The FTC started the new year with a proposed new rule that would ban employers from imposing non-competes on their workers. It also announced increases to civil penalties connected to various federal provisions. These stories after the jump.
Wednesday, January 4, 2023
- For the first time, the FTC has taken administrative action against three companies and two individuals to stop allegedly unlawful non-compete restrictions. In its administrative complaints, the FTC alleged that the restrictions constituted an unfair method of competition pursuant to Section 5 of the FTC Act. More specifically, the Commission alleges that Prudential Security, Inc., Prudential Command Inc., and its owners illegally required security guards to sign contracts containing restrictions that prohibited them from working for a competing business within a 100-mile radius of their job site for two years after leaving Prudential. The Commission also alleges that O-I Glass imposed non-compete restrictions for more than a decade on employees across various positions. These restrictions typically banned the former employees from working for, owning, or being involved in any other way with any business in the United States selling similar products and/or services without written consent from O-I Glass. Similarly, the Commission alleged that Ardagh Group, S.A. limited former employees from directly or indirectly performing “the same or substantially similar services” to those the worker performed for Ardagh on behalf of any business in the United States, Canada, or Mexico that is “involved with or that supports the sale, design, development, manufacture, or production of glass containers” in competition with Ardagh for two years after leaving their post. In each case, the FTC has also submitted a proposed consent order that requires the companies to cease enforcing, threatening to enforce, or imposing noncompete restrictions on relevant workers. The proposed order also requires the parties to notify all affected employees that they are no longer bound by the noncompete restrictions.
Thursday, January 5, 2023
- As reported by Crowell & Moring’s Antitrust Department, the FTC announced the proposal of a new rule that would ban employers from including non-compete terms in employment agreements with virtually all of their workers. Specifically, the FTC’s new rule would make it illegal for an employer to: (1) enter into or attempt to enter into a noncompete with a worker; (2) maintain a noncompete with a worker; or (3) represent to a worker, under certain circumstances, that the worker is subject to a noncompete. The proposed rule would apply to employees of a company and independent contractors, whether paid or unpaid. It would also require employers to rescind existing non-competes and actively notify workers that they are no longer in effect. The proposed rule would generally not apply to other types of employment restrictions, like non-disclosure agreements. However, other types of employment restrictions could be subject to the rule if they are so broad that they function essentially like a non-compete. The Commission voted 3-1 to publish the Notice of Proposed Rulemaking. Chair Khan, Commissioner Rebecca Kelly Slaughter and Commissioner Alvaro Bedoya issued a statement. Commissioner Slaughter, joined by Commissioner Bedoya, issued an additional statement. Commissioner Christine S. Wilson issued a dissenting statement.
Friday, January 6, 2023
Bureau of Consumer Protection: FTC Operations
- The FTC announced that is has adjusted the maximum civil penalty dollar amounts for violations of 16 provisions, as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The maximum civil penalty amounts have increased as follows:
|Federal Provision||Civil Penalty|
|The Clayton Act: Section 7A(g)(l)||From $46,517 to $50,120|
|The Clayton Act: Section 11(l)||From $24, 714 to $26,628|
|The Fair Credit Reporting Act: Section 621(a)(2)||From $4,367 to $4,705|
|The FTC Act: Sections 5(l), 5(m)(1)(A), and 5(m)(1)(B)||From $46,517 to $50,120|
|The FTC Act: Section 10||From $612 to $659|
|The Energy Policy and Conservation Act: Section 333(a)||From $503 to $542|
|The Energy Policy and Conservation Act: Section 525(a)||From $24,714 to $26,628|
|The Energy Policy and Conservation Act: Section 525(b)||From $46,517 to $50,120|
|The Energy Independence and Security Act of 2007: Section 814(a)||From $1,323,791 to $1,426,319|
|The Fur Products Labeling Act: Sections 3(e), and Section 8(d)(2)||From $612 to $659|
|The Medicare Prescription Drug Improvement and Modernization Act of 2003: Section 1115(a)||From $16,445 to $17,719|
|The Webb-Pomerene (Export Trade) Act: Section 5||From $612 to $659|
|The Wool Products Labeling Act: Section 6(b)||From $612 to $659|
As a reminder, civil penalties for FTC rule violations and contempt of existing consent orders (and many of the other provisions listed above) are computed per violation (or per day for ongoing violations). Given how quickly some of these penalties can add up, it is likely a good time for companies to review their business practices to ensure compliance with certain FTC rules and any existing orders. The new maximum civil penalty amounts will take effect upon publication in the Federal Register. The Federal Register notice can be found here.
For the first time, the FTC obtained civil penalties against a company that received a Notice of Penalty Offenses Concerning Money-Making Opportunities, and civil penalties for violations of the Restore Online Shoppers’ Confidence Act (“ROSCA”). Also this week, the FTC demonstrated its desire to return money to consumers and protect consumers’ private information. The FDA and FTC also issued a couple of warning letters to keep unapproved drugs advertised for the treatment of COVID-19 from reaching consumers. These stories and more, after the jump.
