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National retailers must pay $5.5 million to resolve deceptive product representation
On May 10, the DOJ announced that two national retailers agreed to pay a $2.5 million and a $3 million civil penalty (see here and here) to resolve allegations that they engaged in false labeling and marketing tactics by presenting rayon textile products as bamboo. As previously covered by InfoBytes, the DOJ on behalf of the FTC, filed complaints (see here and here) against the defendants, which alleged that since at least 2015, the companies 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. In addition to paying the civil money penalties, the defendants are prohibited from making deceptive claims, including false and/or unsubstantiated claims, relating to bamboo fiber products, and are prohibited from engaging in future violations of the FTC Act, Textile Act and Textile Rules.
FTC settles with retailers over deceptive product representation
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.
FTC says misleading online endorsements may result in fines
On October 13, the FTC issued a warning to more than 700 companies, including top advertisers, leading retailers, top consumer product companies, and major advertising agencies. The warning stated that the companies may face fines over misleading online endorsements. Citing the “rise of social media,” which has “blurred the line between authentic content and advertising,” the FTC used its Penalty Offense Authority to place companies on notice that they could face significant civil penalties of up to $43,792 per violation should a company “engage[] in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.” The notice outlines several practices determined by the FTC to be unfair or deceptive in previous administrative cases, such as: “falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.” Additional FTC resources are available to help companies follow the law when advertising products and services.
As previously covered by InfoBytes, earlier this month the FTC sent a similar notice to for-profit higher education institutions under the Penalty Offense Authority, advising against making false promises about their graduates’ job and earnings prospects.
FTC resurrects authority to penalize for-profit education institutions
On October 6, the FTC unanimously resurrected the Penalty Offense Authority under Section 5 of the FTC Act to deter for-profit higher education institutions from engaging in certain unlawful practices. The Commission sent notices to 70 of the nation’s largest for-profit institutions to inform them that the FTC is “cracking down on any false promises they make about their graduates’ job and earnings prospects and other outcomes and will hit violators with significant financial penalties.” The notice outlines several practices previously found to be unfair or deceptive that could lead to civil penalties of up to $43,792 per violation and puts institutions on alert that they could incur significant sanctions should they engage in certain unlawful practices. Commissioner Rohit Chopra, who was recently confirmed as Director of the CFPB, issued a statement commending the initiative, noting that “[u]nder the FTC’s Penalty Offense Authority, the Commission and the Attorney General can seek substantial civil penalties against companies that engage in practices where they had knowledge that the practices were previously determined by a prior Commission order to be illegal.” This is a particularly important tool, Chopra stressed, given the U.S. Supreme Court’s decision in AMG Capital Management, LLC v. FTC, which unanimously held that Section 13(b) of the FTC Act “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement” (covered by InfoBytes here).