P.T. Barnum famously said, “There’s no such thing as bad publicity.” Oscar Wilde, however, gave that quote his own spin and said, “There’s only one thing in the world worse than being talked about, and that is not being talked about.” Well, some folks most definitely disagree when a whole settlement potentially is tanked over a press release.
The other week, the Federal Trade Commission (FTC) announced a new law enforcement action against a marketer of personal protective equipment that allegedly violated multiple laws in connection with Made in the USA (MUSA) claims that it made for its products. The agency alleged that the company (and its owner) violated the FTC Act and the COVID-19 Consumer Protection Act through certain efficacy claims, and it violated the MUSA Labeling Rule by using MUSA labels when the products used a significant number of imported components. The company and owner settled for a suspended redress judgment and a $157,000 civil penalty.
Until now, there was not much here that warranted a new blog, as MUSA has been discussed, many times. But then things took an unusual turn, and it starts with an FTC press release. The perhaps unnecessarily inflammatory headline boldly touted, “FTC Sues Marketer of Personal Protective Equipment and Light Fixtures for Lying About Products Being Made in the USA and Government-Certified.” For those new here, virtually every FTC case is announced via press release, and the normal practice is that all press releases are approved by the chair’s office before they are released. And quite candidly, for the past few months we have been hearing – from many sources – complaints and grumbling about some recent FTC press releases. In particular, we are hearing concerns that the press releases have become a bit over the top and have been resorting to some extra-harsh and not always on-point language that is sometimes at odds with the behavior being discussed in the underlying case. “Lying” is a pretty strong word to see in a headline announcing a settlement of a MUSA case. (If some are humming an Alanis Morissette song right about now, we get it.)
Well, this company and its owner decided to do something about it, and they filed a motion in federal court seeking two things – to withdraw from the settlement and to request a temporary restraining order against the FTC, directing it to remove the press release in question. The defendants’ motion covers a lot of ground, but at its core, they argue that the FTC press release misrepresented the agreement and harmed the company. (As of the filing date, the court had not yet signed the proposed order.)
The defendants make a number of points. First, in the settlement they signed, the company expressly did not admit or deny liability, which is a standard provision in most FTC orders, but this was not stated in the press release, which accused the company of “lying.” (And to be clear, we don’t see that statement in many press releases.) They also assert that the press release caused them irreparable financial harm and wrongfully harmed their reputation. The defendants also ask that the stipulated order not be entered and stated that they “would rather spend whatever funds [they have] to fight these allegations.” The defendants indicate that they thought a press release would be issued after the court had signed the order, not before.
In essence, they are arguing that because there was no admission of liability, it was deceptive for the FTC to omit that key fact in the press release. And they argue that the FTC’s press release is deceptive based on key FTC advertising principles of net impression. The defendants provided its own press release – which was far less evocative than what we have seen lately – that they proposed that the FTC issue.
It is certainly not the first time there has been litigation against the FTC based on a press release. Indeed, famed infomercial star Kevin Trudeau sued the agency many years ago regarding a press release about him, but that lawsuit was unsuccessful. Generally, there is a lot of leeway given to the FTC and other agencies regarding their press releases. (And in full disclosure, one of the authors worked on the Trudeau lawsuit.)
Negotiating settlements is a lengthy and difficult process, and having a settlement get derailed at truly the last minute because of an explosive press release is – to put it mildly – suboptimal for all involved. One has to wonder whether a few particularly strong words in a press release are worth potentially causing a significant settlement to get undone. The dispute is still ongoing, and the initial press release is still live on the FTC website. And the defendants here certainly have an uphill battle. But one has to wonder whether this lawsuit will cause the agency to perhaps tone it down just a bit in its press releases – or will the FTC double down on the occasional hyperbolic language we are seeing? We will be watching.