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Financial Services Law Insights and Observations

FTC settles with retailers over deceptive product representation

Federal Issues FTC Enforcement UDAP Deceptive FTC Act Penalty Offense Authority

Federal Issues

On April 8, the FTC used its Penalty Offense Authority against two national retailers for allegedly engaging in false labeling and marketing tactics by presenting rayon textile products as bamboo. According to the complaints (see here and here), which were filed by the DOJ on behalf of the FTC, since at least 2015, the companies allegedly made false or unsubstantiated representations in violation of the FTC Act by improperly labeling and marketing textile fiber products as “made of bamboo” in both product titles and descriptions. The companies also, among other things, falsely marketed some of the “bamboo-derived” products as providing general environment benefits, such as being produced “free of harmful chemicals, using clean, non-toxic materials,” also in violation of the FTC Act. Additionally, in connection with the advertising of textile fiber products containing rayon, the companies allegedly made representations regarding the products’ fiber content without disclosing the full fiber content, in violation of the Textile Act and Textile Rules.

According to the proposed settlements (see here and here), the companies are, among other things: (i) prohibited from making deceptive claims, including false and/or unsubstantiated claims, relating to bamboo fiber products; (ii) prohibited from future violations of the FTC Act and Textile Act and Textile Rules; and (iii) ordered to pay $5.5 million total in penalties.

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