Lions Not Sheep is a clothing company that, in its own words, allows consumers who wear its clothes to “show people it’s possible to live your life as a LION, not a sheep.” In addition to making people aware of that possibility, the company prominently advertises that its goods are “Made in the USA,” “Made in America,” “100% AMERICAN MADE,” and – to put a finer point on it – the “BEST DAMN AMERICAN MADE GEAR ON THE PLANET.”

Lions Clothing TagThe FTC disagreed on the US origin claims (but stayed largely silent on the possibility of living like a lion). According to its complaint, the company took clothing that was made in another country, removed tags showing the country of origin, and printed “Made in the USA” on the items. The FTC alleged that in most cases, goods that were advertised as “Made in USA” were wholly imported with limited finishing work performed in the United States.

Whether or not a product is made in the USA is usually not readily apparent, so when these cases come out, many of us wonder what caught the FTC’s attention. In this case, it’s less of a mystery. In 2020, the company’s owner posted a video on social media explaining that in order to make “Made in USA” claims, marketers should substantiate that products are “all or virtually all” made in the USA. So far, so good. He then explained that he could hide the fact that shirts are made in China by ripping off those tags and replacing them with other tags. No longer good.

To settle the case, the company and its owner agreed to pay $211,335 and to change their marketing practices. For example, they can’t make “Made in USA” claims unless:

  • The final assembly or processing of a product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States; or
  • A clear and conspicuous qualification appears immediately adjacent to the representation that accurately conveys the extent to which the product contains foreign parts, ingredients or components, and/or processing; or
  • For a claim that a product is assembled in the USA, the product is last substantially transformed in the United States, the product’s principal assembly takes place in the United States, and United States assembly operations are substantial.

This case demonstrates that the FTC continues to take “Made in USA” claims seriously. If you make claims about domestic origin, be sure to take a close look at the FTC’s new Made in USA Labeling Rule and assess how well you’re complying. This case also demonstrates that you shouldn’t post videos showing how to break laws. If you are doing that, you may want to be a little more sheepish (and less lion-like) about your practices.

On Tuesday, Connecticut became the fifth state to pass comprehensive privacy legislation when Governor Ned Lamont signed “An Act Concerning Personal Data Privacy and Online Monitoring” into law.  Connecticut joins California, Virginia, Colorado, and Utah in enacting new privacy laws that take effect in 2023. Out of fifty states in the U.S., ten percent have now passed a comprehensive privacy law.

Effective July 1, 2023, the Connecticut law adopts a general framework of definitions, consumer rights, and compliance obligations based on concepts of data controller and data processor from the EU’s General Data Protection Regulation (GDPR), and the right to opt out of the “sale” of personal data as first articulated in the California Consumer Privacy Act (CCPA).  Overall, the Connecticut law mirrors Colorado’s privacy law but then borrows select concepts from the California, Virginia, and Utah laws.  The result is a hybrid of the pre-existing state laws, but not a law that introduces significant contradictions or unique compliance challenges. Continue Reading Ten Percent and Rising: Connecticut Becomes Fifth U.S. State to Enact Privacy Law

NAD recently issued a decision in a challenge that Zillow brought against involving a humorous campaign that featured Jeff Goldblum. The decision covers a lot of ground, including some issues that may be unique to the rental market. For today, though, we’ll focus on an issue that spans industries and comes up frequently. Specifically, we’ll look at popularity claims, such as the advertiser’s “The Most Popular Place to Find a Place” tagline and a couple of “#1” claims.

NAD noted that “most popular” and “number 1” claims send a powerful message that a brand is preferred over all other brands. Because these messages can factor heavily in consumer purchasing decisions, NAD scrutinizes them carefully to determine whether the evidence fits the claim. In most cases, the best evidence to support these claims is sales data. That wasn’t available in this case because rentals take place off the parties’ sites. Instead, the parties each presented data on website visitors. and Zillow sparred over whether “most unique visitors” or “most visits” is a better metric for determining popularity. NAD didn’t pick either option, concluding that website traffic is not a good fit for “Most Popular” claims. When an advertiser makes a broad superiority claim, it must support “all reasonable interpretations of its claim.” Because readers could interpret the claim in different ways, the advertiser’s data showing it had the most unique visitors wasn’t enough to support the claim.

