Insights

The Federal Trade Commission (“FTC”) recently approved a final consent order against Sitejabber, an artificial intelligence-enabled consumer review platform, for deceiving consumers by misrepresenting that the ratings and reviews it published came from customers who actually experienced the reviewed product or service. In reality, the reviews were collected before reviewers received the products or services, artificially inflating average star ratings and review counts. 

On December 17, 2024, the Federal Trade Commission (“FTC”) and the Illinois Attorney General (“AG”) announced a $140 million settlement with Grubhub to resolve charges involving an array of allegedly unlawful and deceptive business practices. Even though the FTC’s proposed final rule on junk fees (also announced on December 17, 2024) is limited to hotels, live events, and short-term rentals, this settlement demonstrates that the FTC will use its broad enforcement powers to pursue companies imposing junk fees online, and that both federal and state consumer protection regulators will formulate 2025 enforcement priorities with junk fees and click-to-cancel in mind. Indeed, this $140 million settlement, of which Grubhub will pay $25 million based on its demonstrated inability to pay the full amount, is the first of its kind in that it is a joint action by the FTC and state regulators to pursue both junk fees and click-to-cancel violations.

The Federal Trade Commission (“FTC”)  recently announced that it approved final amendments to its Telemarketing Sales Rule (“TSR”), broadening the rule’s coverage to inbound calls for technical support (“Tech Support”) services. For example, if a Tech Support company presents a pop-up alert (such as one that claims consumers’ computers or other devices are infected with malware or other problems) or uses a direct mail solicitation to induce consumers to call about Tech Support services, that conduct would violate the amended TSR. 

As we’ve previously reported, FTC practitioners and businesses alike have been anxiously awaiting details about the rule that will prohibit purportedly deceptive practices in connection with reviews and testimonials. Our readers likely recall the FTC’s advance notice of proposed rulemaking from November 2022, the notice of proposed rulemaking from June 2023, and the informal hearing on the proposed rule which occurred in February 2024. The wait is finally over: just yesterday, August 14, 2024, the agency announced the “Rule on the Use of Consumer Reviews and Testimonials” (the “Rule”). The final Rule, which the Commissioners unanimously approved, is a formal step to address alleged ongoing non-compliance with Section 5 of the FTC Act and the agency’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”), particularly in the consumer review space.

Call it the summer of junk fees and drip pricing. In July, California’s new drip pricing law went into effect and in August the federal government announced further proposed rules into junk fees and subscription services. Regulators say these proposed price transparency laws and regulations are consumer protection tools that will save consumers money, help them avoid hidden fees and enable them to cancel recurring charges and subscriptions.

Last week, based on a referral from the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”) filed a complaint against Williams-Sonoma alleging that the company violated a previous Federal Trade Commission decision and order dated July 13, 2020 (the “2020 Order”) pursuant to which Williams-Sonoma was prohibited from making unsubstantiated U.S. origin claims. The complaint alleged that, following entry of the 2020 Order, Williams-Sonoma made “numerous false and unsubstantiated representations that their home goods or other products are ‘Made in USA’ or otherwise of U.S. origin, when, in fact, they are wholly imported or contain significant imported components.”

On April 12, 2024, the Tenth Circuit issued a decision in I DIG Texas LLC v. Kerry Creager, which analyzed country-of-origin claims in a manner that diverged from the well-established Federal Trade Commission’s “Made in USA” policy.

In late December, the FDA released a guidance document that provides clarity for small businesses marketing direct-to-consumer (DTC) drug products on television or radio.  The Q&A followed the FDA’s November 2023 Final Rule amending DTC advertising regulations for prescription drugs. 

Since the Federal Trade Commission (“FTC”) published its updated 2023 Guides Concerning the Use of Endorsements and Testimonials in Advertising earlier this year, consumer reviews have been front of mind. This guidance covers, in part, the treatment of consumer reviews, and companies have been (or should be) preparing for an uptick in FTC enforcement. But it’s not just the FTC to watch out for. A recent wave of class actions arising under California Civil Code § 1670.8 related to a customer’s right to make statements about their experience with a seller has raised the bar for retailers to another level.

On Monday, December 18, Tennessee Attorney General Jonathan Skrmetti filed a consumer protection lawsuit against BlackRock, Inc., a large, worldwide asset manager.  The lawsuit alleges that BlackRock made false or misleading representations to Tennessean consumers regarding the extent to which Environmental, Social, and Governance (“ESG”) considerations affect BlackRock’s investment strategies in violation of Tennessee’s consumer protection law.  The suit boils down to BlackRock allegedly holding (and advertising) two inconsistent positions, which arguably leads to consumer confusion and misconception.  The first position is that BlackRock necessarily focuses on maximizing a return for its investors.  The second, a focus on minimizing environmental impact, Attorney General Skrmetti argues conflicts directly with the goal of maximizing profitable return.  The lawsuit argues that BlackRock has violated Tennessee’s consumer protection law by both greenwashing and greenhushing.

