This week, the Commission issued more than 30,000 checks, totaling more than $11 million, to consumers and small businesses for cases settled pre-AMG. The FTC also issued a Notice of Proposed Rule Making for the Motor Vehicle Dealers Trade Regulation Rule that could have a significant impact on car marketing and sales tactics. The Commission also finalized orders against a mattress and bedding retailer making “Made in USA” claims and an online retailer of customizable goods for consumer data and privacy concerns. These stories and more after the jump.
Tuesday, June 21, 2022
FTC Bureau of Consumer Protection: Energy Savings, Advertising and Marketing
- The FTC announced that the U.S. District Court for the Middle District of Florida ordered SPM Thermo-Shield, Inc. to permanently halt deceptive energy-efficiency claims related to wall coating products’ energy-saving capabilities. According to the complaint against SPM Thermo-Shield, the company violated Section 5(a) of the FTC Act by falsely claiming that their Thermo-Shield Roof Coat, Thermo-Shield Exterior Wall Coat, and Thermo-Shield Interior Wall Coat have R-values (a measure of a product’s resistance to heat flow) of R-22 or R-21 and provide significant energy savings for consumers. The court found that even though SPM Thermo-Shield and its officers admitted that the R-value claims the FTC challenged were false, and in response removed them from their marketing materials, the claims reappeared after the lawsuit was filed. SPM Thermo-Shield is now permanently prohibited from the following: (1) misrepresenting the R-value of any architectural coating product; (2) making unsubstantiated claims that any architectural coating product is equivalent to, or substantially similar to, the R-value of any other product or system or provide the equivalent of adding insulation with a specific R-value; and (3) claiming that any architectural coating product will provide energy savings without disclosing that such savings vary according to several factors, such as location, climate, building type, and level of construction.
FTC Bureau of Consumer Protection: Consumer Reimbursements
- The FTC issued more than 30,000 checks totaling more than $11 million to consumers and small businesses that were harmed in recent and unrelated suits against Yellowstone Capital LLC and Student Debt Doctor in 2020 and 2017, respectively. The 2018 final order against Student Debt Doctor and the 2021 final order against Yellowstone Capital LLC outline the terms of the monetary relief, which preceded the FTC Supreme Court’s decision in AMG Capital Management LLC v. FTC.
FTC Bureau of Consumer Protection: Consumer Goods, Advertising and Marketing
- The FTC finalized an order against Resident Home LLC, a mattress and bedding retailer, and its owner resolving allegations that it violated the FTC Act and the Made in USA Labeling Rule by making unsupported advertising claims that their imported DreamCloud mattresses were made from 100% US-made materials. According to the complaint, the company’s promotional materials claimed that the mattresses were “proudly made with 100 percent USA-made premium quality materials” when the mattresses were finished overseas, and in some cases, wholly imported or used significant imported materials. Pursuant to the final order, Defendants are required to pay $753,000 to the FTC and are prohibited from making several claims that deceive or harm customers. Resident Home must show the following when making unqualified U.S.-origin claims: (1) that the product’s final assembly, final processing, and all significant processing takes place in the United States; and (2) that all or virtually all ingredients or components of the product are made and sourced in the United States. The order requires that Resident Home’s qualified Made in USA claims include a clear disclosure about the extent to which the product contains foreign parts, ingredients, components, or processing.
Thursday, June 23, 2022
FTC Bureau of Consumer Protection: Automobiles, Advertising and Marketing
- The FTC has proposed a new rule, the Motor Vehicle Dealers Trade Regulation Rule, to ban “junk fees” (excessive fees charged by financial institutions) and bait-and-switch advertising tactics. This is the first time that the FTC is using authority given to it by Congress through the Dodd-Frank Act, which authorizes the FTC to prescribe rules governing motor vehicle dealers, and to do so pursuant to the FTC Act and the Administrative Procedure Act. The proposed Rule intends to address some concerns raised in the FTC’s 2017 study, summarized in a 2020 Staff Report. The study found that add-ons were often the greatest area of confusion for consumers purchasing cars. The proposed Rule would take the following measures: (1) prohibit motor vehicle dealers from making certain misrepresentations in the course of selling, leasing, or arranging financing for motor vehicles; (2) require accurate pricing disclosures in dealers’ advertising and sales discussions; (3) require dealers to obtain consumers’ express, informed consent for charges; (4) prohibit the sale of any add-on product or service that confers no benefit to the consumer; and (5) require dealers to keep records of advertisements and customer transactions. The notice’s preliminary regulatory analysis estimated that the net economic benefit of the rule would be more than $29 billion over ten years. Chair Lina M. Khan, Commissioner Noah Joshua Phillips, Commissioner Rebecca Kelly Slaughter, and Commissioner Alvaro M. Bedoya issued a joint statement that noted the importance of this rule given the Supreme Court’s decision in AMG, which held that the FTC cannot use Section 13(b) of the FTC Act to make consumers who are harmed by deception or unfair practices financially whole. Commissioner Wilson issued a dissenting statement, which noted that the proposed rulemaking tends to create market distortions that stifle innovation, increase costs and prices, and ultimately harm consumers.
Friday, June 24, 2022
FTC Bureau of Consumer Protection: Privacy and Security
- The FTC finalized an order against CafePress, an online retailer of customizable goods, resolving allegations that it failed to properly secure its consumers’ sensitive personal data and covered up a major data breach. The FTC’s complaint alleged that CafePress engaged in the following practices: (1) stored Social Security numbers and password reset answers in clear, readable text; (2) retained certain sensitive data longer than was necessary; (3) failed to apply readily available protections against well-known threats, and adequately respond to security incidents; and (4) covered up a major data breach resulting from its shoddy security practices. The finalized order requires the defendants to pay $500,000 in redress to victims of the data breach. In addition, defendants are required to implement a comprehensive information security program that, among other things, (1) replaces inadequate authentication measures with multifactor authentication methods; (2) minimizes the amount of data they collect and retain; (3) encrypts Social Security numbers; and (4) has a third party assess their information security programs and provide the Commission with a redacted copy of that assessment suitable for public disclosure.
For further information, please contact:
Tiffany Aguiar, Crowell & Moring
taguiar@crowell.com