NAD also considered the claim that is “#1 listing network for houses, townhomes, condos and apartments.” The advertiser provided evidence comparing the number of listings on its site and the number of listings on Zillow. NAD concluded that could support a claim that it has the” #1 listing network” based on listing volume, but recommended that the basis of the claim – listing volume – be clearly disclosed to avoid conveying a message that it is the #1 network based on popularity.

Zillow also challenged the claim that is “the nation’s #1 rental network, with more than 25 million visitors to our sites each month searching for a new apartment.” Although NAD determined that the “25 million visitors” part of the claim was supported, it pointed to its previous conclusion that website traffic was not sufficient to support a popularity claim. Accordingly, NAD recommended that the advertiser stop the claim or make “a more limited claim regarding the number of visitors to a website.”

Popularity claims are always going to be . . . well . . . popular with advertisers. And they’re always going to be unpopular with companies on the losing end of the comparison. If you plan to make a popularity claim, you should generally look to independent sales data for support. Although this decision states that website traffic won’t be enough to substantiate a broad claim, advertisers still have room to make more tailored claims. Those can still have an impact with consumers, while lowering your risk of challenge. Ad

Earlier this week, 50 states and D.C. obtained a $141 million settlement with Intuit related to its advertising of free and freemium TurboTax products. This settlement, which took the form of an Assurance of Voluntary Compliance (a special kind of settlement authorized by many state unfair and deceptive trade practice laws), concluded a three year investigation of the company, and is an example of a bipartisan and nearly unanimous effort among state AGs to address a consumer protection matter. However, it came as a precursor to several state AGs pulling out of the National Association of Attorneys General signaling division within the State AG community.

The Attorneys General alleged facts similar to the FTC’s suit on March 29, 2022 in their findings. In that case, the FTC had filed an administrative action alleging FTC Act violations, while simultaneously filing a federal district court action seeking a temporary restraining order (TRO). The hearing on the TRO didn’t go so well for the FTC, and the judge denied the FTC’s request a day later – noting that the “emergency” need for relief (tax day) had passed; that Intuit had already halted some of the alleged violations; and that the administrative case could address any continuing violations. It is notable that the States have chosen to settle their case while the FTC continues its fight on its own, especially since the settlement could render some or all of the FTC’s case moot.  (And indeed, in a motion to the FTC filed just after the State settlement was announced, Intuit is seeking withdrawal of the FTC’s administrative action on both procedural and mootness grounds.)

The settlement requires that when advertising a product as free, Intuit disclose the existence of material limitations and that not all taxpayers qualify, “clearly and conspicuously, and in close proximity to the representation that the product is free. . .” Demonstrating some flexibility, the States include special provisions for space-constrained ads, which must disclose that eligibility requirements apply and provide a link to the full disclosure online. Video ads require an audible disclosure in addition to written, unless shorter than 8 seconds. However, the States have enjoined altogether the use of certain ads repeating the word free.

Intuit also must intentionally design its software to determine at the earliest point possible that a person doesn’t qualify to use a free product and make disclosures accordingly. The Attorneys General further required data portability, insuring data from any paid upgrade be transferable to the free product.

The $141 million payment will be placed into a Settlement Fund, which will be run by a Fund Administrator and governed by an Oversight Committee made up of FL, IL, NJ, NY, NC, PA, TN, TX, WA.  While the Settlement Fund will pay restitution to consumers, amounts for the cost of administration and for the attorneys’ fees and costs for the States will come out of that Fund.  And while there is an initial allocation schedule attached, it is there for “informational purposes only” since the actual amount flowing to each State and its consumers is ultimately still subject to determination by the Oversight Committee.

Importantly, some key takeaways from the settlement for companies to consider include:

  • Make sure “freemium” product advertising fully discloses offer limitations and eligibility requirements from the outset;
  • Avoid “dark patterns” that may dissuade customers from taking an available free option;
  • Don’t overuse the word free especially without accompanying disclosures in close proximity.

