It’s rulemaking week at the FTC, particularly within the Bureau of Consumer Protection. The agency announced multiple Advance Notices of Proposed Rulemaking for public comment in connection with its October 20, 2022 Open Commission meeting. These Notices and other FTC reports this week touch on fake reviews, illegal fees, protecting older consumers, right-to-repair issues, energy costs, and even funeral services. FTC Commissioners issued a joint statement responding to allegations that its staff traded stocks and funds more than those at any other major agency, while FTC Chair Lina Khan and Department of Justice Antitrust Division Assistant Attorney General Johnathan Kantor met with European competition officials on regulating digital markets. These stories and more after the jump.
Tuesday, October 11, 2022
Bureau of Consumer Protection: Energy-Efficient Products
- The FTC secured a permanent injunction against F & G International Group Holdings, LLC, FG International, LLC, (“FGI”) and their principal J. Glenn Davis over allegations the company and its CEO falsely claimed their paint products “provides excellent insulation” at an “extreme insulation value.” The U.S. Court for the Southern District of Georgia granted the FTC’s motion for summary judgment and permanently banned FGI from making deceptive claims and prohibited them from supporting similar deception from other companies. In particular, the Commission argued that FGI made these allegedly false claims and misrepresentations in a way that was important in consumers’ buying decisions when FGI misrepresented testing to support the insulation value of its paints. The order bars defendants from making misleading claims about insulation ratings or the energy efficiency that their products will provide. Commenting on the case, Sam Levine, Director of the FTC’s Bureau of Consumer Protection, emphasized that “[a]t a time of high energy prices and deep concern about inflation, today’s ruling shows the impact FTC cases are having on issues of vital economic importance to American consumers.”
Bureau of Competition: Farming Products and Services
- The Commission approved Tennessee-based farm store chain Tractor Supply Company’s (“Tractor Supply”) acquisition of Midwest and South farm chain store rivals Orscheln Farm (“Orscheln”) and Home LLC. The FTC challenged the merger, arguing that online retailers are not reasonable substitutes for brick-and-mortar farm stores and that the acquisition would increase prices and decrease the quality and selection of products. The consent order requires Tractor Supply to divest some Orscheln stores, corporate offices and a Missouri distribution center, to farm store chains Bomgaars (based in Iowa) and to Buchheit (based in Missouri and Illinois). Tractor Supply must assist Bomgaars and Buchheit as they convert the stores and Orscheln’s distribution center and move the stores it is retaining out of the distribution center on a specific timeline. The FTC insisted on physical and technical separation between the teams supporting Tractor Supply’s stores, the stores being divested to Bomgaars, and the stores being divested to Buchheit. For three years, Bomgaars and Buchheit must obtain prior approval from the Commission before selling any of the Orscheln stores they acquired.
Wednesday, October 12, 2022
Bureau of Competition: International Agency Cooperation
- Chair Lina M. Khan and the Justice Department Antitrust Division Assistant Attorney General Jonathan Kanter participated in a G7 Joint Competition Policy Makers & Enforcers Summit (the “Summit”) as part of the 2022 G7 Digital and Technology Track. The Summit was hosted by the German Bundeskartellamt and Ministry for Economic Affairs and Climate Action and included participants from G7 competition authorities and economic ministries in Canada, France, Germany, Italy, Japan, the UK, the United States, and the European Commission. At the Summit’s conclusion, participating agencies issued a compendium of legislative approaches to regulate competition in digital markets. The agencies agreed on the “important role that access to data relevant for competition plays in digital markets” and that digital advertising is an area where competition authorities will remain “particularly active.” The following day, Chair Khan, Assistant Attorney General Kanter, and Executive Vice President Margrethe Vestager of the European Commission convened the second meeting of the US-EU Joint Technology Competition Policy Dialogue (“TCPD”), which the agencies launched on December 7, 2021.
