Legal Library: Cases and Proceedings

The FTC today announced another case in a series of recent actions targeting allegedly deceptive online “free-trial” offers that tricked consumers into enrolling in negative option plans.

The FTC will require background report providers TruthFinder and Instant Checkmate to pay $5.8 million to settle charges that they deceived consumers about whether consumers had criminal records and that the companies violated the Fair Credit Reporting Act (FCRA) by operating as consumer reporting agencies.

The Federal Trade Commission issued an administrative complaint challenging Axon Enterprise, Inc.’s consummated acquisition of its body-worn camera systems competitor VieVu, LLC. Before the acquisition, the two companies competed to provide body-worn camera systems to large, metropolitan police departments across the United States. According to the complaint, Axon’s May 2018 acquisition reduced competition in an already concentrated market. Before their merger, Axon and VieVu competed to sell body-worn camera systems that were particularly well suited for large metropolitan police departments. The Commission vote to issue the administrative complaint was 5-0. On April 17, 2020, the Commission announced a proposed settlement with Safariland, which is one of the respondents and the parent company of VieVu. The final settlement was issued on June 11, 2020. The administrative trial was scheduled to begin on Oct. 13, 2020, but the United States Court of Appeals for the Ninth Circuit ordered a stay until further notice. 

A federal court granted the Federal Trade Commission’s request to temporarily shut down an alleged pyramid scheme known as “Success By Health,” and to freeze the assets of the company and its executives.

In May 2023, a federal court sided with the Federal Trade Commission, ruling that James D. Noland, Jr. illegally owned and operated two pyramid schemes—Success By Health (SBH) and VOZ Travel—in violation of the FTC Act and that Noland violated a previous federal court order barring him from pyramid schemes and from misrepresenting multilevel marketing participants’ income potential.

The FTC alleged that the defendants fraudulently marketed investment-related services that they claimed would enable consumers to make consistent profits and beat the market. Instead, the FTC alleges that consumers—many of them retirees, older adults, and immigrants—have lost at least $137 million to the scam in just the last three years. The defendants claimed in their pitches that consumers don’t need a lot of time, money, or experience, and that the global coronavirus pandemic represents a great time to pay hundreds or thousands of dollars to learn their secret trading techniques, claiming in one ad that the pandemic “…might be the most exciting opportunity in decades!” The defendants also made claims like “Learn how you could DOUBLE or TRIPLE your account in One Week!” In March 2023, the FTC sent payments totaling more than $2.4 million to consumers in this case.

The Federal Trade Commission filed suit against American Screening for failing to deliver on promises that it could quickly ship products like face masks, sanitizer, and other personal protective equipment (PPE) related to the coronavirus pandemic.

The lawsuits allege that the companies violated the FTC’s Mail, Internet and Telephone Order Rule (Mail Order Rule), which requires that companies notify consumers of shipping delays in a timely manner and give consumers the chance to cancel orders and receive prompt refunds.

The FTC obtained an order against education technology provider Edmodo for collecting personal data from children without obtaining their parent’s consent and using that data for advertising, in violation of the Children’s Online Privacy Protection Act Rule (COPPA Rule), and for unlawfully outsourcing its COPPA compliance responsibilities to schools. 

The FTC sued the health information company Surescripts, alleging that the company employed illegal vertical and horizontal restraints in order to maintain its monopolies over two electronic prescribing, or “e-prescribing,” markets: routing and eligibility.  According to the complaint, Surescripts monopolized two separate markets for e-prescription services: The market for routing e-prescriptions, which uses technology that enables health care providers to send electronic prescriptions directly to pharmacies; and the market for determining eligibility, a separate service that enables health care providers to electronically determine patients’ eligibility for prescription coverage through access to insurance coverage and benefits information, usually through a pharmacy benefit manager.The FTC alleges that Surescripts intentionally set out to keep e-prescription routing and eligibility customers on both sides of each market from using additional platforms (a practice known as multihoming) using anticompetitive exclusivity agreements, threats, and other exclusionary tactics. Among other things, the FTC alleges that Surescripts took steps to increase the costs of routing and eligibility multihoming through loyalty and exclusivity contracts.

In July 2023, the FTC filed a proposed order that would resolve the Commission’s charges. The proposed order prohibits Surescripts from engaging in exclusionary conduct and executing or enforcing non-compete agreements with current and former employees. The proposed order also goes beyond routing and eligibility, extending the same prohibitions to Surescripts’ medication history services and the company’s on-demand formulary services.

Resident Home LLC and owner Ran Reske paid $753,000 to settle FTC charges that they made false, misleading, or unsupported advertising claims that their imported DreamCloud mattresses were made from 100% USA-made materials. According to the complaint, although the company and Reske repeatedly claimed in promotional literature that their mattresses were “proudly made with 100 percent USA-made premium quality materials,” all DreamCloud mattresses were finished overseas, and in some cases were wholly imported or used significant imported materials.  On June 14, 2022, the Commission announced the final consent agreement in this matter.

On March 30, 2023, the FTC began sending payments totaling nearly $45,000 to consumers who purchased DreamCloud mattresses sold by Resident Home, LLC, the parent company of Nectar Sleep, which used misleading “Made in USA” claims to pitch its products to consumers. 

In the next few months, the FTC will be contacting an additional 12,300 consumers who bought DreamCloud mattresses and may be eligible for a payment. Consumers who believe that they may be eligible and want more information about the claims process can contact the administrator, JND Legal Administration, at 844-798-0740.

In July 2023, the Commission took action under the FTC Act and the OARFPA against the makers of Sobrenix, which was deceptively marketed to reduce and even eliminate alcohol cravings and consumption. As a result of the FTC’s suit, the defendants agreed to a proposed court order permanently banning them from making any unsubstantiated claims about health care products or services, as well as requiring them to pay $650,000 to provide refunds to consumers. In November 2024, the FTC announced it was sending $536,000 in refunds to defrauded consumers who bought the product.

The FTC reached a settlement with the developer of the fertility app Premom over allegations it deceived users by sharing their sensitive personal information with third parties, including two China-based firms, disclosed users’ sensitive health data to AppsFlyer and Google, and failed to notify consumers of these unauthorized disclosures in violation of the Health Breach Notification Rule (HBNR).

In February 2022, the FTC took action in federal court against a Florida-based group of defendants it alleges called hundreds of thousands of consumers nationwide to pitch them expensive “extended automobile warranties” using deceptive telemarketing tactics. According to the FTC complaint, American Vehicle Protection Corp. and related defendants bilked consumers out of more than $6 million over the last four years.  Under the terms of proposed court orders, three companies and their owners that were charged by the FTC with running the operation that scammed consumers out of millions of dollars would be permanently banned from participating in the extended automobile warranty market, as well as from any further involvement in outbound telemarketing. An additional court order announced in July 2023 bans an additional corporate defendant and its owner.

The Federal Trade Commission is sending more than $449,000 in refunds to consumers who were harmed by American Vehicle Protection Corp., which engaged in a telemarketing scam that involved calling hundreds of thousands of consumers nationwide to pitch expensive “extended automobile warranties” using deceptive telemarketing tactics.