Legal Library: Cases and Proceedings

The Federal Trade Commission has taken enforcement action for the first time under its Health Breach Notification Rule against the telehealth and prescription drug discount provider GoodRx Holdings Inc., for failing to notify consumers and others of its unauthorized disclosures of consumers’ personal health information to Facebook, Google, and other companies.

In February 2020, the FTC filed a complaint in federal district court against ZyCal Bioceuticals, a company that manufactured and sold the ingredient Cyplexinol to trade customers for use in making pain relief products for joint ailments, such as arthritis. Zycal also marketed a line of Cyplexinol-based pain relief products to chiropractors and directly to consumers under the brand name Ostinol. The same complaint includes allegations against another company, Excellent Marketing Results, Inc. (EMR), which was one of ZyCal's trade customers. EMR marketed a Cyplexinol-based formulation called StimTein via infomercials and online, and claimed it was clinically proven to stimulate cells to grow bone tissue and cartilage. EMR and its president agreed to a settlement that resolves charges against them in the FTC’s complaint, and prohibits them from making such health-related product claims unless they are supported by competent and reliable scientific evidence. In September 2020, the FTC announced it was returning more than $110,000 to consumers who bought EMR’s StimTein.   In February 2023, the FTC announced a proposed order barring the ZyCal defendants from the deceptive conduct alleged in the complaint.

A group of auto dealerships in Arizona and New Mexico must cease business operations as part of a court-approved settlement resolving Federal Trade Commission charges that the dealerships deceived consumers and falsified information on vehicle financing applications.

In a case filed in 2018, the FTC alleged that Tate’s Auto Center of Winslow, Inc.; Tate’s Automotive, Inc.; Tate Ford-Lincoln-Mercury, Inc. (doing business as Tate’s Auto Center);  Tate’s Auto Center of Gallup, Inc.; and Richard Berry, an officer of the dealerships, falsified consumers’ income and down payment information on vehicle financing applications and misrepresented important financial terms in vehicle advertisements. The case continues against Berry and relief defendant Linda Tate.  

The Federal Trade Commission is sending payments totaling more than $415,000 to 3,508 consumers who financed a car or truck at a Tate’s Auto dealership after January 1, 2013, and later had the vehicle repossessed. Tate’s Auto, which operated dealerships in Arizona and New Mexico, allegedly deceived consumers about payment information and falsified information on consumers’ financing applications.

In May 2021, the FTC filed a complaint against Kushly Industries LLC and its CEO, Cody Alt, for allegedly marketing products containing cannabidiol (CBD) using unsubstantiated health and establishment claims. According to the complaint Kushly sold a variety of CBD products to the public through its website, kushly.com, and social media platforms from January 2019 to August 2020. The FTC order announced at the same time as the complaint banned the company and Alt from the alleged illegal conduct. The Commission approved the final order in July 2021. In August 2022, the FTC announced it was returning almost $21,000 to defrauded consumers.

In 2019, the operators of a sweepstakes scam that appeared to target seniors agreed to forfeit a record $30 million in cash and assets and will be permanently banned from the prize promotion business under a settlement with the Federal Trade Commission. In July 2022, the FTC returned almost $25 million to consumers worldwide who were defrauded by the scheme.

The Federal Trade Commission sued SPM Thermo-Shield, Inc., and its principals Peter J. Spiska, and George P. Spiska, alleging they make false or unsubstantiated R-value and energy savings claims about their architectural coatings products. In July 2020, the FTC sued four companies that sell paint products used to coat buildings and homes, alleging that they deceived consumers about their products’ insulation and energy-savings capabilities. In complaints filed in federal court, the FTC charged that the companies falsely overstated the R-value ratings of the coatings, making deceptive statements about heat flow and insulating power. The FTC announced a summary judgment ending the litigation in June 2022.

In June 2022, the FTC took action against California-based Gravity Defyer Medical Technology Corporation and its owner Alexander Elnekaveh, filing a complaint in federal district court to permanently stop their allegedly deceptive pain-relief claims for Gravity Defyer footwear. In its complaint the FTC alleged that Elnekaveh violated a 2001 order barring him from such allegedly deceptive advertising by making scientifically unsupported claims and using misleading consumer testimonials to sell Gravity Defyer products.

The Federal Trade Commission charged three individuals and nine businesses with bilking more than $125 million from thousands of consumers with a fraudulent business education program called MOBE (“My Online Business Education”). A federal court halted the scheme and froze the defendants’ assets at the FTC’s request. The FTC alleged that the defendants falsely claim that their business education program will enable people to start their own online businesses and earn substantial income. They claim to have a “proven” 21-step system for making substantial sums of money quickly and easily from internet marketing, which they promise to provide to those who join their program. Most people who buy into the program and pay for the expensive memberships are unable to recoup their costs, and many experience crippling losses or mounting debts, including some who have lost more than $20,000, the FTC alleged. The defendants agreed to pay more than $17 million as part of settlements with the Federal Trade Commission.

The Federal Trade Commission, jointly with the Department of Justice and the U.S. Food and Drug Administration, have sued a New York-based marketer of herbal tea, seeking to permanently block deceptive ads that claim its Earth Tea is clinically proven to treat, cure, and prevent COVID-19.

The Federal Trade Commission is returning more than $930,000 to consumers who bought tea products that Teami marketed and sold using allegedly deceptive health claims.

The FTC sued Teami, LLC and its owners in March 2020, charging that the company made bogus health claims and paid for endorsements from well-known social media influencers who did not adequately disclose that they were being paid to promote the defendant’s products. Teami claimed without reliable scientific evidence that their Teami 30 Day Detox Pack would help consumers lose weight, and that its other teas would fight cancer, clear clogged arteries, decrease migraines, treat and prevent flus, and treat colds.

In March 2021, a New York-based company and its CEO agreed to settle FTC charges that they sold hundreds of thousands of indoor TV antennas and signal amplifiers to consumers using deceptive claims that the products would let users cancel their cable service and still receive all of their favorite channels for free. Among other things, the proposed consent order settling the FTC’s complaint prohibits the defendants from making claims about: 1) any product’s rating, ranking or superiority to other products; 2) the channels users will receive; or 3) any material aspect of a product’s performance, efficacy, or central characteristics, unless the claims are true and substantiated.

The Department of Justice on behalf of the Federal Trade Commission sued MyLife.com, Inc. and its CEO Jeffrey Tinsley over allegations they deceived consumers with “teaser background reports” that often falsely claimed to include information about arrest, criminal, and sex offender records, and also engaged in misleading billing and marketing practices.

Amazon will pay more than $61.7 million to settle Federal Trade Commission charges that it failed to pay Amazon Flex drivers the full amount of tips they received from Amazon customers over a two and a half year period. The FTC’s complaint alleges that the company stopped its behavior only after becoming aware of the FTC’s investigation in 2019.

The $61.7 million represents the full amount that Amazon allegedly withheld from drivers and will be used by the FTC to compensate drivers. The FTC announced approval of the final order in June 2021.

The operators of the MoviePass subscription service have agreed to settle Federal Trade Commission allegations they took steps to block subscribers from using the service as advertised, while also failing to secure subscribers’ personal data.The operators of the MoviePass subscription service have agreed to settle Federal Trade Commission allegations they took steps to block subscribers from using the service as advertised, while also failing to secure subscribers’ personal data.