AUGUST 2020
Consumer Protection and Privacy
Volkswagen and Porsche returned a total of more than $9.5 billion since 2016 to car buyers under the FTC’s orders stemming from the companies’ deceptive “clean diesel” advertising of VWs and Audis fitted with illegal emission defeat devices, according to a Final Status Report filed by the FTC in federal court. Buyers had been given a choice between returning their vehicle to VW or Porsche in exchange for compensation or having the car modified to comply with clean-air rules. More than 86 percent of those who concluded the claims process chose to return their car through a buyback or early lease termination, the FTC noted. “Most important, the FTC orders and related private class settlements provided redress sufficient to compensate consumers fully,” the FTC report said. The report marks the end of the largest consumer redress program in U.S. history, set up in 2016 and 2017 to compensate purchasers and lessees of more than 550,000 deceptively marketed “clean diesel” VW and Audi cars.
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The FTC charged Golden Sunrise Nutraceutical, Inc. with deceptively advertising a $23,000 “Emergency D-Virus” treatment as a scientifically proven way to treat COVID-19. According to the FTC’s complaint, Golden Sunrise falsely claimed on billboards, their websites, and social media that use of the company’s supplements—ImunStem, Aktiffvate, and AnterFeerons—would lead to the “disappearance of viral symptoms within two to four days.” The FTC had previously sent Golden Sunrise a warning letter.
The FTC also filed suit against three online merchandisers for failing to deliver on promises that they could quickly ship products like face masks, sanitizer, and other personal protective equipment (PPE) related to the coronavirus pandemic. Among other charges, the lawsuits allege that the companies violated the FTC’s Mail, Internet, or Telephone Order Merchandise 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.
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The FTC sued MyLife.com, Inc., a purveyor of background reports, alleging that the company deceived consumers with “teaser background reports” that often falsely claimed to include information about arrest, criminal, and sex offender records, to persuade consumers to sign up for auto-renewing premium subscriptions. The complaint, filed by the Department of Justice on behalf of the FTC, also alleges that the defendant engaged in misleading billing and marketing practices in violation of the Restore Online Shoppers’ Confidence Act and the Telemarketing Sales Rule. The complaint maintains that MyLife is a Consumer Reporting Agency subject to the Fair Credit Reporting Act (FCRA) because MyLife claimed that its reports could help customers make housing, lending, and employment eligibility decisions. The FCRA promotes the accuracy, fairness, and privacy of information the companies use to determine creditworthiness, insurance eligibility, and suitability for employment and housing rentals.
The FTC sued four companies that sell paint products used to coat buildings and homes, alleging that they deceived consumers about their products’ insulation and energy savings capabilities. In complaints filed in federal court, the FTC charged that the companies falsely overstated the R-value ratings of the coatings, making deceptive statements about heat flow and insulating power. A product’s R-value is a measure of its resistance to heat flow – the higher the R-value, the greater the insulating power. Using R-value and other product information, consumers can improve the energy efficiency of their homes by purchasing the right products to meet their energy saving needs.
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Competition
Indivior, Inc. agreed to pay $10 million to settle FTC charges that it violated antitrust laws through a deceptive scheme to thwart lower priced generic competition with its branded opioid replacement therapy drug Suboxone. The proposed settlement also bars Indivior from similar future conduct. The proposed settlement is part of a broader government settlement with Indivior, which resolves criminal and civil fraud claims by the U.S. Attorney’s Office for the Western District of Virginia and the U.S. Department of Justice.
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In Other News
All five FTC Commissioners testified at an oversight hearing before the Senate Committee on Commerce, Science, and Transportation about the agency’s work to protect consumers and promote competition, including its efforts to combat frauds designed to take advantage of consumers during the COVID-19 pandemic. In addition to outlining the agency’s major accomplishments over the past year, the Commissioners urged Congress to clarify the FTC’s ability to provide monetary redress to consumers under Section 13(b) of the FTC Act. Over the past four fiscal years, pursuant to Section 13(b) of the FTC Act, the FTC has returned more than $975 million directly to consumers and won judgments under which consumers received nearly $10 billion more through defendant-administered redress programs. The Commissioners also urged Congress to reauthorize the U.S. SAFE WEB Act, which enhances the FTC’s ability to cooperate with foreign counterparts, and to enact federal privacy and data security legislation that would be enforced by the FTC.
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The Director of the FTC’s Bureau of Consumer Protection (BCP), Andrew Smith, testified before the Commerce Committee’s Subcommittee on Manufacturing, Trade, and Consumer Protection on BCP’s efforts to combat scams and other consumer problems related to the ongoing COVID-19 pandemic.
The FTC has sent a report to Congress on the use of social media bots in online advertising. The report notes research showing that the market for social media bots is thriving and out in the open, and that it remains easy, cheap, and effective to sell, buy, and use these bots for commercial purposes. It also notes that bots are used on social media for many other purposes, both good and malicious, that they range from simple to sophisticated, and that they can be difficult to detect despite the continuing efforts of platforms, researchers, and others to combat them. The report also describes the Commission’s previous law enforcement activity related to social media bots and other inauthentic online activity, highlighting the Commission’s case against Devumi, a company that sold fake followers, likes, and subscribers on social media accounts.
The FTC’s Bureau of Competition published a blog post offering advice to companies subject to Commission Divestiture Orders in the wake of Alimentation Couche-Tard and CrossAmerica Partners (collectively ACT)’s recent agreement to pay a $3.5 million civil penalty to settle allegations that they violated a Commission divestiture order that was designed to prevent their merger from harming consumers.
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