MARCH 2020
Consumer Protection and Privacy
The FTC and U.S. Food and Drug Administration (FDA) have sent warning letters to seven companies allegedly selling unapproved products that may violate federal law by making deceptive or scientifically unsupported claims about their ability to treat coronavirus (COVID-19). The warning letters are the first issued by the agencies alleging unapproved and/or unsupported claims that products can treat or prevent coronavirus. The agencies sent the letters to the following companies: 1) Vital Silver, 2) Quinessence Aromatherapy Ltd., 3) N-ergetics, 4) GuruNanda, LLC, 5) Vivify Holistic Clinic, 6) Herbal Amy LLC, and 7) The Jim Bakker Show. The recipients are companies that advertise products—including teas, essential oils, and colloidal silver—as able to treat or prevent coronavirus. According to the FDA, however, there are no approved vaccines, drugs, or investigational products currently available to treat or prevent the virus. For consumer guidance regarding coronavirus, click here and here.
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A marketer of “detox” teas and skincare products has agreed to settle FTC charges that it promoted its products using deceptive health claims and endorsements by well-known social media influencers who did not adequately disclose that they were being paid to promote its products. The FTC’s complaint alleges that Teami, LLC, and its owners, claimed without reliable scientific evidence that their Teami 30 Day Detox Pack would help consumers lose weight, and that its other teas fight cancer, clear clogged arteries, decrease migraines, treat and prevent flus, and treat colds. The complaint also highlights promotional Instagram posts by well-known social media influencers Cardi B, Katya Elise Henry, Brittany Renner, Adrienne Bailon, Princess Mae, Jordin Sparks, Alexa PenaVega, Leyla Milani-Khoshbin, Jenicka Lopez, and Darnell Nicole. Followers who read those posts could not see a disclosure that the endorsements were paid-for unless they clicked the “more” option.
In addition to requiring disclosures and ordering the defendants to return $1 million to consumers who were harmed, the Commission issued a statement underscoring its “commitment to battling digital misinformation.” It stated: “Across the board, the Commission is committed to seeking strong remedies against advertisers that deceive consumers because deceptive or inaccurate information online prevents consumers from making informed purchasing decisions and creates an uneven playing field for those that follow the rules.”
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A federal court has granted the FTC’s request to temporarily halt the alleged illegal practices of Online Trading Academy (OTA). The FTC’s complaint against OTA companies and three individual defendants alleges that the defendants have used false or unfounded earnings and related claims to sell investment “training programs” costing as much as $50,000. The company’s claims are often targeted at older consumers and consumers looking towards retirement. According to the FTC, OTA has collected more than $370 million from consumers nationwide within the last six years, bilking many consumers of their savings. The complaint also alleges that OTA has required consumers who have gotten refunds from OTA to sign a form contract that limits their ability to speak to law enforcement agencies or post negative comments about OTA “on any blog, internet chat room, website, including all forms of social media” in violation of the Consumer Review Fairness Act. For additional details, click the headline above or this link to an FTC blog post.
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Competition
The FTC filed an action to block the proposed merger of Jefferson Health and Albert Einstein Healthcare Network, two leading providers of inpatient general acute care hospital services and inpatient acute rehabilitation services in two counties in Pennsylvania. According to the complaint, Jefferson and Einstein have a history of competing against each other to improve quality and service, including by upgrading medical facilities and investing in new technologies. The proposed merger would eliminate the robust competition between Jefferson and Einstein for inclusion in health insurance companies’ hospital networks to the detriment of patients. The FTC action was filed jointly with the Pennsylvania Attorney General.
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The FTC filed an administrative complaint challenging a proposed joint venture between Peabody Energy Corporation and Arch Coal. The transaction would combine the firms’ coal mining operations in the Southern Powder River Basin, located in northeastern Wyoming. The complaint alleges that the transaction would eliminate competition between Peabody and Arch Coal, which are the two major competitors in the market for thermal coal in the Southern Powder River Basin and the two largest coal-mining companies in the United States.
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Rent-to-own (RTO) operators Aaron’s Inc., Buddy’s Newco, LLC, and Rent-A-Center, Inc. agreed to settle FTC charges that they negotiated and executed reciprocal purchase agreements that swapped customer contracts from RTO stores in various local markets. These reciprocal agreements likely led to store closures that may not have occurred otherwise, resulting in reduced competition for quality and service in the remaining stores and increased travel time and costs for customers who must travel to the next-closest location to make regular payment in person, according to the complaints. The FTC’s consent agreements prohibit the three RTO companies and their franchisees from entering into any reciprocal purchase agreement or inviting others to do so, and from enforcing non-compete clauses still in effect from past reciprocal purchase agreements.
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In Other News
The FTC released its annual privacy and security update for 2019, highlighting a record year for enforcement actions aimed at protecting consumer privacy and data security. Of note, the Commission levied a $5 billion penalty—the largest consumer privacy penalty ever—against Facebook for violating its 2012 FTC privacy order and imposed significant new restrictions on the social network’s business operations. The FTC also obtained a record $170 million penalty against YouTube and Google for alleged violations of the Children’s Online Privacy Protection Act (COPPA). On the data security front, the FTC—along with 50 states and territories and the Consumer Financial Protection Bureau—announced a global settlement totaling as much as $700 million with Equifax related to a 2017 data breach that affected approximately 147 million consumers. On the international front, the agency worked with its data protection and privacy counterparts, including collaborating with the UK’s Information Commissioner’s Office in actions against Cambridge Analytica and related defendants. The FTC also enforced the EU-U.S. Privacy Shield framework by bringing 13 cases in 2019 against companies that allegedly made false promises related to the Privacy Shield.
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Approximately $153 million is being mailed to 109,000 consumers in the first distribution of refunds resulting from the law enforcement actions brought against Western Union by the FTC, the U.S. Department of Justice, and the U.S. Postal Inspection Service. The affected consumers are receiving compensation for 100 percent of their losses. The company’s settlement with the FTC required Western Union to pay $586 million in monetary relief. This distribution is the first of multiple payments over the coming months to consumers who lost money due to Western Union’s actions. The FTC’s complaint against Western Union alleged that for many years, Western Union was aware that fraudsters around the world used the company’s money transfer system to bilk consumers in multiple jurisdictions, and that some Western Union agents were complicit in the frauds. The FTC’s complaint alleged that Western Union failed to put in place effective anti-fraud policies and procedures and to act promptly against problem agents.
New FTC data from the agency’s Consumer Sentinel Network show that consumers reported losing $201 million to romance scams in 2019—up nearly 40% since 2018. Romance scammers prey on consumers who are looking for love, converting what feels like a budding relationship into an ask for money to help the scammer get out of some manufactured crisis. The stories and feelings can be compelling, and the losses can be huge. In 2019, more than 25,000 consumers filed a report with the FTC about romance scams, and over the past two years total reported losses to romance scams were higher than to any other scam reported to the FTC. A new blog post from the FTC has more information.
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The FTC and the Food and Drug Administration co-sponsored a public workshop on promoting competition in biologics markets. Panelists discussed the agencies’ efforts to support competition between biosimilars and reference biologics, discouraging false or misleading statements about biosimilars’ safety and efficacy, and deterring anticompetitive behaviors in the biologics marketplace. Last month, the FTC and FDA signed a joint statement promoting competition in markets for biologics. The FTC will post a webcast here shortly.
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