Legal Library: Cases and Proceedings

Clarence L. Werner, founder of the Omaha, Nebraska-based truckload carrier Werner Enterprises, Inc. will pay a $486,900 civil penalty to settle charges that certain of his acquisitions of company stock while he was a director of the company violated the Hart-Scott-Rodino Act. The HSR Act requires companies and individuals to report stock purchases over a certain threshold to the FTC and DOJ and wait before closing the transaction so that the federal agencies can investigate the potential competitive impact of the acquisition. Smaller transactions may also be reportable under the Act due to the need to aggregate the new purchase with all current holdings.

The FTC sued Kohl’s, Inc. and Walmart, Inc. for falsely marketing dozens of rayon textile products as bamboo. Both companies also are charged with making deceptive environmental claims, touting that the “bamboo” textiles were made using ecofriendly processes, while in reality converting bamboo into rayon requires the use of toxic chemicals and results in hazardous pollutants. The court orders settling the complaint require the companies to stop making deceptive green claims or using other misleading advertising, and pay penalties of $2.5 million and $3 million, respectively.

The FTC’s October 2018 complaint against Redwood Scientific charged the defendants with a scheme that used illegal robocalls to deceptively market dissolvable oral film strips as effective smoking cessation, weight-loss, and sexual-performance aids. Announced in June 2019 as part of a crackdown on illegal robocalls against operations around the country responsible for more than one billion calls, an initial  settlement resolved the FTC’s charges against one defendant in the Redwood Scientific case, Danielle Cadiz. The order permanently banned Cadiz from all robocall activities, including ringless voicemails, and imposes a judgment of $18.2 million against Cadiz. In March 2022, the FTC announced the final court orders against all remaining defendants.

The FTC reached a settlement with WW International, Inc., formerly known as Weight Watchers, and a subsidiary called Kurbo, Inc., over allegations they marketed a weight loss app for use by children as young as eight and then collected their personal information without parental permission.

In March 2021, a New York-based company and its CEO agreed to settle FTC charges that they sold hundreds of thousands of indoor TV antennas and signal amplifiers to consumers using deceptive claims that the products would let users cancel their cable service and still receive all of their favorite channels for free. Among other things, the proposed consent order settling the FTC’s complaint prohibits the defendants from making claims about: 1) any product’s rating, ranking or superiority to other products; 2) the channels users will receive; or 3) any material aspect of a product’s performance, efficacy, or central characteristics, unless the claims are true and substantiated.

In February 2022, at the request of the Federal Trade Commission, federal courts in California ordered two Voice-over-Internet Protocol (VoIP) service providers, Xcast and Deltracon, to turn over information that the agency is seeking as part of ongoing investigations into potentially illegal robocalls. Companies that fail to comply with such federal court orders can be held in contempt.

In February 2022, at the request of the Federal Trade Commission, federal courts in California ordered two Voice-over-Internet Protocol (VoIP) service providers, Xcast and Deltracon, to turn over information that the agency is seeking as part of ongoing investigations into potentially illegal robocalls. Companies that fail to comply with such federal court orders can be held in contempt.

The Federal Trade Commission is returning more than $3.7 million to consumers who lost money because of unfair and deceptive loan servicing practices by online lender Avant, LLC.

The FTC sued Avant in April 2019, alleging that the company falsely advertised that it would accept payments by credit or debit cards, when in fact it did not. This often resulted in customers being charged additional interest on their loans as they tried to arrange a different form of payment. The FTC also alleged that the company withdrew money from customers’ bank accounts or charged their credit cards without authorization, failed to properly and timely credit payments made by check, provided deceptive payoff quotes to customers, and tried to collect more money than the quoted payoff amount.

The Federal Trade Commission required generic drug marketers ANI Pharmaceuticals, Inc. and Novitium Pharma LLC to divest, to Prasco LLC, ANI’s development rights to one generic drug and assets with respect to another generic drug as part of a settlement resolving charges that ANI’s $210 million acquisition of Novitium likely would be anticompetitive. According to the complaint, without a remedy, the acquisition would likely harm future competition in U.S. markets for both of these generic products. The order requires ANI and Novitium to divest ANI’s rights and assets to generic SMX-TMP oral suspension and generic dexamethasone tablets to Prasco within 10 days after the acquisition is final. On Jan. 12, 2022, the Commission announced the final consent order in this matter.

The Department of Justice on behalf of the Federal Trade Commission sued MyLife.com, Inc. and its CEO Jeffrey Tinsley over allegations they deceived consumers with “teaser background reports” that often falsely claimed to include information about arrest, criminal, and sex offender records, and also engaged in misleading billing and marketing practices.

Under an order with the FTC, OpenX Technologies, Inc. will be required to pay $2 million over allegations that the company collected personal information from children under 13 without parental consent. The FTC also alleged that the company collected geolocation information from users who specifically asked not to be tracked.