On Wednesday, we described draft legislation circulating in the Senate Commerce Committee that would have given the Federal Trade Commission almost unfettered authority to enjoin permanently any act, practice or method of competition that did not meet its approval.  All the Commission would need to do is show that a reasonable person had fair notice that the conduct “could” violate the FTC Act.

Senator Cantwell has now introduced the bill and it’s more one-sided today than it was in draft form.  The need to show fair notice of even a possible violation is gone.

S. 4145, the “Consumer Protection Remedies Act,” was introduced by Chair Cantwell last night, with co-sponsors Senators Klobuchar (D-MN), Warnock (D-GA), and Lujan (D-NM). If this bill becomes law, to stop a practice, the Commission would merely need to persuade a judge that “the public interest” is on its FTC’s side . That is effectively no standard at all.

At least defendants will have an opportunity to argue that the Commission cannot obtain money until it proves a violation of some law the FTC enforces. The bill says that restitution, disgorgement, and rescission or reformation of contracts are available only in suits with respect to a violation of a provision of law enforced by the Commission.”

The Cantwell bill no longer confines relief under Section 13(b) to violations that are occurring or about to occur. Any violation within the past ten years remains exposed to monetary recovery. This doubles or triples the period for which the Commission can seek money.

In short, S. 4145 gives the Commission virtually unlimited authority to enjoin methods of competition, marketing practices, privacy protections, and information-security practices. And it would expose a decade of revenues to the agency’s monetary demands. The “Consumer Protection Remedies Act” would not simply streamline the procedures in the FTC Act; it would expand the Commission’s powers, handcuff the courts, and leave American businesses wondering when their conduct might run afoul of three Commissioners’ interpretation of the public interest.

Expect some movement next week in advance of the Commerce Committee markup, with Senator Lee likely to offer an amendment in the nature of a substitute.  With 14 Democrats and 14 Republicans on the Committee, however, a party line vote would allow the Cantwell bill to advance.  But once it does, it likely loses traction.  Without 60 votes as a stand-alone on the Senate floor, Chair Cantwell would need to slip this into must-pass legislation for it to become law.

The one-year anniversary of the Supreme Court’s decision in AMG Capital Management, LLC v. FTC has renewed calls for Congressional action to expand and codify the Federal Trade Commission’s enforcement authority under Section 13(b) of the FTC Act. Last Thursday, we wrote here about the agency’s most recent open meeting, during which Commissioners heard from a key Senate staffer that Senate Commerce Committee Chair Maria Cantwell (D-WA) intended to introduce what she hoped would be a bipartisan fix. Yesterday, Chair Cantwell’s bill was made public, and its terms render any hope of bipartisan support a long-shot, at best, with little likelihood of garnering the Republican support needed to clear the chamber.

The bill’s release followed the May 2 release of a Senate Commerce Committee report entitled Restoring the Federal Trade Commission’s Authority to Protect Consumers and the Marketplace – an 80-page report, more than 50 pages of which purported to list dollar amounts received in each state due to “FTC cases resulting in significant refunds” (many of which were settlements never actually litigated under Section 13(b)). The report echoed much of what we heard from Commissioners last week – that AMG has created an enforcement void for the agency and no alternative enforcement approaches come close to 13(b)’s ability to protect consumers and provide monetary redress. The report couched the court’s decision as particularly damaging to the agency’s efforts to curtail “Big Tech and Pharma’s ability to harm consumers and fledgling businesses.” Continue Reading Senate Commerce Committee Chair Pushes One-Sided 13(b) Fix

In a major development, the States of Missouri, Montana, and Texas have announced their withdrawal from the National Association of Attorneys General (NAAG).  For several months, there have been increasing rumblings from certain states over questions and concerns about the organization, leading to this significant announcement.  The long term impact of this announcement, however, remains to be seen.

