mo money, mo problems – scrutinizing ftc settlements

www.ifrahlaw.com www.ifrahlaw.com

MO’ MONEY, MO’ PROBLEMS – SCRUTINIZING FTC SETTLEMENTS

Affiliate Summit East 2014Rachel Hirsch, Esq., Senior Associate

P (202) 524-4145 /

http://www.ifrahlaw.com/


www.ifrahlaw.comP (202) 524-4145 /

Meet The FTC –The “Notorious” F.T.C.

“Independent” Federal Agency 5 Commissioners/ 7-Year Staggering Terms

Chairman With Fixed Term, But Serves At Leisure of President

No More Than 3 Commissioners From Same Political Party



Meet The FTC – Bureau of Consumer ProtectionThe “Notorious” F.T.C.

Division of Advertising Practices

Division of Consumer & Business Education

Division of Financial Practices

Division of Privacy and Identity Protection

Division of Marketing Practices

Division of Planning and Information

DIVISON OF ENFORCEMENT



Meet The FTC – Bureau of Consumer ProtectionThe “Notorious” F.T.C.



Know The Law – Ain’t Nuthin’ But An FTC Thang

As the nation’s consumer protection agency, the Federal Trade Commission has a broad mandate to protect consumers from fraud and deception in the marketplace. To fulfill this goal, the FTC takes law enforcement actions, provides consumer and business education, issues reports and policy guidance, leads workshops, and participates in other forums.

The FTC’s Mandate



Know The Law –Ain’t Nuthin’ But An FTC Thang

The FTC Enforces Consumer Protection Statutes, Including:

Fair Credit Reporting Act

Fair Debt Collection Practices Act

Federal Trade Commission Act

Gramm-Leach-Bliley Act

Lanham Trademark Act

CAN-SPAM Act

Telemarketing And Consumer Fraud And Abuse Act

Truth in Lending Act


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Respect The Law – Avoid FTC Scrutiny“Too Legit To Quit?” Or “Slim Shady?”

P (202) 524-4145 / www.ifrahlaw.com / [email protected]

When It Comes To The FTC Act, The Basic Principles of Advertising Law Apply:

1. Advertising Must Be Truthful And Not Unfair And Deceptive.

2. Claims Substantiation Must Occur Before Ad Is Disseminated.

3. Disclose And Disclose Often.

4. Limitations And Qualifications Must Be Included Where Needed.

It’s Not Just What You Say, But What You Don’t Say.




Know the Process – What Makes You A Target“Can’t Touch This?”

Anyone Who Is Engaged In Interstate Commerce

Except If: Regulated By Federal Banking Agency, Regulated by FCC, Or Regulated By A State Insurance Regulator



Know The Process – What Makes A Good FTC Case“Dollar, Dollar Bill Y’All”



Know The Process – Top FTC Enforcement Priorities“It’s Hammer Time!”

Protecting Consumer Privacy

Protecting Economically-Vulnerable Consumers

Trending in Technology

Challenging Deceptive Advertising and Marketing

Monitoring Environmental Claims Monitoring Marketing to Children



Know The Process – FTC Enforcement Trends“It’s Hammer Time!”

2010 2011 2012 2013Identity Theft Identity Theft Identity Theft Identity Theft

Debt Collection Debt Collection Debt Collection Debt Collection

Internet Services Prizes, Sweepstakes and Lottery

Bankers and Lenders Bankers and Lenders

Prizes, Sweepstakes and Lotteries

Shop-at-Home and Catalog Sales


Imposter Scams


Bankers and Lenders Prizes, Sweepstakes and Lotteries

Telephone and Mobile Services

Imposter Scams Internet Services Imposter Scams Prizes, Sweepstakes and Lotteries

Internet Auctions Auto-Related Internet Services Auto-Related

Foreign Money/Counterfeit Check Scams

Imposter Scams Auto-Related Shop-at-Home and Catalog Sales




Television and Electronic Media

Credit Cards Advance-Fee Loans and Credit Protection/Repair

Credit Card Advance Payment for Credit Card Services

1,339,265 1.8 million# Of Complaints: > 2 million > 2 million



Know The Process – How An FTC Case Develops“Don’t Hate the Player, Hate the Game”

State Attorney Generals “Surf” Days

Private Litigants Your Competitors

Triggers For An Investigation




Targets For Investigation

Industry-Wide Sweeps

Specific Practices

Low-Hanging Fruit




INITIATION OF PRIVATE INVESTIGATION

Informal – e.g., Access Letter

Formal – e.g., Civil Investigation Demand (CID) or Subpoena

Or Seek Immediate Relief By:1. Filing A Complaint For Permanent Injunction.2. Filing A Motion For a TRO.3. Requesting An Asset Freeze.4. Requesting Appointment of Temporary Receiver.5. Seeking Other Equitable Relief.

Best Result? FTC Issues “Closing Letter” After Investigation.




