JUNE 2020
Consumer Protection and Privacy
The FTC continues to warn business about making misleading COVID-19 claims. In early June, the agency announced new letters warning 35 more marketers nationwide to stop making unsubstantiated claims that their products and therapies can treat or prevent COVID-19, pushing the total above 160. The agency’s earlier warning letters addressed purported dietary supplement, herbal treatment, and homeopathic cures, while the new round of warnings targets “treatments” offered in clinics or medical offices, including Vitamin C and D infusions, supposed stem cell therapy, and other vitamin injections. At the same time, the FTC sent a second round of warning letters to multi-level marketing companies (MLMs) to remove and address claims about their products’ ability to treat or prevent coronavirus or about the earnings people who have recently lost income can make, or both. In addition, following earlier joint warning letters with the Federal Communications Commission to VoIP providers that route scam COVID-19 related robocalls, the FTC joined the FCC in three new letters, two of them to providers routing overseas scam calls.
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Swiss digital game maker Miniclip, S.A. has settled FTC allegations that it misled consumers about its membership in a program aimed at ensuring that companies adhere to requirements of the Children’s Online Privacy Protection Act (COPPA). The FTC alleged that Miniclip falsely claimed it was a current member of the Children’s Advertising Review Unit’s (CARU) COPPA Safe Harbor Program although it was terminated from the program in 2015. The COPPA Rule requires companies that collect personal information about children under 13 to provide parents with notice of their collection practices and obtain verifiable parental consent. CARU’s COPPA Safe Harbor Program monitors members’ compliance with CARU’s Guidelines and the COPPA requirements.
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The FTC, through a complaint filed by the Department of Justice on the agency’s behalf, alleged that HyperBeard, Inc., the developer of the popular KleptoCats app and other apps directed to children, violated the Children’s Online Privacy Protection Act Rule (COPPA Rule) by allowing third-party ad networks to collect personal information in the form of persistent identifiers to track users of the company’s child-directed apps, without notifying parents or obtaining verifiable parental consent. The ad networks used the identifiers to target ads to children. To resolve the FTC’s charges, the order prohibits Hyberbeard and related individual defendants from using or benefitting from personal data they collected and requires them to delete and destroy that data. It also requires them to notify and obtain verifiable consent from parents for any child-directed app or website they offer that collects personal information from children under 13. The judgment imposes a $4 million penalty, which will be suspended upon payment of $150,000 by HyperBeard due to its inability to pay the full amount. FTC Chairman Joe Simons issued a statement supporting the settlement, while Commissioner Noah Joshua Phillips issued a dissenting statement.
The FTC sued the operators of a telemarketing scheme, alleging that they charged organizations such as businesses, schools, fire and police departments, and non-profits for books and newsletter subscriptions they never ordered. The FTC’s complaint also names the defendants behind a New York-based debt collection operation, alleging that they illegally threatened the organizations if they failed to pay for the unordered merchandise. According to the FTC’s complaint, if an employee agrees to accept what many believe to be free newsletters, American Future Systems, Inc. (AFS) enrolls their organization in a negative option program without their consent, under which they are automatically invoiced for annual subscriptions to the newsletters. The complaint alleges that after six months, AFS forwards accounts of organizations that have not paid for unwanted and unordered subscriptions to a debt collection firm, International Credit Recovery, Inc. (ICR), which then uses false threats to collect the supposed debt.
Competition
The FTC submitted a staff comment supporting provisions in the Centers for Medicare & Medicaid Services’ Interim Final Rule that reduce or eliminate restrictive Medicare payment requirements for telehealth and related services during the pandemic. The Rule sets forth policy and regulatory revisions made in response to the COVID-19 public health emergency. FTC staff noted that by connecting widely separated providers and patients, telehealth can alleviate primary care and specialty shortages, especially in rural areas, as well as for urban patients who have difficulty accessing providers due to economic disparities and limited mobility.
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Over the past few years, the FTC’s Bureau of Competition has faced a surprising number of failing firm claims by merging parties. But, according to a blog post by Bureau Director Ian Conner, despite the many claims the Bureau rarely finds that the facts support a failing firm argument. Conner noted that the Bureau will not relax the stringent conditions that define a genuinely “failing” firm, and will continue to require the same level of substantiation as required before the COVID pandemic.
In Other News
FTC Chairman Joseph J. Simons participated in a House Committee on Energy & Commerce, Consumer Protection and Commerce Subcommittee teleconference forum on critical consumer protection issues related to the COVID-19 pandemic. The teleconference focused on steps FTC is taking to ensure consumers are protected during the pandemic. The Committee has posted the audio here.
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FTC investigators, working undercover in five states, found that funeral homes failed to disclose timely itemized pricing information, as required by the agency’s Funeral Rule, in 17 of the 90 funeral homes they have visited since 2018. The Rule gives consumers important rights when making funeral arrangements, enabling them to compare prices and buy only the goods and services they want. Click the headline above for business and consumer information about the Rule, as well as the agency’s ongoing regulatory review of the Rule.
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