For the first time, the FTC used the Opioid Addiction Recovery Fraud Prevention Act to go after the promoter of an addiction treatment network. The 2018 law allows the agency to seek civil penalties for deceptive practices related to addiction treatment, and the case sparked dueling public statements from FTC Chair Lina Khan and Commissioner Christine Wilson. Later in the week, the Commission held an open meeting and discussed endorsements and testimonials in advertising, education technology, and the Children’s Online Privacy Protection Act. Following the meeting, the FTC released the long-awaited draft revised Guides Concerning the Use of Endorsements and Testimonials in Advertising for comment. These stories and more after the jump.
Monday, May 16, 2022
Bureau of Competition: Intellectual Property
- FTC Chair Lina Khan and Commissioner Rebecca Kelly Slaughter filed a written submission on the public interest of the FTC with the International Trade Commission (“ITC”) in response to the ITC’s notice of request for submissions. In the submission, the FTC Chair and Commissioner wrote about their concern with standard essential patent (“SEP”) holders who license SEPs on fair, reasonable, and nondiscriminatory (“FRAND”) terms, but then seek exclusionary orders to ban products from the marketplace to gain leverage over existing or potential licensees. They urged the ITC to “consider the impact that issuing an exclusion order against a willing licensee implementing a standard would have on competition and consumers in the United Sates.” More specifically, the pair raised the potential for anticompetitive conduct when interoperability standards are implemented on an industry-wide basis.
FTC Internal Operations: Commissioners
- Alvaro Bedoya was sworn in as FTC Commissioner after the Senate confirmed his nomination on May 11, 2022. In announcing his swearing in, the FTC highlighted Commissioner Bedoya’s past experience in areas of privacy and technology. His term will expire on September 25, 2026.
Tuesday, May 17, 2022
Bureau of Consumer Protection: Opioid Addiction Recovery Fraud Prevention Act
- The Commission filed a proposed consent decree and a complaint against R360 LLC and owner Steven Doumar over allegations that the company misrepresented the evaluation and selection criteria for its addiction treatment center network. The case is the agency’s first enforcement action under the Opioid Addiction Recovery Fraud Prevention Act of 2018. This law authorizes the FTC to collect civil penalties for deceptive practices with respect to substance use disorder treatment services or products. The proposed order settling the complaint prohibits R360 and Doumar from misrepresenting any material fact about addiction treatment services and requires them to pay $3.8 million in civil penalties; these penalties are suspended, however, based on their inability to pay. In response, FTC Chair Lina Khan issued a statement commending the agency for fully exercising its legal authority and investigating individual liability. Commissioner Christine Wilson issued a concurring statement, however, and took issue with the eighteen-month delay from when the agency resolved the matter with the parties and when it announced of the settlement.
Wednesday, May 18, 2022
FTC Internal Operations: Testimony Before House Appropriations Subcommittee
- FTC Chair Lina Khan testified before the House Appropriations Subcommittee on Financial Services and General Government and urged the Subcommittee to increase funding and resources for the Commission. Chair Khan represented that “the FTC saved consumers an estimated $2.4 billion through its merger and nonmerger competition law enforcement actions and an estimated $1.5 billion through its consumer protection law enforcement actions.” She also detailed the Commission’s recent use of its Penalty Offense Authority and its first case involving a company’s failure to post negative customer reviews. Finally, Chair Khan hinted at future action to protect against “digital harms” and revisions to merger notification forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
Thursday, May 19, 2022
FTC Internal Operations: Open Commission Meeting
- The FTC held an open commission meeting and adopted a new policy statement on education technology and the Children’s Online Privacy Protection Act (“COPPA”). COPPA imposes certain requirements on websites that are directed to children under 13 or whose operators have actual knowledge they collect data online from children under 13. While COPPA is known primarily for its “notice and consent” provisions, the policy statement emphasizes those governing the use, retention, and collection of children’s data. It cautions that companies are strictly limited in how they can use the personal information they collect from children and advised companies that they should not retain children’s personal information longer than reasonably necessary to fulfill the purpose for which it was collected. Chair Lina Khan’s statement also warned that children’s data “should not be plugged into supposedly ‘anonymous’ or ‘aggregate’ audience models, and should not be extracted and used to develop new products.” Newly sworn-in Commissioner Alvaro Bedoya pushed back on the idea that tracking is necessary to make better apps for kids in his statement. He praised apps that “track people using hashed identifiers that cannot be used to track kids after they stop using a particular app.” Interestingly, he also remarked that he views “this statement as part of a systemic effort to use the tools we already have in our toolbox that go beyond notice and consent.” In her statement, Commissioner Rebecca Kelly Slaughter highlighted that the COPPA’s statutory provisions “do not apply exclusively to ed tech companies” and that their enforcement “can have important competition effects as well.” Although she voted in favor of the policy statement, Commissioner Christine Wilson offered oral remarks criticizing the Commission for offering such a statement while it was engaged in ongoing rulemaking on the same issues. She underscored, however, that the policy statement reiterates “already existing guidance.”
- FTC staff provided a presentation, and the Commission voted on the request for public comment on amendments to the guides concerning the use of endorsements and testimonials in advertising. The revised guides focus heavily on fake reviews, the suppression of negative reviews, and social media platform tools for “endorsers.” More broadly, the proposed revisions update the guides to address new issues such as advertising to children, ensuring that consumer reviews are non-deceptive, advertiser responsibility for older endorsements that remain on social media, disclosures on social media, expert endorsers, and more. As a result, these revisions represent significant changes and would modernize FTC enforcement to account for influencer advertising. The Commission voted 5-0 to submit the notice to the Federal Register. In his statement on the vote, Commissioner Alvaro Bedoya highlighted “young children’s unique vulnerability to advertising,” while Commissioner Rebecca Kelly Slaughter praised last year’s Notice of Penalty Offenses regarding fake and deceptive endorsements in her statement. Commissioner Christine Wilson’s oral remarks underscored how the Amendments “reflect new media and advertising trends.” Looking forward, the Commission announced that it will hold a virtual event on October 19, 2022 on “Protecting Kids from Stealth Advertising in Digital Media” to “bring together “researchers, child development and legal experts, consumer advocates, and industry professionals to examine the techniques being used to advertise to children online.”
For further information, please contact:
Emma Cunningham, Crowell & Moring