As we have previously reported, NAAG functions as an association that helps facilitate many bipartisan efforts throughout the AG community.  NAAG does not control or direct the joint priorities and enforcement efforts of those Attorneys General.  Last week, NAAG hosted the first annual Attorney General Symposium (ironically, in the Texas capital of Austin) which included an entire panel highlighting some of these past initiatives – from the tobacco master settlement agreement of the late 90s to the national opioid settlement finalized this year.  The AGs discussed some of the odd couples these efforts have created, including Texas Attorney General Ken Paxton and former California Attorney General (current Secretary of Health and Human Services) Xavier Becerra, who came together to help shepherd an allocation formula for distribution of opioid settlement funds.  As we have discussed, a departure from NAAG does not have to signal an end to these bipartisan efforts, but does raise a number of logistical questions that will have to be worked out.  For example, will these states still participate in “NAAG” sign-on letters?  Can they participate in a multistate case and be direct or indirect beneficiaries of a NAAG grant?  Will they be able to participate in NAAG or NAGTRI sponsored trainings and meetings?

This isn’t the first time that a State AG has left NAAG however – in April 2021 Alabama Attorney General Steve Marshall announced his departure from NAAG.  But since that time, Alabama has continued to participate in NAAG sign on letters and multistate settlements, including today’s announced multistate settlement with Intuit regarding its free tax preparation services.  (Missouri, Montana, and Texas all participated in that settlement as well).  Whether these three states follow a similar path remains to be seen, but businesses should not assume that any instability with membership in NAAG will change the important focus that State Attorneys General place on consumer protection issues.  If anything, the erosion of the tools used to help the AGs act in a coordinated way could lead to more individual state activity, which may subject businesses to multiple AG inquiries instead of having them coordinated through a single structure.  Our State AG team will keep you updated on these developments.

FTC Uses AMG Anniversary to Push for a Bipartisan 13(b) Legislative Fix in an Increasingly Partisan EnvironmentDuring the Federal Trade Commission’s April 28 open meeting, Commissioners utilized the one-year anniversary of the Supreme Court’s decision in AMG Capital Management, LLC v. FTC to highlight the implications of the ruling that gutted their enforcement authority under Section 13(b) of the FTC Act. Commissioners called yet again for a legislative fix and were encouraged by public remarks from a counsel to Senate Commerce Committee Chair Maria Cantwell (D-WA), who delivered an update from the chair that she “hope[d] to have a bipartisan solution soon” – whether that solution can get over the line remains far from certain.

Following a presentation from Bureau of Consumer Protection Acting Deputy Director Audrey Austin, the Commissioners opined on the loss of – in Chair Lina Kahn’s words – “the key engine of our law enforcement efforts for four decades” and the inability to adequately obtain monetary relief for consumers.

Chair Kahn and fellow Democratic Commissioner Rebecca Slaughter commended the agency’s alternative enforcement approaches over the past year in AMG’s wake. They highlighted the use of Section 19; new rulemakings to codify conduct that the courts had already determined was unfair or deceptive; additional administrative proceedings to “preserve a pathway” for monetary relief; warning letters to businesses and the threat of civil penalties; and coordination with State Attorneys General. Under those alternative enforcement pathways, however, Commissioner Slaughter said the agency’s “best outcomes are still justice diminished or delayed.”

While all four current Commissioners indicated support for legislation to clarify the agency’s enforcement authority under Section 13(b), comments from Republican Commissioner Christine Wilson reflect ongoing stakeholder concerns that appear to have stood in the way of Senate action following the House’s passage last summer of Representative Cárdenas’s (D-CA) Consumer Protection and Recovery Act on a nearly party-line vote (see more on the Cárdenas bill here).

Specifically, Commissioner Wilson stressed the need for statutory guardrails to address: (1) the absence of a statute of limitations; (2) the potential “unbounded” use of Section 13(b) to achieve disgorgement in antitrust cases; and (3) the application of Section 13(b) in consumer protection cases involving legitimate businesses selling legitimate products and services, albeit with deceptive claims. Another potential legislative flash point is the possible retroactive application of any new penalty authority. Today, Commissioner Slaughter noted that $1 billion in relief “could be preserved if action were taken now to restore 13(b) to all current and future cases.” While one can imagine a legislative framework that satisfies both sides, such a framework has not yet materialized.