RESPONDING TO CID

Read Thoroughly

Preserve Immediately

Communicate Thoughtfully

Negotiate Carefully

Produce Cautiously

Respond Substantively

Preserve Confidentiality

Choose Wisely

Move Quickly

Wait Patiently




Settling By Consent Order

May Occur At Any Point Pre-Litigation, Even After Draft Complaint

Requires Authority From Bureau

Contains Boilerplate Provisions (e.g., Periodic Reporting Requirements)

Provides For Civil Penalties, Where Applicable, Disgorgement, Consumer Redress

It Turns A Private Investigation Into A Public Headline




Entering Into Litigation

It Turns A Private Investigation Into A Public Proceeding

FTC Administrative Action(Judge, Jury, and Executioner?)

Federal Court Litigation(Bias Toward Government?)



Understand The Results – FTC Settlements“Ain’t Nuthin’ But A Gold Digger”

Health And Beauty

Case Name Court Filed Nature of Complaint Enforcement Trend

Resolution (Trial v.

Settlement)

Judgment

FTC v. TriVita, Inc., et al.

(2014)

Federal Court:District of Arizona

Deceptive Advertising; False Product Claims: “Relieves Pain! Reduces Swelling! Improves Breathing!

Efforts to Stop Advertising of Over-Hyped Health Claims

Settlement(2014)

$3.5M for consumer refunds plus injunction stipulation

In the Matter of L'Oreal USA, Inc.

(2014 – with violations dating back to 2009)

No Jurisdiction: Administrative Case

Deceptive Advertising; False Product Claims: “Youth Code boosts gene’s activity and stimulates production of youth proteins”

Cosmetic Companies Crossing the Line with unproven Claims

Settlement pre-filing of Federal Charges

(Proposed Consent Order – June 2014)

Consent Order prohibiting similar claims for product and other L’Oreal products

FTC v. Beony International LLC, at al.

(2011)

Federal Court:N.D. Illinois

Deceptive Advertising; Fake News Websites: “News 6 News Alerts: Acai Berry Diet Exposed.”

Sweep Against Online Affiliate Marketers

Settlement (2013)

$13M Suspended to only $1.6M within 5 days; plus sale of 2008 Porsche




Financial Services/Debt Management



Settlement)

Judgment

FTC v. Forensic Case Management Services

(2011)

Federal Court:Central District of California

Illegal Debt Collection Practices: Berated Customers with Obscene/Abusive Language and Threats of Physical Harm

Curb Illegal Debt Collection Practices

Settlement(2013)

$35M combined; reduced to $1,027,000 for inability to pay

FTC v. U.S. Mortgage Funding, Inc., et al.

(2011)

Federal Court:Southern District of Florida

False Advertising of Claims for Mortgage Debt Relief; Collection of Payment prior to Service Rendered

Scams That Target Homeowners who are behind on mortgage payments

Settlements Imposing Judgments

(2012)

$18.7M suspended to $998,000; plus 1996 Rolex Submariner 2-tone steel & gold, 2007 Cadillac DTC; 1971 53’ Hatteras Yacht

FTC v. Asset & Capital Management Group et al.

(2013)


Extorted Payments from Customers under False Threats

Stop Debt Collectors who Intimidate and Scam Consumers

Settlements Imposing Judgments

(2014)

$90.5M which include frozen corporate assets; land, vehicles etc.; $4M went to victim compensation




Telemarketing



Settlement)

Judgment

FTC v. Castle Rock Capital Management, Inc.

(2011)


Allegedly distributed illegal robocalls for credit card interest rate reduction programs, extended automobile warranties, & home security systems

Stop Illegal Rococalls

Settlement

(2013)

$1.1M suspended due to inability to pay; Ban from industry

FTC v. Phillip A. Flora

(2011)


Serial text spammer for deceptive mortgage relief services and free gift cards

Crack Down on Affiliate Marketers who sent spam text messages for deceptive websites falsely promising “free” gift cards

Settlement and Contempt Judgment

(2014)

$59,000- suspended upon payment of $32,000; Compliance Monitoring- then in May fined $148,309 and Industry Ban

FTC v. The Text Club Inc. et al.

(2012)

Federal Court: Southern District of New York

Called Consumers misrepresenting companies they had purchased from in the past to pitch business development services

Crackdown on scams that falsely promise jobs and opportunities to “be your own boss.”

Settlement

(2014)

$15M; also $115M suspended to $2.6M & $114M to $13M



Prep Your Team– When The FTC Comes Knocking“Mama Said Knock You Out!”

Educate Employees

Designate A Corporate Representative

Identify Purpose of Visit

Contact Counsel

Involve Counsel Post-Visit

Don’t Panic!


www.ifrahlaw.comwww.ifrahlaw.com

1717 Pennsylvania AvenueWashington, D.C. 20006

www.ifrahlaw.com

P (202) 524-4145 /

Email: [email protected]: TheRealMsHirsch

Blog: www.ftcbeat.com

You May Have 99 Problems, But The FTC Ain’t One Of Them!

