The FTC unveiled its Proposed Rule on Commercial Surveillance and Data Security. The Commission relied on the COVID-19 Consumer Protection Act and the Made in USA Labeling Rule to refer a complaint against personal protective equipment (“PPE”) and light fixture manufacturers. The case marks the second time the FTC has used the Made in the USA Labeling Rule to target companies for allegedly deceptive claims. Commissioner Alvaro Bedoya spoke at the National Association of Attorneys General Presidential Summit on technology threats to consumer protection. These stories and more after the jump.

Tuesday, August 9, 2022

Bureau of Consumer Protection: Health Claims

  • The Federal Trade Commission referred a complaint to the Department of Justice alleging Adam J. Harmon and two companies he controls falsely told consumers that PPE they marketed during the pandemic, as well as light fixtures they sold, were made in the United States. The FTC contends this conduct violates the COVID-19 Consumer Protection Act, the Made in USA Labeling Rule, and the FTC Act. The proposed order settling the complaint bars Harmon and his companies from making deceptive claims in the future and requires them to pay $157,683.37 civil penalty immediately. A $2.8 million redress judgment is suspended due to their inability to pay. In particular, the order requires defendants to substantiate all Made in USA and COVID-19-related claims. Sam Levine, Director of the FTC’s Bureau of Consumer Protection, remarked that “ALG and its CEO slapped the Made in USA label on masks that were made overseas, and now they’re paying the price.” Levine emphasized that, “[a]s Americans struggle to obtain safe, authentic personal protective equipment, the Commission will use every tool we have to root out false claims and phony labels.” To avoid future violations, Harmon and his companies must (1) show that their products’ final assembly or processing – and all significant processing – takes place in the United States, and that virtually all ingredients or components of the product are made and sourced in the United States, or (2) clearly and prominently qualify origin claims to disclose imported content or processing. 

FTC Internal Operations: Consumer Protection & Technology

  • Commissioner Alvaro Bedoya rendered prepared remarks at the National Association of Attorneys General President Summit. His address, “Consumer Protection 2.0: Tech Threats and Tools,” urged attorneys general to protect digital privacy and ask “who is being left behind” by the latest technology. Specifically, he called on attorneys general to stop online scams in all languages, protect teen mental health online, and protect location data. Commissioner Bedoya explained the federal laws that govern the collection, use, and sharing of location data or other sensitive user data, including the FTC Act, the Safeguards Rule, the Fair Credit Reporting Act, the Health Breach Notification Rule, and the Children’s Online Privacy Protection Rule. He urged attorneys general to “prioritize” the enforcement of “similar and at times overlapping state laws.” Commissioner Bedoya also highlighted the proposal from Representative Cathy McMorris Rodgers that proposed adding technologists to the FTC’s staff, along with psychologists and youth development experts. He is “thrilled that this proposal is part of the bipartisan privacy bill currently working its way through Congress.”

Bureau of Competition: Gasoline and Diesel Stations

  • The Commission approved a final order settling charges that pipeline and storage company Buckeye Partners, L.P. (“Buckeye”)’s $435 million acquisition of competitor Magellan Midstream Partners, L.P. would harm competition for light petroleum and gasoline products terminaling services in North Augusta, South Carolina; Spartanburg, South Carolina; and Montgomery, Alabama. In June 2022, the Agency brought the complaint as part of its efforts to target critical links in supply chains. As a result of the order, Buckeye must divest two light petroleum product terminals in North Augusta, South Carolina; two terminals in Spartanburg, South Carolina; and one terminal in Montgomery, Alabama. Buckeye also must seek prior approval before it acquires any light petroleum products terminal within a 60-mile radius of the divested assets for a period of 10 years. Correspondingly, the buyer of Buckeye’s divested assets must obtain prior approval for three years before transferring any of the divested assets to any buyer, and for seven years before transferring to a buyer with an interest in any light petroleum products terminal across any of the three relevant geographic markets.

Thursday, August 11, 2022

Bureau of Consumer Protection: Data Privacy Rulemaking

  • The Commission published an advance notice of proposed rulemaking (“ANPR”) on commercial surveillance and data security. The FTC is seeking public comment on “whether it should implement new trade regulation rules or other regulatory alternatives concerning the ways in which companies (1) collect, aggregate, protect, use, analyze, and retain consumer data, as well as (2) transfer, share, sell, or otherwise monetize that data in ways that are unfair or deceptive.” A fact sheet accompanying the ANPR clarifies the Commission’s priorities and its interest in “dark patterns,” through which companies influence consumers’ choices, including purchases or sharing personal information, and “surveillance creep,” wherein companies “reserve the right to change their privacy terms after consumers sign up for a product or service.” Importantly, the Commission is targeting companies that “require people to sign up for surveillance as a condition of service.” A public forum will be held virtually on Thursday, September 8, 2022, from 2:00 PM to 7:30 PM; members of the public must sign up in advance for an opportunity to speak, and registration closes at 8:00 PM on Wednesday, August 31, 2022.

Bureau of Consumer Protection: Credit & Finance

  • Following a 2021 settlement agreement, the FTC is sending payments with a total of more than $9.7 million to 61,990 consumers who were charged hidden fees by LendingClub Corporation (“LendingClub”). The payments could come in as either a PayPal payment or a check in the mail. The FTC sued LendingClub over allegations that it falsely promised loan applicants that they would receive a specific loan amount with “no hidden fees,” while at the same time deducting hundreds to thousands of dollars of up-front fees from the loans. The first distribution of settlement funds in January 2022 resulted in the Agency sending refunds via PayPal to 15,748 LendingClub customers. The FTC has refunded more than $17.6 million to LendingClub consumers to date.