In May 2017, the Federal Trade Commission announced "Operation Tech Trap," which was a series of enforcement actions against companies who were allegedly engaging in tech support scams that tricked consumers into believing that their computers were infected with viruses and malware in order to charge them for costly repairs.
As part of "Operation Tech Trap," the FTC and the State of Florida sued Vylah Tec LLC and other defendants, alleging that they deceptively marketed and sold technical support services. (For simplicity, I'll refer to both the FTC and the State of Florida as the "FTC.")
The FTC alleged that the Defendants used computer pop-up messages containing phony warnings that consumers' computers were at risk and that urged them to call "Microsoft Technicians" at a toll-free number in order to fix the problem. The FTC also alleged that when consumers called, they became "ensnared by Defendants' telemarketers, who use a scripted sales pitch to falsely diagnose consumers' computers with viruses, malware or other technical problems and coerce them into paying hundreds of dollars for unneeded repairs and software."
In January 2019, a federal district court in Florida granted the FTC summary judgment on the issue of liability under Section 5 of the FTC Act and under Florida's Deceptive and Unfair Trade Practices Act. The court held that the FTC had established "Defendants' widespread practice of disseminating false or misleading information about computers and computer security to induce consumers to buy Defendants' software."
The parties were forced to go to trial, however, on the issue of monetary relief. Here, the FTC was seeking $3,400,000 in disgorgement. The issue at trial was, essentially, whether the FTC demonstrated that its disgorgement figure "reasonably approximated" the amount of the Defendants' unjust gains. The court held that they failed to do so.
The FTC had tried to use the Defendants' bank records to show how much they had improperly earned, arguing that the net revenue from their bank records was a reasonable approximation of unjust enrichment because every sale that the defendants made was tainted by their deceptive sales tactics. The court held that the evidence was not sufficient, however, since the bank records do not include enough specificity to allow the FTC to "identify with any precision which transactions originated from consumer sales, the number of transactions included in each deposit, or the purpose of each purchase."
It's another big loss in court for the FTC. A pretty surprising result? The court had already found the defendants had engaged in a tech support scam that had deceived consumers. You might think that, when it came to making the defendants' turn over their ill-gotten gains, the court would give the FTC the benefit of the doubt, so long as the FTC presented some evidence about the amount of damages. Well, that didn't happen here.
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