This week the FTC released updates related to the Negative Option Rule and the proposed Business and Government Impersonation Rule. The FTC, along with three other federal agencies, issued a joint statement describing their commitment to enforce their respective laws and regulations to promote responsible innovation in automated systems, such as artificial intelligence. The Agency also requested over $500 million from the House Appropriations Subcommittee on Financial Services and General Governmentfor FY 2024, which would enable it to fund over 300 additional full-time employees. In addition, the agency announced that it would be sending over 41,000 refund checks to consumers that fell victim to alleged dark pattern practices for dental products. These stories and more after the jump.
Monday, April 24, 2023
Bureau of Consumer Protection: Online Advertising and Marketing
- The FTC is seeking public comment on proposed amendments to its Negative Option Rule. The FTC has used the Negative Option Rule to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs. The proposal would make several specific changes, including implementing (1) a simple cancellation mechanism; (2) new requirements before making additional offers, and; (3) new requirements regarding reminders and confirmations. Parties interested in filing a comment online may file their comments through https://www.regulations.gov. Those looking to file a comment on paper may do so by mailing the comment(s) to Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC–5610 (Annex N), Washington, DC 20580. Comments must be received no later than June 23, 2023.
Tuesday, April 25, 2023
Bureau of Consumer Protection: Deceptive/Misleading Payments and Billing
- The FTC announced that it will be sending 41, 934 checks, totaling more than $1.1 million as part of a settlement related to a 2017 lawsuit against RevMountain, LLC, Anasazi Management Partners, and 59 related corporate defendants. The settlement resolved allegations that the defendants utilized dark patterns, such as hidden disclosures and deceptive claims to confuse consumers into providing their billing information and signing them up for two ongoing subscriptions to nearly identical teeth whitening and other products. As a result, consumers who believed they had agreed to buy a single trial product for about $5 were charged about $200 a month until they canceled both unauthorized subscriptions.
Bureau of Consumer Protection: Privacy and Security; Artificial Intelligence
- Leaders from the FTC, the U.S. Department of Justice, the Equal Employment Opportunity Commission, and the Consumer Financial Protection Bureau issued a joint statement describing their commitment to enforce their respective laws and regulations to promote responsible innovation in automated systems, such as artificial intelligence. All four agencies have previously expressed concerns about potentially harmful uses of automated systems and communicated their resolve to vigorously enforce their collective authorities and to monitor the development and use of automated systems. The statement also described how automated systems may contribute to unlawful discrimination and otherwise violate federal law. The statement listed some examples of how automated systems can lead to discrimination: (1) automated system outcomes can be skewed by unrepresentative or imbalanced datasets; (2) automated systems are often “black boxes” whose internal mechanisms are not clear to most people, which makes it more difficult to know whether the system is fair; and (3) developers do not always understand or account for the contexts in which private or public entities will use their automated systems.
Wednesday, April 26, 2023
Bureau of Consumer Protection: Government and Business Impersonation Rule
- On May 4, the FTC held an informal hearing on its proposed rule prohibiting government and business impersonation. The proposed rule would codify the principle that impersonation scams violate the FTC Act, and would ban scammers from the following: (1) using government seals or business logos; (2) spoofing government and business emails and web addresses; and (3) falsely implying government or business affiliation. The proposed rule would also allow the Commission to recover money from, or seek civil penalties against, scammers who harm consumers in violation of the rule.
Bureau of Consumer Protection: Deceptive/Misleading Credit and Finance
- The FTC and the Commonwealth of Pennsylvania announced a court stipulated order with debt collection company, International Credit Recovery, Inc. (ICR), officer Richard Diorio, Jr., and manager Cynthia Powell. The settlement resolves allegations that the defendants engaged in fake debt collection efforts against businesses and non-profits. According to the complaint, since at least 2014, American Future Systems, Inc. (AFS) called organizations nationwide offering to send sample books or newsletters for the organizations to try. However, by the end of the call, if an employee agreed to accept what many believed to be free newsletters, AFS enrolled their organization in a negative option program without their consent. For organizations that had not paid for the unwanted and unordered subscriptions, the complaint alleged that AFS forwarded their accounts to a debt collection firm, ICR, which contacted consumers that it knew or had reason to know did not agree to order paid subscriptions. The FTC and the Commonwealth also alleged that ICR used false or unsubstantiated representations to try to get consumers to pay, and that ICR illegally threatened consumers if they did not pay. The court stipulated order permanently bans the defendants from the debt collection industry, and requires them to cooperate since the case will continue against the other defendants AFS, Progressive Business Publications of New Jersey, Inc. and Edward Satell.
Thursday, April 27, 2023
Bureau of Consumer Protection: Office of Congressional Relations
- The FTC appeared before the House Appropriations Subcommittee on Financial Services and General Governmentto discuss its FY 2024 budget request and the agency’s ongoing work to ensure open, competitive, and fair markets on behalf of consumers, workers, and honest businesses. FTC Chair Lina M. Khan delivered the Commission testimony, which described how the agency is utilizing current funding to address a variety of consumer protection and competition related issues. The testimony reaffirmed the Commission’s commitment to ensuring that the funding it receives from Congress is used effectively and that the agency is addressing root causes and dealing with the most significant harms across markets, particularly by dominant firms whose business practices affect large numbers of Americans. For FY 2024, the Commission is requesting a budget of $590 million, which would enable the FTC to fund an additional 310 full-time employees to address in part the increased demand on agency staff and resources.
Thursday, April 27, 2023
Bureau of Competition: Industrial Goods and Manufacturing Merger
- The FTC’s Bureau of Competition Director, Holly Vedova, issued the following statement in response to the announcement that cement producer CalPortland Company terminated its proposed $350 million acquisition of assets from a rival cement producer in Southern California, Martin Marietta Materials, Inc.: “The transaction would have reduced the number of cement suppliers in Southern California from five to four, further concentrating an already concentrated market, and was presumptively illegal. The abandonment is a victory for consumers and preserves competition for a key component of Southern California’s construction and infrastructure industries.” According to the FTC, if the transaction had consummated, CalPortland, would have owned half of all cement plants serving the Southern California market. CalPortland would have been well-poised to raise prices unilaterally, and to sustain those price increases, according to the FTC’s investigation.