Thursday, October 13, 2022
Bureau of Competition: E-Cigarettes
- Altria Group, Inc. (“Altria”) filed a motion for official notice of termination of its non-compete agreement with Juul Labs Inc. (“Juul”). Juul did not join in Altria’s motion, but did not object to the motion for official notice. Under the terms of the agreement, Altria had the option to permanently terminate its non-compete obligations once the varying value of Altria’s investment in Juul fell to 10 percent or less than Altria’s investment. As a result, Altria also lost its board designation rights (other than its right to appoint one independent director so long as its ownership interest continues to be 10 percent or more) and consent and certain other rights in connection with a sale of Juul. Altria’s Juul shares were converted to single vote common stock, which significantly reduced Altria’s voting power.
FTC Operations: Open Commission Meeting & Joint Statement
- The FTC announced its tentative agenda for the October 20th Commission meeting. The Commission will vote on three advanced notices of proposed rulemaking on “junk fees,” fake reviews and deceptive endorsements, and online access to funeral service prices. The FTC also will vote on issuing a staff report that summarizes the results of a review of almost 200 funeral provider websites, which if issued, is expected to reveal that more than 60 percent of funeral home websites have little to no pricing information.
- The Commission unanimously issued a joint statement responding to a negative Wall Street Journal article. The article reported that FTC officials “traded stocks and funds more than those at any other major agency, including going heavily into tech shares.” In their statement, the Commissioners “stand behind our career staff,” but also “demand compliance with the FTC’s ethics rules, set clear expectations of staff behavior, and swiftly refer any violations of these rules to the proper authorities.”
Friday, October 14, 2022
Bureau of Consumer Protection: Fuel Labeling
- The Commission approved a partial exemption for fuel-dispenser pump manufacturer Gilbarco, Inc. pursuant to the Fuel Rating Rule under the Petroleum Marketing Practices Act. The partial exemption will allow Gilbarco to make small reductions in the type and size of fuel labels to allow room for an additional fuel grade button on its pumps. Commissioner Christine Wilson issued a concurring statement to the partial exemption criticizing the Fuel Rating Rule’s “prescriptive requirements” and analogizing it to “a familiar children’s game of ‘Mother May I.’” Commissioner Wilson encouraged the FTC to consider streamlining the Rule and giving greater flexibility to manufacturers.
Bureau of Consumer Protection: Data Security
- The FTC delayed the deadline for public comment on its August 2022 advanced notice of proposed rulemaking on commercial surveillance and lax data security practices. The public will now have until November 21, 2022 to submit comments. The Commission voted to approve the extension 4-0-1, with Commissioner Christine Wilson abstaining. Various trade associations had requested an extension of the public comment period to give them additional time to respond.
Monday, October 17, 2022
Bureau of Consumer Protection: Updating the Energy Labeling Rule
- The FTC wishes to update the Energy Labeling Rule and is seeking public comment via an Advance Notice of Proposed Rulemaking (“ANPR”). The FTC is particularly interested in amending the rule to add (1) a requirement that manufactures include information on how consumers can repair their products, (2) potential new energy labels for nine different categories of consumer appliances, and (3) changes to label format and location requirements to make the label information readily available to consumers even when shopping online. Chair Lina Khan issued a statement emphasizing the Commission’s commitment to allow consumers to access independent repair, and Commissioner Wilson issued a concurring statement recounting past efforts to revise this rule and noting that she looked forward to reviewing the incoming comments.
Tuesday, October 18, 2022
Bureau of Consumer Protection: Report to Congress on Protecting Older Consumers
- The Commission issued its annual report to Congress regarding key problematic trends involving older consumers and how the agency is attempting to fight back. In 2021, per the report, older adults reported significantly higher losses due to scams compared to 2020. Older consumers lost $147 million to investment scams (up 213% from the previous year), $151 million to business impersonation scams (134%), and $122 million to government impersonation scams (109%). While adults over age 60 were less likely to report losing money to fraud than adults, they tended to report higher losses, and they were far more likely to report losses from specific scams, such as online scams where consumers are contacted via social media. The report also highlights the FTC’s major rulemaking and enforcement actions against these scams, including enforcement actions related to the COVID-19 pandemic. Finally, the report outlines the agency’s outreach and education efforts, such as the “Pass It On” campaign compiling fraud prevention tools for consumers.
