Valentine’s Day at the FTC was marked by the Commission’s breakup with one of its longtime Commissioners, who abruptly announced her retirement in a splashy op-ed that garnered significant media attention. The agency also announced a new Office of Technology and proposed consent orders related to “review hijacking” and robocalls. These stories and more after the jump.
February 6, 2023
Bureau of Consumer Protection: Healthcare, Advertising and Marketing, Over-the-Counter Drugs and Devices
- The FTC announced an order settling a lawsuit against defendants ZyCal Bioceuticals Healthcare Company, Inc. (ZyCal) and its president, James J. Scaffidi. The order follows a 2020 complaint that alleged the ZyCal defendants deceptively marketed products under the brand name Ostinol. The oral products contained the ingredient Cyplexinol, which the FTC claimed was a stem cell activator that could grow bone and cartilage in users and relieve joint pain. The complaint further alleged the defendants supplied a third-party company, Excellent Marketing Results, Inc., with “the means and instrumentalities to deceptively market a copycat Cyplexinol product called StimTein.” Once signed by a judge, the order will bar defendants from making bone and cartilage growth, joint pain, and any other health benefit claims for any food, drug, or dietary supplement, unless the statements are not misleading, or deceptive, and are substantiated by competent and reliable scientific evidence, including randomized clinical trials. The defendants are also prohibited from providing anyone else with the means to make false or misleading statements. Director of the FTC’s Bureau of Consumer Protection, Samuel Levine, highlighted the significance of this order stating, “This settlement is an important reminder that health-related advertising claims require rigorous substantiation in the form of competent and reliable scientific evidence.”
February 9, 2023
Bureau of Consumer Protection: Advertising and Marketing; Endorsements, Influencers, and Reviews
- The FTC finalized consent orders against Google LLC and iHeartMedia, Inc. settling allegations that they purportedly produced and aired nearly 29,000 deceptive first-person endorsements by radio personalities promoting their use of and experience with Google’s Pixel 4 phone in 2019 and 2020. According the FTC, Google allegedly provided radio personalities from iHeartMedia and 11 other radio networks with scripts detailing their experiences with the Pixel 4 although personalities allegedly never received Pixel 4s from the company. The final orders bar Google and iHeartMedia from similar representations, and separate state judgments require them to pay $9.4 million in penalties.
Bureau of Consumer Protection: Credit and Finance
- The FTC has provided the Consumer Financial Protection Bureau (CFPB) with an annual summary of its Equal Credit Opportunity Act (ECOA) enforcement activities. The summary includes lawsuits against auto dealership groups, Napleton Auto and Passport Auto, charging the dealerships with discriminating with respect to interest rate markups and illegal junk fees; a staff report cautioning about the use of artificial intelligence to combat online issues; and information related to the FTC’s efforts on fair lending issues.
Bureau of Consumer Protection: Imposter; Online Dating
- The FTC released a new data spotlight, shedding light on the methods romance scammers used to take advantage of victims. According to reports to the FTC, nearly 70,000 consumers lost $1.3 billion in 2022 to romance scammers. These scams most often began on social media then progressed to other messaging apps where scammers solicited money via an array of lies. The data spotlight also sheds light on a new tactic, mostly reported by consumers age 18-29, known as “sextortion,” when a romance scammer elicits explicit photos and then threatens to share those photos with the consumer’s social media contacts. Consumers also reported losing more money by sending cryptocurrency than any other method.
February 10, 2023
Bureau of Competition: Hart-Scott-Rodino Act (HSR)
- The FTC and the Justice Department’s Antitrust Division released the 44th Annual Hart Scott Rodino (HSR) Report. The report presents data on the HSR Premerger Notification Program that alerts the agencies to mergers that may substantially lessen competition in violation of federal law. The report notes that a record-breaking 3,520 transactions were reported to both antitrust agencies during fiscal year 2021 and highlights 32 merger challenges that were undertaken by both agencies in various sectors, including consumer goods and services, pharmaceuticals, agriculture, healthcare, high tech and industrial goods, and energy. Of the 32 merger challenges, seven transactions were abandoned or restructured; six were faced with litigation to block or undo merger transaction; and five transactions were modified by FTC final orders.
Bureau of Consumer Protection: Credit and Finance; Money Transfers
- The FTC announced MoneyGram will be refunding more than $115 million to nearly 40,000 consumers as a result of a 2018 action, charging the company with violations of a 2009 FTC settlement and a 2012 DOJ agreement. In the 2009 settlement, MoneyGram agreed, among other things, to implement a fraud prevention program and take proactive steps to reduce scammers’ ability to use their system to receive money from consumers. However, in 2018, the FTC charged MoneyGram for turning a bling eye to numerous instances continued fraud on their payment network despite the settlement. The charges revealed MoneyGram failed to address numerous instances of suspicious payment activity by the company’s agents.
