Federal Trade Commission (FTC)

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By now, most of our readers have likely heard about the FTC’s proposed rule to ban noncompete clauses in employment contracts, including from Kelley Drye’s other posts on the topic discussing the sheer breadth of the proposal and the potential implications for employers.  In this post, we zero in on an issue that merits a lot more attention than it’s getting – namely, the serious legal and practical questions that the FTC’s proposal raises.  

Brief recap of how we got here and what the rule would require

This is the first of many rulemakings that the FTC has said it will launch based on its supposed authority to issue rules banning “unfair methods of competition” (“UMCs”) under the FTC Act. Notably, starting with a statement of regulatory priorities submitted to OMB in December 2021, the FTC has said repeatedly that it may launch multiple competition rulemakings based on this authority (as well as multiple consumer protection rulemakings based on its Magnuson-Moss authority, which it has done). More recently, the FTC issued a policy statement taking an expansive view of what’s an UMC, so the scope of the FTC’s intended reach here could be very broad indeed.   …

Continue Reading The FTC’s Proposal to Ban Noncompetes is on Shaky Legal Ground

The Federal Trade Commission’s (“FTC”) proposed rule banning the use of non-competes with employees and workers could regulate nearly every employer in the nation. If a final rule emerges from this proposal it could potentially prohibit non-disclosure, non-solicitation, and non-recruitment agreements and functional non-compete clauses. How can individual firms and industry groups alike weigh in on one of…

On Friday, the FTC announced what would ordinarily be an unremarkable enforcement action against a company for unsubstantiated earnings claims.  The FTC alleges that WealthPress, an investment advice company purporting to offer training from experts on trading strategies, made a series of unsubstantiated earnings claims such as “make $24,840 or more every single week,” “track…

We periodically stumble across older FTC investigations that have new relevance, and post about them as reminders. That happened recently as we get more questions about the use of recycled content and the desire to tout U.S.-based manufacturing. Although the FTC’s Enforcement Policy Statement and regulation regarding Made in USA claims do not mention how…

Last week, the Federal Trade Commission revealed what it meant when it vowed to be more than an antitrust and consumer protection agency. It announced a proposal to regulate virtually every labor and service relationship in the United States and make it more lucrative for people to quit.

The new rule is predicted to boost wages and salaries for millions of Americans at every income level, with CEOs getting some of the largest raises. According to the FTC’s analysis, the rule is likely to reduce on-the-job training, shorten job tenure, and generate more resignations. It might also spur litigation if employees spill trade secrets in their new posts.

In measures both simple and sweeping, the rule would ban certain terms of service and regulate others. Categorically banned would be non-compete clauses (or NCCs) in agreements between companies and workers or contractors. Any agreement that prevents a person from quitting a job and working for a competitor or starting a competing business would be illegal, no matter how important it might be to protect trade secrets and competitive strategies of the employer.

Potentially prohibited would be non-disclosure, non-solicitation, and non-recruitment agreements. These would be deemed functional NCCs if they effectively preclude someone from quitting a job and joining a competitor. Agreements requiring workers to pay employers for training would also be deemed functional NCCs if the payments not reasonably related to the cost of the training prevent workers from quitting.…

Continue Reading FTC Proposes to Regulate Virtually Every Labor Relationship in the United States

Just in time for the holidays, the FTC has released two companion settlements resolving allegations that Epic Games (maker of the popular video game Fortnite) violated the Children’s Online Protection Act (COPPA) and the FTC Act, with Epic to pay $520 million in penalties and consumer redress. The cases build on existing FTC law and precedent but add new dimensions that should interest a wide array of companies subject to FTC jurisdiction.    

Notably, the first case alleges COPPA violations (compromising the privacy and safety of users under 13) but adds allegations that Epic violated teens’ privacy and safety, too. And the second case alleges unauthorized in-app purchases – not just by kids, which was the focus of earlier FTC cases, but by users of all ages. Both cases rely on unfairness theories in extending their reach. Both incorporate the (now ever-present) concept of dark patterns (generally defined as practices that subvert or impair user choice). And both got a 4-0 Commission vote, with a strong concurrence from Republican Commissioner Wilson explaining her support for the FTC’s use of unfairness here. Neither case names any individuals.  

The privacy case

The FTC’s privacy case alleges that, for over two years following Fortnite’s launch in 2017, Epic allowed kids to register with no parental involvement, and for kids and teens to play the game with features enabling them to communicate in real time with anyone on the platform. According to the FTC, these practices subjected kids and teens to bullying, harassment, threats, and “toxic” content, including “predators blackmailing extorting, or coercing children and teens…into sharing explicit image or meeting offline for sexual activity.” Further, says the FTC, Epic knew about these problems, resisted fixing them and, when it finally took action, added controls that were hard to find and use, and failed to cure the violations.     …

Continue Reading Two Epic Cases from the FTC: Spotlight on COPPA, Unfairness, Teens, Dark Patterns, In-App Purchases, Cancellations, and More

Yesterday, the FTC’s Bureau of Consumer Protection released its Health Products Compliance Guidance—a sweeping overhaul of the 1998 Guidance, Dietary Supplements: An Advertising Guide for Industry.  Unlike the recently announced effort to review its Green Guides, the FTC did not seek public comment prior to issuing this update. 

According to an FTC blog post that accompanied its release, the new Guidance purports to “correct misunderstandings” and “urban myths” that have circulated about FTC substantiation standards.  In actuality, however, the new Guidance represents a recitation of some of the positions the agency has taken in health-related enforcement matters over the last decade, continuing a stark departure from the prior “flexible” approach to substantiation set forth in the 1998 Guidance.

While FTC guidance does not have the force and effect of law, if a person or company fails to comply with a guide, the Commission might bring an enforcement action alleging an unfair or deceptive practice in violation of the FTC Act.  This makes the new Guidance a must-read for any company operating in the food, supplement, personal care, health equipment or app, or related industries. 

While there is quite a bit of material to digest in this new Guidance, including a new definition of what constitutes a clear and conspicuous disclosure and an entirely new section addressing advertisers’ mischaracterization of FDA approval, here are two main takeaways: 

First, the 2022 Guidance encompasses a far wider industry scope than its predecessor.  While the 1998 Guidance was, by title and content, focused on dietary supplement products, the 2022 Guidance purports to guide advertising practices for “any health-related product,” including dietary supplements, foods, over-the-counter (OTC) drugs, homeopathic products, devices, health equipment, diagnostic tests, and health-related apps.” …

Continue Reading Misguided:  The FTC Attempts to Redefine the Law with its Health Products Compliance Guidance

Earlier this month, we reported that the AGs (including the DC Attorney General’s Office) are paying close attention to delivery and service fees. Sure enough, the DC AG’s office filed yet another lawsuit related to delivery fees on December 7.

The District alleges that Amazon’s Flex tipping practices deceived customers from 2016-2019, stopping only…