The Federal Trade Commission (“FTC”) will host a virtual hearing on January 16, 2024 to discuss the proposed amendments to the Rule Concerning the Use of Prenotification Negative Options Plans. One such amendment will retitle the rule to the Rule Concerning Subscriptions and Other Negative Option Plans, often called the Negative Option Rule. One likely focus of the virtual hearing is the “Click to Cancel” update. The virtual hearing will include six nongovernmental organizations, each of which will provide oral statements addressing issues raised in their comment submissions regarding the notice of proposed rulemaking. The virtual hearing is open to the public and Crowell & Moring attorneys will attend.

On November 7, 2023, the Federal Trade Commission (“FTC”) announced it is challenging over 100 patents as improperly listed in the Food and Drug Administration’s (“FDA”) publication titled “Approved Drug Products with Therapeutic Equivalence Evaluations,” which is commonly known as the Orange Book. The FTC sent warning letters to ten drug and medical device manufacturers identifying patents for inhalers, autoinjectors and anti-inflammatory multi-dose bottles that the FTC believes are improperly listed. In the letters, the FTC indicated it is using the FDA’s regulatory dispute process to challenge the listing of these patents in the Orange Book because improperly listing patents may violate antitrust laws and impede competition. The FTC’s actions appear to be consistent with its recent and increased scrutiny of the healthcare and pharmaceutical industries.

On October 11, the Federal Trade Commission announced a proposed rule designed to increase transparency in pricing practices. The proposed Rule on Unfair or Deceptive Fees would prohibit businesses from misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and mispresenting the nature and purpose of fees. If the rule goes into effect, which we anticipate will happen following the comment period, businesses will be required to disclose all mandatory fees and do so at the start of the purchasing process, rather than waiting to disclose such fees after consumers have invested time in navigating purchase flows (or failing to disclose them altogether). Once the rule publishes in the Federal Register, there will be a sixty-day comment period, after which the FTC will consider a final rule.

New considerations have emerged for advertisers who publish reviews or endorsements. On June 29, 2023, the FTC finalized its updated Endorsement Guides, which provide insights to businesses on how the use of reviews and endorsements might be considered unfair or deceptive in violation of Section 5 of the FTC Act. Over the past several months, the FTC sought public comments on proposed updates to the Endorsement Guides to accurately reflect the modern landscape of advertising, which includes reliance on social media and content creators.

On Tuesday, June 20, 2023, the Federal Trade Commission sent letters to 50 online marketplaces notifying them of their responsibility to fully comply with the new Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – or the INFORM Consumers Act – as soon as the law takes effect on June 27, 2023.

On December 20, 2022, the FTC originally noticed its solicitation for public comments regarding potential updates and changes to the Green Guides (Guides for the Use of Environmental Marketing Claims) on the Federal Register. While the original deadline to submit comments was February 21, 2023, the Federal Trade Commission (“FTC”) extended the public comment period to April 24, 2023.

The Federal Trade Commission (“FTC”) sued three operators, Sean Austin, John Steven Huffman, John Preston Thompson, and their affiliated companies last year for falsely promising to eliminate or substantially reduce credit card debt for consumers.  These companies operated under several names, including ACRO Services, American Consumer Rights Organization, Consumer Protection Resources, Reliance Solutions, Thacker & Associates, and Tri Star Consumer Group.

The Federal Trade Commission (“FTC” or “Commission”) recently announced that it has adjusted the maximum civil penalty dollar amounts for violations of 16 provisions that the Commission enforces. The increase is required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, and is intended to account for inflation. The act directs agencies to implement annual inflation adjustments based on a prescribed formula. Given the uptick in FTC enforcement actions, companies are likely to begin feeling the impact of the increased penalties in the coming year.

Promotional products seller Gennex Media LLC and its owner, Akil Kurji, have settled Federal Trade Commission (“FTC”) charges that they made false, misleading, or unsupported advertising claims that their “Brandnex” customizable promotional products were “all or virtually all” made in the United States. Despite numerous claims that the company’s novelty items were “Made in the USA,” “USA Made,” and “Manufactured Right Here in America!”, the items were wholly imported from China.

Although COVID-19 is occupying a lot of regulatory resources, Attorneys General are continuing their consumer protection mission, including watching out for deceptive claims related to stem cell therapy and other medical treatments. Attorneys General are particularly concerned about businesses making unsupported claims suggesting their services or procedures can treat or cure disease.