Further, the agency’s internal politics could portend trouble for champions of an expeditious legislative solution. In a broad rebuke of Chair Kahn’s Federal Trade Commission, Commissioner Wilson warned that Congress may be wary to expand the FTC’s power given recent examples of the agency using its authority in a way that exceeds statutory boundaries or undermines Congressional intent. She urged her colleagues to “tread carefully” and noted the importance of demonstrating the agency will be “careful stewards” of any new enforcement authority bestowed upon it.

As we have written before, while there is bipartisan support for holding “scammers and fraudsters” accountable and providing for consumer redress, Congress’s sense of urgency to pass legislation clarifying the FTC’s authority under Section 13(b) seems to have waned as partisan tensions – both in Congress and the agency – have intensified.

Meanwhile, the Senate may vote as soon as next week on Alvaro Bedoya’s nomination to serve on the Federal Trade Commission. The confirmation vote had originally been expected this week, but was delayed due to the absence of two Democratic Senators. Perhaps reflective of those above-mentioned partisan tensions, Commissioner-designate Bedoya is expected to need the votes of all 50 Senate Democrats, in addition to the tie-breaking vote of Vice President Kamala Harris.

There’s a “request for investigation” pending at the FTC that some of our readers might have missed.  The April 12 complaint, filed by Georgetown Law professor Laura Moy on behalf of the Council on American-Islamic Relations, urges the FTC to conduct a wide-ranging investigation of the location data industry.

The complaint focuses in particular on alleged abuses harming the Muslim community, including the government’s purchase of location data from popular Muslim prayer apps to conduct “warrantless surveillance” on Muslim individuals.  According to the complaint, these practices have led to a “sense of constant surveillance” that has chilled Muslims’ practice of religion, freedom of assembly, and use of technology to communicate. The allegations have broader implications, too, as they describe the “unfettered” and “surreptitious” data collection across many contexts by multiple industry actors, including the operating systems, app and SDK developers, data brokers, and participants in digital advertising’s real time bidding (RTB) process.

As I write this blogpost, the complaint does not appear to have been posted on the FTC’s website.  Although the FTC seeks public comment on petitions for rulemaking, this complaint may not fall within that process since it chiefly seeks investigations, citing rulemaking as a “longer term” goal.  (Of course, stakeholders may want to consider providing input to the FTC anyway to assist in its consideration of the issues.)        Continue Reading Complaint Urges FTC to Investigate the Location Data Industry

Website accessibility lawsuits continue to be big business for plaintiffs’ attorneys. Every year since 2018, over 2,000 of such suits have been filed in federal courts, and many other suits have been threatened and settled outside of the public eye. Part of the problem is the lack of clear guidance in this area. Although settlements provide some insights about what standards companies should use, they don’t shed light on thornier issues, such as whether 100% compliance with those standards – something many experts think is not realistic – is required.

In 2010, the Department of Justice issued an Advance Notice of Proposed Rulemaking seeking comments on a variety of questions concerning the scope, applicability, and feasibility of website accessibility. The rulemaking efforts were delayed several times until 2017, when they were put on an “inactive list” by the Trump Administration. DOJ hasn’t publicly addressed this area in much detail since then, until last month, when they issued new guidance. Unfortunately, although the guidance states that website accessibility is an enforcement priority, it doesn’t provide much clarity for businesses.

Although there are no official regulations governing website accessibility, DOJ writes that “existing technical standards provide helpful guidance concerning how to ensure accessibility of website features.” Among other things, DOJ points to the Web Content Accessibility (or “WCAG”) Guidelines that are incorporated into most settlements in this area. No surprise there. DOJ also states while “businesses must comply with the ADA’s requirements,” they “have flexibility in how they comply,” and can “choose” how to ensure accessibility.  Unfortunately, DOJ does not elaborate on what that means.

Where does leave us? Essentially, the same place we were before. Most companies will continue to attempt to code their websites according to the WCAG Guidelines, without knowing how much compliance is enough, and plaintiffs’ attorneys will continue to threaten or file suits for even small errors. Although DOJ’s reference to “flexibility” in compliance may provide a glimmer of hope, without more elaboration from DOJ, companies will likely be left to fight that out in court. Moreover, DOJ continues to hold companies to a very high standard of compliance (WCAG 2.1 AA) in settlement agreements, such as that it entered into with CVS earlier this month.