Tuesday, January 10, 2023
Bureau of Consumer Protection: Consumer Refunds
The FTC is paying tens of thousands of consumers a total of over $2.9 million who paid to use Warrior Trading’s investment programs. The FTC complaint alleged that Warrior Trading made deceptive earnings claims, and most of its customers lost money trading on top of the money they paid to use the company’s service. To read about this blog’s coverage of the case and the FTC complaint, click here. To view a state-by-state breakdown of FTC refunds, click here. It is now more challenging for the FTC to refund consumers because of the 2021 Supreme Court decision stripping the FTC of its ability to seek monetary relief in federal court. The FTC has asked Congress to revive the FTC’s authority.
Bureau of Consumer Protection: Data Security
The FTC finalized an order with Drizly, LLC, an online alcohol marketplace, and its CEO for security failures that led to a data breach leaving 2.5 million consumers’ data exposed. The FTC complaint alleged that Drizly and its CEO failed to take measures to protect consumer data despite having been warned about the company’s security vulnerabilities two years before the 2020 breach. You can read about this blog’s reporting on the proposed order here.
The order includes (1) a requirement that Drizly destroy personal data unnecessary to provide products or services; (2) cease collecting personal data unless for specific purposes in the retention schedule; (3) post on its website the data it collects and why collection is necessary; (4) implement a comprehensive data security program; and (5) create safeguards to protect against security incidents similar to those in the complaint. Furthermore, CEO James Rellas is required to implement a data security program at future companies under certain conditions. The Commission voted 4-0 to finalize the complaint and order.
Warning Letters: Unapproved and Misbranded Products Related to COVID-19
The United States Food and Drug Administration (“FDA”) and the FTC issued two warning letters on Tuesday, January 10 to PureCraft LLC and Medical Mikes, Inc., because the companies advertised drugs they claimed could aid the treatment of COVID-19. The cannabinoid (“CBD”) products were unapproved new drugs sold in violation of and misbranded per sections 505(a) and 502 of the Federal Food, Drug, and Cosmetic Act (“FD&C Act”), respectively. Furthermore, the products could not enter interstate commerce under sections 301(a) and (d) of the FD&C Act. The FTC issued a cease and desist demand stating that the companies cannot advertise that a product “can prevent, treat, or cure human disease unless [it] possess[es] competent and reliable scientific evidence.”
Case Update: Intuit Inc.
The FTC submitted its opposition to Intuit Inc.’s Motion for Leave to File Surreply in Opposition to Complaint Counsel’s Motion for Summary Decision. Intuit asks for leave to file a new brief based on a clerical error. To read about this blog’s reporting on In the Matter of Intuit, Inc., click here.
Thursday, January 12, 2023
January 19 Open Commission Meeting
FTC Chair Lina Khan announced the Commission’s open meeting to take place virtually on Thursday, January 19, 2023, beginning at 11 a.m. ET with time for members of the public to address the Commission. The tentative agenda for the meeting includes: (1) a presentation by staff in the Division of Consumer Response and Operations on fraud reporting trends based on age; and (2) Chair Khan recognizing a few staff award recipients.
Individuals may register to speak live or submit prerecorded comments until January 17 at 8 p.m. ET and will have two minutes to offer comments. A link to the meeting will be posted on FTC.gov before the meeting begins. The event will be recorded and posted along with comments.
Friday, January 13, 2023
Bureau of Consumer Protection: False Claims for Money-Making Opportunities
Following the Federal Trade Commission’s (“FTC”) lawsuit, WealthPress, an investment advice company, and its owners agreed to refund over $1.2 million to consumers, and the company agreed to pay $500,000 as a civil penalty, for making false claims about its services to deceive consumers. In addition, defendants must substantiate any earnings claims in writing and give notice to consumers about the case.
The complaint against WealthPress and its owners alleges that the company made deceptive and false claims to sell its investment advising services. For example, WealthPress falsely claimed that the services were rendered by experts who used a system or strategy to provide trading recommendations that were certain or very likely to reap substantial rewards. The FTC alleged that the company’s actions violated Sections 5, 13, and 19 of the Federal Trade Commission Act (“FTC Act”) and Section 5 of the Restore Online Shoppers’ Confidence Act (“ROSCA”). The FTC called for civil penalties for each ROSCA violation and instance where WealthPress acted with actual knowledge that the Commission had determined such action was unfair or deceptive, injunctive relief, and monetary relief.
WealthPress agreed to a proposed court order, making this case the first in which the FTC has obtained civil penalties against a company that received a Notice of Penalty Offenses Concerning Money-Making Opportunities, and also the first civil penalties for violations of ROSCA. Director of the FTC’s Bureau of Consumer Protection Samuel Levine emphasized the number of lawsuits the FTC has brought against companies making false earnings claims and warned, “we won’t hesitate to bring more.” The Commission authorized the filing of the complaint and proposed consent decree in a 4-0 vote. Commissioner Christine Wilson issued a concurring statement.