During the National Advertising Division's annual conference this week in Washington, DC, Samuel Levine, Director of the Federal Trade Commission's Bureau of Consumer Protection, delivered an update on the agency's current priorities, recent enforcement actions and focus for the year ahead.
First, Levine discussed the impact of the Supreme Court's AMG decision, which dealt the Commission a "devastating blow" by stripping it of its ability to recover redress for consumers through Section 13(b) of the FTC Act. However, as he explained, instead of settling for injunctive relief and awaiting a legislative fix from Congress—"the easiest option," according to Levine—the FTC has persisted in pursuing alternative paths to monetary relief since the April 2021 decision.
Those alternative paths align with the FTC's current strategy, which rests on three pillars: (i) focusing enforcement resources on actors causing the most harm to consumers' pocketbooks; (ii) pursuing significant relief in spite of AMG; and (iii) tackling broader problems in the marketplace in addition to case-by-case enforcement actions.
With respect to the first pillar, Levine highlighted recent FTC actions against both individual fraudsters and the firms enabling such fraud, including cases against Electronic Payment Systems and, most recently, its $100 million settlement with Benefytt Technologies. The FTC is paying particular attention to practices that harm underserved communities, recently bringing actions to protect, among others, minority-owned businesses, consumers suffering from substance use disorders, military families and student borrowers.
Next, Levine discussed new rulemakings and the revival of the FTC's Penalty Offense Authority as necessary responses to AMG in seeking new remedies to prevent consumer harm. For instance, last year, the Commission sent Notices of Penalty Offenses to hundreds of recipients, making clear that they can face civil penalties for false earnings claims and deceptive endorsement practices.
As additional examples of the FTC's pursuit of "a new suite of remedies," Levine highlighted its settlement with Dun and Bradstreet, which armed small businesses with new tools to dispute inaccuracies on their credit reports; action against Raging Bull, which resulted in an order requiring the settling defendants to provide consumers with easy methods for canceling subscriptions; and settlement with Credit Karma, which will return money to consumers whose time was wasted by the company's deceptive preapproval claims—"a recognition by the Commission that direct monetary loss is not the only way consumers can be harmed."
Along with these enforcement actions, the FTC continues to reassess whether to deploy additional tools to tackle broader problems in the marketplace. Among priority issues, according to Levine, are the deceptive marketing of business opportunities, including through investment training courses, gig work, franchise sales and multi-level marketing; hidden fees and charges, including through negative option marketing; and imposter and telemarketing scams.
The FTC is applying these same pillars to curb unlawful commercial surveillance, which Commissioner Alvaro Bedoya also discussed during the conference. In August, the Commission issued an Advance Notice of Proposed Rulemaking, seeking public comment on rules to crack down on harmful surveillance, lax data security and digital discrimination (read more here).
Levine concluded his remarks with a topic of particular interest to NAD's audience: the Commission's approach to combating deceptive advertising. Levine admitted that he does not share the views of one of his predecessors, Thomas Pahl, who expressed during a previous NAD conference that the FTC would move away from seeking monetary relief in cases against national advertisers (as opposed to fraudsters), particularly in substantiation cases. "I believe that the remedies we seek should be based on the violations we allege, not the size of the company that committed them," Levine said. "Allowing advertisers to reap the rewards of deceptive claims not only leaves consumers in the lurch but also undercuts honest businesses who play by the rules."
According to Levine, the FTC's Made in USA program reflects its evolving approach. Early in Chair Lina M. Khan's tenure, the FTC finalized its Made in USA Rule, which banned the deceptive use of Made in USA labels and triggered civil penalty liability for violations. The Commission brought its first penalty action under the Rule, against Lithionics, shortly thereafter. Levine also discussed the FTC's use of its Penalty Offense Authority to secure civil penalties against companies such as Kohl's, which allegedly falsely marketed their textile products as being made of bamboo through eco-friendly processes. Additionally, the Commission continues to crack down on deceptive review practices, including fake reviews and review manipulation and suppression, as evidenced in recent actions against Roomster, Fashion Nova and Vision Path.
Finally, Levine warned that, while the FTC is proud of its recent settlements, it will not hesitate to take companies, including national advertisers, to court to obtain the relief it believes is necessary to fully protect consumers.
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.