Monday, February 13, 2023
FTC Operations: Commissioner Slaughter Renomination
- Last week, President Biden renominated Commissioner Rebecca Kelly Slaughter to continue in her current position. Chair Khan released a statement congratulating Commissioner Slaughter and praising her past work for the FTC.
Tuesday, February 14, 2023
Bureau of Competition: FTC Public Forum on Noncompete Restrictions
- The Commission released its final agenda for its February 16, 2023 forum on the FTC’s proposed rule to prohibit employers from imposing noncompete restrictions on employees. The agenda listed multiple speakers from within the agency, including three Commissioners, but also featured a panel of speakers from private organizations. The agenda concluded with an opportunity for public comment. The event was held virtually, and the recording can be viewed online here.
FTC Operations: Commissioner Wilson Resignation
- Following Commissioner Wilson’s widely-covered decision to resign from the FTC – announced via a fiery opinion piece in the Washington Post – the remaining Commissioners on the FTC issued a response. The statement in full: “While we often disagreed with Commissioner Wilson, we respect her devotion to her beliefs and are grateful for her public service. We wish her well in her next endeavor.” Commissioner Wilson’s resignation will create a second vacancy on the FTC’s five-member slate, following Commissioner Phillips’ resignation last October. To the extent President Biden appoints new Commissioners, he will have to choose two Republicans because there can only be three Commissioners from one political party.
Thursday, February 16, 2023
Bureau of Consumer Protection: Review Hijacking
- For the first time, the FTC is going after a company for “review hijacking,” in which a marketer steals or repurposes reviews of another product. In its complaint against The Bountiful Company, the Commission alleged that the company took advantage of an Amazon feature that allowed it to merge its new products with different, more well-established products that had more ratings and reviews and therefore boost sales in a deceptive manner. According to the complaint, in 2020 and 2021, Bountiful asked Amazon to create “variation relationships” for some of its supplement products, so that the supplements would appear on the same product detail page as better-known products. The variation relationships are supposed to be for similar products that differ in specific minor ways, such as a piece of clothing that comes in different colors. The complaint alleges that Bountiful inappropriately requested variation relationships for supplements that had entirely different formulations. The complaint asserts that these practices are unfair and deceptive in violation of Section 5(a) and 12 of the FTC Act. Under the proposed order, the company must pay $600,000 as monetary relief for consumers.
FTC Operations: Commissioner Bedoya Comments on Privacy
- In a speech at the Future of Privacy Forum’s 13th Annual Privacy Papers for Policymakers Event, Commissioner Bedoya delivered prepared remarks, with a focus on highlighting six papers featured at the event. The papers covered topics including sensitive health data, surveillance, data collection and protection, algorithmic bias, and a proposed Global Privacy Agreement to address divergences in international trade and privacy norms.
Bureau of Competition: Health Care Mergers
- In response to news that the State University of New York Upstate Medical University and Crouse Health System, Inc. would abandon their proposed merger, the FTC’s Office of Policy Planning issued a statement praising the decision. The Office notes that the deal presented “substantial risk of serious competitive and consumer harm” in terms of higher healthcare costs and lower healthcare worker wages. The FTC had been actively investigating the proposed merger, and had filed a comment with the New York State Department of Health to oppose the companies’ request for a certificate that could have shielded the merger from antitrust laws.
Friday, February 17, 2023
FTC Operations: Launch of Office of Technology
- The FTC announced a new Office of Technology that will assist the Commission in investigations, research, and public engagement in relation to trends in technology. To staff the new office, the agency is hiring technologists with expertise in a number of different subjects, including software engineering, design, technology research and policy, and product management and development.
Bureau of Consumer Protection: Robocalls
- The FTC and DOJ worked together to stop an interconnected web of companies and individuals generating millions of unwanted phony debt service robocalls. The DOJ filed a complaint and a proposed consent order on the FTC’s behalf against this web of companies. The complaint focuses on one defendant in particular – Stratics Networks, Inc. – and alleges that Stratics sold Voice Over Internet Protocol (“VoIP”) technology services that allowed its clients to transmit millions of robocalls to consumers. Stratics also allegedly sold access to ringless voicemail (“RVM”) technology, which allowed its clients to make calls to a consumer’s voicemail without ringing their phone. The complaint explains that Stratics customers included telemarketers, lead generators, and debt relief service sellers, who used Stratics’ services to drown consumers in millions of robocalls. These customers used tactics that violate the Telemarketing Sales Rule (“TSR”), including making misrepresentations about debt relief services, causing calls to numbers on the FTC’s Do Not Call Registry, using pre-recorded telemarketing messages, failing to make TSR-required disclosures, and charging consumers a fee before providing a debt relief service.