At this week’s National Association of Attorneys General Capital Forum, FTC Chair Lina Khan and CFPB Director Rohit Chopra addressed state AGs and their staff on a number of pressing issues, including antitrust, enforcement authority, privacy and other priorities. And most importantly to the state AG observers, both agency heads expressed the value of state
Since Lina Khan took the reins of the FTC, the agency has launched five new rulemakings under its Section 18 (“Mag-Moss”) authority – specifically, rules to combat government and business impersonation scams, deceptive earnings claims, “commercial surveillance,” deceptive endorsements, and “junk fees.” (I’m excluding here revisions to existing Mag-Moss rules, as well…
In a case that will likely resonate with many readers, the FTC’s recent settlement with Vonage describes in excruciating detail the obstacles and costs that Vonage allegedly imposed on consumers when they tried to cancel their phone service. In many ways, it’s a typical FTC case involving deception, unauthorized charges, and misuse of a “negative option” that makes it simple to sign up and almost impossible to cancel. However, the FTC’s characterization of the practices as “dark patterns,” coupled with some other features, make this case stand out. Indeed, any company with a “customer retention strategy” (which is apparently what this was) would be wise to pay attention.
The FTC’s Complaint
According to the FTC’s complaint, Vonage provides internet based phone service (known as Voice Over Internet Protocol or VOIP) to consumers and small businesses. Monthly charges range from $5-50 for individual customers and can be as high as thousands of dollars for small businesses. In many cases, Vonage signs up consumers using a negative option plan that requires them to cancel by certain date before being charged.
The complaint alleges that, between 2017 and 2022, Vonage provided several ways to sign up for its plans (including online and via toll free number) but made cancellation much more difficult through numerous hurdles. It also alleges that, in some cases, monthly fees continued after cancellation; consumers were charged (or threatened with) undisclosed early termination fees (ETFs); and Vonage provided only partial refunds or no refunds at all. The complaint says that this was all part of a “customer retention strategy” that Vonage pursued despite hundreds of consumer complaints, knowledge among employees, and an earlier settlement with 32 states over similar allegations.
According to the complaint, these practices violated the Restore Online Shoppers’ Confidence Act (ROSCA) (failure to disclose material terms, obtain informed consent before imposing charges, and provide a simple mechanism to stop recurring charges) and Section 5 (charging consumers without their express informed consent).
Continue Reading The FTC’s case against Vonage – Customer Service Nightmare as “Dark Patterns”
As we recently blogged here, the FTC’s review of the COPPA rule has been pending for over three years, prompting one group of Senators, in early October, to ask the agency to “Please Update the COPPA Rule Now.” The FTC has not yet responded to that request (at least not publicly) or made any official moves towards resuming its COPPA review. However, the agency is focusing on children’s privacy and safety in other ways, including by hosting a virtual event on October 19 on “Protecting Kids from Stealth Advertising in Digital Media.”
The FTC’s day-long event examined how advertising that is “blurred” with other content online (“stealth advertising”) affects children. Among other things, the event addressed concerns that some advertising in the digital space – such as the use of influencers on social media, product placement in the metaverse, or “advergames” – can be deceptive or unfair because children don’t know that the content is an ad and/or can’t recognize the ad’s impact.
The event focused in particular on: (1) children’s capacity at different ages to recognize advertising content and distinguish it from other content; (2) harms resulting from the inability of children to recognize advertising; (3) what measures can be taken to protect children from blurred advertising content; and (4) the need for, and efficacy of, disclosures as a solution for children of different ages, including the format, timing, placement, wording, and frequency of disclosures. The FTC has also sought public comment on these topics (until November 18).
The event dove deeply into these issues, with help from a range of legal, policy, behavioral, and communications experts. (See here for the agenda and list of panelists.) The discussion was interesting and substantive, and built on actions already undertaken in Europe and California to develop Age-Appropriate Codes governing child-directed content. However, the event left open the question of whether and how the FTC intends to address the issues discussed. Will it proceed via guidance or rulemaking? If rulemaking, does it plan to use COPPA, the pending Mag-Moss rulemaking on “commercial surveillance,” or some other regulatory vehicle?