Bureau of Consumer Protection: Deceptive Marketing in the Automotive Industry
- The FTC and Maryland-based car dealer Passport Automotive Group have entered into a stipulated order under which the company will pay $3.38 million in refunds to consumers. The order stems from a complaint alleging that the company charged illegal certification, reconditioning, or inspection fees that it falsely claimed consumers had to pay. These fees were omitted from advertisements listing cars at specific prices; for example, the complaint cites one case where a car advertised for $24,050 was sold for $26,440 due to illegal add-on fees. In addition, the complaint alleges that Passport regularly charges Black and Latino customers more in financing costs and fees than non-Latino white customers; on average, Black and Latino customers paid $291 and $235, respectively, more in interest and fees. In addition to the monetary aspect of the settlement, the order requires Passport to create a fair lending program to ensure that it does not discriminate, and prohibits the company from misrepresenting the cost or terms to purchase or lease a car. Commissioner Wilson and Commissioner Phillips each issued statements dissenting from the inclusion of Count III in the complaint, and Commissioner Wilson dissented from the inclusion of top Passport executives as individual defendants. Count III, entitled “Unfair Discrimination,” alleges that Passport’s imposition of higher costs on Black and Latino consumers violated Section 5 of the FTC Act; Commissioners Wilson and Phillips criticize the count as gratuitous and not within the scope of Section 5. Chair Khan together with Commissioners Slaughter and Bedoya issued a statement disagreeing with these dissents, noting that Count III is a straightforward application of Section 5.
Thursday, October 20, 2022
Bureau of Consumer Protection: New Advertising and Marketing Rules
- The FTC announced several potential new rules that it was exploring to reduce deceptive practices against consumers.
- The agency issued an ANPR requesting public comment regarding unfair review and endorsement practices, such as fake reviews, suppressed negative reviews, and payments for positive reviews. These rules, per the FTC, cheat consumers looking for real feedback on products and services, and undercut honest businesses. The ANPR seeks comment on particular types of deceptive reviews and endorsements, including (1) fake reviews, (2) review reuse fraud (in which sellers repurpose reviews posted about another product or service), (3) paid reviews, (4) insider reviews (written by a company’s executives or employees without appropriate disclosures), (5) review suppression, (6) fake review websites, and (7) buying or selling of followers, subscribers, views, or other indicators of social media influence. The FTC also referenced its existing business guidance on how to ensure that endorsements, influencers, and reviews comport with the FTC Act.
- The Commission also announced an ANPR related to “junk fees” – defined as unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value. The ANPR seeks public comment about (1) unnecessary charges for worthless, free, or fake products or services, (2) unavoidable charges imposed on captive consumers, and (3) surprise charges that secretly increase the purchase price. Chair Khan issued a statement in support of the ANPR noting that 82% of consumers surveyed by Consumer Reports had spent money on hidden fees in the past year, but she added that “there’s nothing inevitable” about these fees, which are a “surprisingly recent phenomenon.” Commissioner Wilson issued a dissenting statement discussing procedural issues related to the rule’s announcement, asking questions about the rule’s scope, and expressing concern that the FTC’s overall rulemaking agenda may take up substantial FTC resources and risk ignoring other threats to consumers and competition.
- Finally, in one additional rulemaking effort, the FTC issued an ANPR exploring possible steps to update the Funeral Rule, which requires funeral providers to give in-person visitors itemized price information to make informed decisions. The Funeral Rule was issued in 1984 and so contains no provisions about providing pricing information online or electronically. Concurrently with the ANPR, the Commission released an FTC staff report summarizing the results of reviews of over 200 funeral provider websites. The majority of the websites provided little to no information about pricing, and only 24% had an itemizing price list. Chair Khan highlighted this report in a statement on the ANPR and noted the ANPR’s request for comment on whether the Funeral Rule should require funeral providers to provide pricing information online or via email.
Friday, October 21, 2022
Bureau of Consumer Protection: Deceptive Claims in Home Sales
- The FTC has entered a final order against Opendoor Labs, Inc. in relation to a complaint alleging that the company deceived potential home sellers into believing that they could make more money selling their home via Opendoor than via traditional sales methods. In reality, per the final order, consumers lost thousands of dollars selling via Opendoor than they would have received from a traditional sale. The final order matches the proposed order reported on in this blog in August, requiring Opendoor to pay $62 million to be used for relief and redress for consumers harmed by the deceptive practices.