020 regarding the same practices. After receiving the warning letter, however, the advertiser continued to make claims such as “COVID-19 Patients who get enough Vitamin D are 52% less likely to die.” Continue Reading

Everywhere Commerce: Top Strategies for Mitigating Risk

Recent changes to our way of living have made it clear just how important it is for marketers and retailers to be thinking about the convergence of brand experience and commerce and redefining how consumers shop and interact with brands online. Join us virtually from 11-3:30 ET on June 15-16 for an opportunity to connect with peers and learn from business leaders and regulators as our advertising, digital risk advisory and cybersecurity, and class action defense teams host a mix of engaging panels and breakout sessions that will cover the latest developments, enforcement trends, and risk mitigation strategies. Approved for 8.0 hours CLE credit.

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Podcast: AD-ttorneys@law: The Future of Consumer Redress after Supremes Rule in AMG Capital Management v. FTC

In a highly anticipated recent Supreme Court decision in the case of AMG Capital Management v. FTC, the court ruled in favor of putting the brakes on consumer redress and the commission’s ability to protect consumers from unfair or deceptive practices in the marketplace. BakerHostetler partner Randy Shaheen discusses the ramifications.

Questions and Comments: rshaheen@bakerlaw.com

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COPPA Compliance Back in Congressional Crosshairs

With more children getting online, the Federal Trade Commission (FTC) is not the only stakeholder concerned about reevaluating regulations related to children’s online privacy. Certain members of Congress are also seeking to review the current landscape of compliance with the Children’s Online Privacy Protection Act (COPPA). Note that the FTC received public comments regarding possible changes in implementation of the enforcement of COPPA in December 2019, and will be responding soon.

Sen. Edward Markey (D-Mass.) and Rep. Kathy Castor (D-Fla.) sent a letter to the FTC on April 21 asking the government agency to investigate around 150 mobile applications accessible through mobile app stores. Their concerns are related to how app store platforms address apps directed to children, including providing apps with a way to market the application through platform-approved family-friendly designation. The letter alleges that the apps are marketed as COPPA-compliant even though an investigation found the apps to be tracking user behavior and disclosing children’s personal information (including for advertising purposes), both without verifiable parental consent. Sen. Markey and Rep. Castor are also concerned that the app stores may have violated Section 5 of the FTC Act, which prohibits unfair and deceptive business practices. Continue Reading

SCOTUS: No Equitable Monetary Relief for FTC Under § 13(b)

Well, the buck stops here (for now). Last week, in AMG Capital Management, LLC v. Federal Trade Commission, the Supreme Court unanimously ruled that Section 13(b) of the Federal Trade Commission (FTC) Act does not authorize the FTC to obtain equitable monetary relief such as restitution or disgorgement. This highly anticipated landmark decision reverses decades of precedent and strips the FTC of one of its key enforcement tools for obtaining consumer redress. The decision will likely represent a sea change in FTC enforcement practices.

How did we get here? In 2012, the FTC sued race car driver Scott Tucker and a payday lending company he ran, AMG Capital Management (collectively, Tucker). The FTC alleged that Tucker engaged in unfair or deceptive acts or practices in violation of Section 5 of the FTC Act by failing to clearly and conspicuously disclose that the loans issued would automatically renew, even after the customer paid off the loan, unless the customer affirmatively opted out. The FTC sued in federal district court under Section 13(b) and asked the court for restitution and disgorgement of Tucker’s ill-gotten gains in addition to injunctive relief. The court granted the FTC’s motion for summary judgment and its request for a permanent injunction and ordered the equitable monetary relief sought. Tucker appealed, arguing that Section 13(b) does not authorize the FTC to obtain the monetary relief granted because Section 13(b) only expressly authorizes the FTC to obtain injunctive relief against those who are violating or are about to violate the law. The Ninth Circuit upheld the district court’s decision, pointing to long-standing precedent giving district courts broad power “to grant any ancillary relief necessary to accomplish complete justice, including restitution.” Continue Reading

Podcast: AD-ttorneys@law: Marketing a Subscription-Based Service? Beware

We used to think of subscriptions as mostly for newspapers and magazines, but today you can subscribe to get cosmetics, cars, clothes, mental health counseling – even a curated selection of cat toys and treats that will show up on your doorstep every month. Is your brand offering a subscription-service? Linda Goldstein explains how to mitigate your legal risk.

Questions and Comments: lgoldstein@bakerlaw.com

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PA Supreme Court Finds Intent Is Not Nine-Tenths of the Law

We regularly tell clients that intent is meaningless when it comes to deception under Section 5 of the FTC Act. And that’s true (or we wouldn’t say it). But fewer people realize that it’s not necessarily true when it comes to a minority of the states. As of a couple weeks ago, however, that number has shrunk by one, courtesy of the Pennsylvania Supreme Court. In Gregg et al. v. Ameriprise Financial Inc. et al., the Pennsylvania Supreme Court held that Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (CPL) does not require a showing of intent to hold defendants liable. This 4-3 decision, which was nearly 20 years in the making, makes clear that the statute functions in a strict liability manner. There no longer needs to be a finding of fraud or negligence for a court to deem a business’s practices deceptive. This broadens the power of the law to regulate unscrupulous business practices.

In 1999, Gary and Mary Gregg enlisted the expertise of Robert A. Kovalchik, a financial adviser and insurance salesman for Ameriprise Financial Inc. Kovalchik engaged in what the trial court described as deceptive sales practices, as Kovalchik misrepresented his investment strategy for the Greggs. It was not disclosed to the Greggs that Kovalchik would earn a significant amount of money in commission while the Greggs would incur additional costs. Continue Reading

Podcast: AD-ttorneys@law: False Advertising or Just Puffing?

Absolute truth in advertising is something of a rarity, but not every untrue statement is false advertising. In this episode, BakerHostetler partner Randy Shaheen is going to ply you with pointers on avoiding puffery’s promotional pitfalls and potential problems.

Questions and Comments: rshaheen@bakerlaw.com

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Beware Operation CBDeceit

The Federal Trade Commission (“FTC”) announced on December 17 that it has taken action against six sellers of CBD products.  In case you need a refresher, CBD is a substance found in the cannabis plant that is widely touted for its health benefits.  The 2018 Farm Bill legalized hemp-derived CBD at the federal level, and almost all states have followed suit in the last two years.  Notably, however, the FDA still prohibits adding CBD to food and dietary supplements.  While CBD is generally thought to have certain health benefits – including, for example, sleep, relaxation, inflammation, pain – to make health claims in advertising requires a high level of scientific support.

Which brings us to Operation CBDeceit.  The FDA and FTC alike have previously sent warning letters related to CBD claims, but last week the FTC announced the first organized crackdown against unsubstantiated CBD claims: Operation CBDeceit.  That’s right, CBDeceit.  We may just keep repeating it because it’s that fun to say.  Hats off to whoever at the Commission thought of this one.  The focus of CBDeceit is the same as that of the warning letters – companies that claim their CBD products can treat serious diseases, such as cancer and Alzheimer’s.  In its press release, the FTC described it this way: Continue Reading

Podcast: AD-ttorneys@law: Consumer Reviews: Paid? Fake? Negative?

Let’s be honest. Customer reviews and testimonials influence buying decisions — an online review can make or break the path to purchase. Amy Ralph Mudge is her authentic self as she outlines the legal framework and counts down an essential list of legal dos and don’ts.

Questions & Comments: amudge@bakerlaw.com

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