For the first time, the FTC used its new Made in USA rule to go after a battery manufacturer. The rule, enacted last summer, gives the agency power to seek civil penalties, injunctive relief, and other remedies against companies who use a “Made in USA” label in a misleading way. The FTC also received a request from the House of Representatives to look into a NFL team’s potentially illegal business practices, and the agency attempted to put a positive spin on a recent DOJ criminal wage-fixing case. These stories and more after the jump.
Monday, April 11, 2022
FTC Internal Operations: Data Privacy and Security
- In her first public speech since her appointment last June, FTC Chair Lina Khan gave prepared remarks at the International Association of Privacy Professionals’ Global Privacy Summit 2022 in Washington, D.C. In her remarks, Chair Khan outlined the data privacy and security landscape, with an emphasis on the pandemic-fueled increased digitization of the economy and society generally. She noted that, while some of these changes were beneficial, they give rise to increased concerns about privacy breaches, increased surveillance, unlawful data practices, and law enforcement’s ability to keep pace with these developments. She emphasized that the FTC was “well suited” to keeping up with technology, highlighting the recent FTC settlement with CafePress, which, among other things, required the company to begin using multi-factor authentication. Chair Khan promised to use the FTC’s current enforcement tools to “take swift and bold action” and to update the agency’s approach to data privacy and security via rulemaking and reassessing the frameworks used to investigate unlawful conduct.
Tuesday, April 12, 2022
FTC Internal Operations: Financial Misconduct in the NFL
- S. Representatives Carolyn B. Maloney and Raja Krishnamoorthi issued a 20-page letter on behalf of the Committee on Oversight and Reform to FTC Chair Lina Khan. The letter summarizes the Committee’s investigation into the business practices of the Washington Commanders football team, which revealed that the team and its owner, Daniel Snyder, “may have engaged in a troubling, long-running, and potentially unlawful pattern of financial conduct that victimized thousands of team fans and the National Football League (NFL).” The results of the investigation suggested that Commanders executives may have withheld up to $5 million in refundable security deposits from customers and concealed revenues from the NFL to avoid redistribution under a revenue-sharing agreement. The Representatives requested that the FTC review the documents to determine whether the Commanders violated any laws enforced by the FTC and whether further action is warranted.
Wednesday, April 13, 2022
Bureau of Consumer Protection: Deceptive Advertising and Marketing
- The Commission filed a proposed consent decree and a complaint against Lithionics Battery, LLC and owner Steven Tartaglia over allegations that the company falsely labeled its products, which are primarily made overseas, as made in the United States. The agency brought the action under the “Made in USA Labeling Rule” which went into effect on August 13, 2021. This rule prohibits marketers from labeling products as made in the United States unless all significant processing, including final assembly or processing, takes place in the United States, and all or virtually all ingredients or components are made and sourced in the United States. The proposed order settling the complaint requires Lithionics and Tartaglia to stop all claims that its products are made in the United States and to pay $100,000 in civil penalties; these penalties are trebled from Lithionics’ profits attributable to the allegedly false labeling.
Thursday, April 14, 2022
Bureau of Competition: Criminal Obstruction of FTC Investigations
- The FTC issued a statement in response to the recent jury verdict on the Department of Justice’s first-ever criminal wage-fixing case. The DOJ brought the case against Neeraj Jindal and John Rodgers, the former owner and former clinical director, respectively, of Your Therapy Source, LLC, a physical therapist staffing company. While Jindal and Rodgers were found not guilty on the wage-fixing claims, the FTC’s statement highlights the guilty verdict against Jindal in relation to his obstruction of an FTC investigation in 2017. The offense carries a statutory maximum penalty of five years imprisonment and a $250,000 fine. Holly Vedova, Director of the Bureau of Competition, commented that the finding of guilt on this charge “should serve as a warning to companies and their top executives that contemplate obstructing FTC investigations” and added that the FTC would “not hesitate” to refer companies to the DOJ for criminal prosecution for such obstruction. Though the DOJ did not prevail in its prosecution of the criminal wage fixing claims, Jindal did settle with the FTC in 2018 over the same allegations and agreed to cease and desist the behavior which gave rise to the claims.
Friday, April 15, 2022
Bureau of Consumer Protection: Deceptive Medical School Claims
- The Commission filed a complaint and a stipulated order against the for-profit Caribbean-based Saint James School of Medicine and its Illinois-based operators. The complaint alleges that the operators deceptively marketed the pass rate of the school’s medical license exam and overall residency and job prospects; for example, one brochure listed a 96.77% pass rate, but since 2017, only 35% of students completing necessary coursework passed the standardized test. The 63% match rate for residency is also well below the advertised 83% rate. The agency brought claims under the Holder Rule, which protects consumers who purchase a product or service with credit extended by the seller, and the Credit Practices Rule, which protects consumers from unfair credit practices in contracts. The order requires St. James and its operators to pay over $1.2 million in refunds and debt cancellations for students of the school, notify consumers and consumer reporting agencies that debts are being cancelled, and refrain from misrepresenting pass rates, residency matches, and other unsubstantiated claims.