All of these options present challenges: COPPA gives parents the tools to control the content that their children see, but generally doesn’t regulate the content itself. Mag-Moss is a long process, which the FTC has made especially complex with its sprawling ANPR. Finally, any rulemaking restricting kids’ advertising could run into the specific Mag-Moss provision (discussed here) limiting the FTC’s regulatory authority in this area. (On the other hand, protecting kids’ privacy and safety tends to be a bipartisan issue, which will assist the agency as it seeks to address these issues.)
Here’s more detail on what happened at the workshop:…
Continue Reading Blurred Lines: A Rundown on the FTC Workshop “Protecting Kids from Stealth Advertising in Digital Media”
In late September, we blogged about a lawsuit that the Chamber of Commerce and other business groups filed against the CFPB, challenging the CFPB’s update to its Supervision and Examinations Manual. As updated, the manual now states that discrimination is an “unfair” practice under the Dodd-Frank Act, and that the agency plans to scrutinize it…
The FTC has long used policy statements, public workshops, reports, and warning letters to influence the marketplace and communicate its thinking about key issues and aspects of its mission. Examples from my tenure at the FTC include workshops and reports on big data, data brokers, mobile payments, and the internet of things…
Amidst all of the recent news and developments about the privacy of kids and teens (including multiple Congressional hearings; Frances Haugen’s testimony; enactment of the UK’s and California’s Age Appropriate Design Codes; the Irish DPC’s GDPR decision against Instagram; numerous bills in Congress; and the FTC’s ongoing focus on kids’ privacy in policy statements, workshops, and its “commercial surveillance” rulemaking), the FTC still has a powerful tool that seems to be sitting on the back-burner: the Children’s Online Privacy Protection Act (COPPA) and its implementing rule.
But some members of Congress just wrote a letter to the FTC, asking it to make COPPA a priority.
Background on COPPA
As most of our readers know, COPPA protects the privacy of kids under 13, mostly by requiring kid-directed web sites or apps, or sites/apps that have actual knowledge they’re dealing with kids, to get parental permission before collecting, using, or sharing kids’ data. Enacted in 1998, COPPA is now nearly 25 years old, a dinosaur in today’s fast-moving world of privacy. However, using the APA rulemaking authority granted in COPPA, the FTC has amended its COPPA rule to ensure that it keeps pace with developments – for example, extending the rule to ad networks and plug-ins; adding geolocation, persistent identifiers, photos, and videos to the definition of “personal information”; and strengthening the rule’s requirements governing data security, retention, and deletion.
However, those updates to COPPA became final in 2013 – almost ten years ago – and the FTC hasn’t amended the rule since then. Although the FTC initiated a rule review in July 2019, that review is still pending more than three years later. According to Regulations.gov, the Commission received over 176,000 public comments in the rule review. That’s a lot of comments, but it surely can’t explain such a lengthy delay.
Continue Reading Congress to FTC: “Please Update the COPPA Rule Now”
On September 21, Rep. Gus Bilirakis, R-Fla., cited the Kelley Drye article “The Deletion of ‘Legitimate Business Activity’ from the FTC’s Strategic Plan” during a House Energy & Commerce Committee hearing before entering it into the record. From the transcript:
For years, the FTC has been tasked with the critical …
No, we’re not talking about sinister sewing guides, but rather practices or formats that may manipulate or mislead consumers into taking actions they would not otherwise take.
Last November, the FTC sought public comment on a draft strategic plan for 2022-2026. As we blogged here and discussed in a comment submitted to the FTC (one of only 21 submitted), a key change from prior strategic plans was deletion of the phrase “without unduly burdening legitimate business activity” from the FTC’s Mission Statement…