Richard B. Newman

2026-01-292026-01-29

Eleventh Circuit Vacates TCPA One-to-One Consent Rule Immediately Following FCC Postponing the Effective Date

On the eve prior to its effective date, the FCC’s One-to-One Consent Rule which sought to redefine the meaning of “prior express written consent” under the Telephone Consumer Protection Act, was postponed for one year by order of the FCC’s Consumer and Government Affairs Bureau. Just minutes thereafter, the rule was struck down by the U.S. Court of Appeals for the Eleventh Circuit.

Background

The Telephone Consumer Protection Act (TCPA) , in part, requires callers to possess “prior express consent” when making non-emergency telephone calls to cell phones using an automatic telephone dialing system, or artificial or prerecorded voice; and telephone calls to residential telephone lines using an artificial or prerecorded voice (with limited exceptions).

In 2012, the Federal Communications Commission established that the foregoing calls (including SMS text messages) for marketing purposes must have “prior express written consent,” defined as “an agreement, in writing, bearing the signature of the person called that clearly authorizes the seller to deliver or cause to be delivered to the person called advertisements or telemarketing messages using an automatic telephone dialing system or an artificial or prerecorded voice, and the telephone number to which the signatory authorizes such advertisements or telemarketing messages to be delivered.”

The FCC Consumer and Government Affairs Bureau Postpones Effective Date of the TCPA One-to-One Consent Rule

On January 24, 2025, the FCC announced that it has postponed the effective date of the one-to-one consent rule. “By this Order, we postpone the effective date for revisions to section 64.1200(f)(9) of the Commission’s rules, 47 CFR § 64.1200(f)(9), by 12 months, to January 26, 2026, or until the date specified in a Public Notice following a decision from the court reviewing a challenge to the new rule on the petition filed by the Insurance Marketing Coalition (IMC), whichever is sooner.”

The announcement also states, in pertinent part, that “we find that justice requires postponement of the effective date pending judicial review of the adopted rule.”

As stated by the Acting Chief, Consumer and Governmental Affairs Bureau, “[t]he previous requirements for prior express written consent in 47 CFR § 64.1200(f)(9) under the Telephone Consumer Protection Act (TCPA) will meanwhile remain in effect. We will provide notice of the new effective date, if any, through publication of a Public Notice in the Federal Register.”

The Second Text Blocking Report and Order revised section 64.1200(f)(9) of the Commission’s rules.

Second Text Blocking Report and Order, 38 FCC Rcd at 12258-69, paras. 30-53. The Second Text Blocking Report and Order adopted several additional provisions, that are not postponed. Specifically, the FCC required terminating mobile wireless providers to block text messages from a particular number following notification from the Commission unless their investigation determines that the identified text messages are not illegal; the Commission codified that the National DNC Registry’s protections apply to text messages; and the Commission encouraged providers to make email-to-text a service that consumers proactively opt into.

The Federal Communications Commission published the revised 47 CFR § 64.1200(f)(9) in the Federal Register on January 26, 2024 (Targeting and Eliminating Unlawful Text Messages, Implementation of the Telephone Consumer Protection Act of 1991, Advanced Methods To Target and Eliminate Unlawful Robocalls, 89 Fed. Reg. 5098 (Jan. 26, 2024)), with an effective date of January 27, 2025 (Effective Date for One-To-One Consent Rule Set for January 27, 2025, CG Docket Nos. 02-278, 21-402, 17-59, Public Notice, DA 24-1154 (CGB Nov. 19, 2024)).

IMC filed a petition for review of the revised section 64.1200(f)(9) in the Second Text Blocking Report and Order in the Eleventh Circuit on January 26, 2024 (Insurance Marketing Coalition v. FCC, No. 24-10277 (11th Cir.), filed Jan. 26, 2024. IMC also petitioned the Commission for stay of this revision pending judicial review. Insurance Marketing Coalition, Ltd, Petition for Partial Stay Pending Judicial Review, CG Docket Nos. 02-278, 21-402, 17-59 (Mar. 21, 2024) (IMC Petition for Stay). The Commission did not act on that petition. IMC subsequently filed a petition in the Eleventh Circuit for a judicial stay, which the Commission opposed and the court denied. See Insurance Marketing Coalition, Ltd. v. FCC, No. 24-10277 (11th Cir. May 30, 2024) (denying stay)).

The court heard oral arguments on December 18, 2024, and its review in this matter remains pending.

“We find that justice requires postponing the effective date of the new rule pending judicial review. We take this action sua sponte under section 705 of Title 5, which provides: “When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review.”

Several commenters expressed serious concerns about their ability to comply with the revised prior express consent rule by January 27, 2025.

Since the adoption of the Second Text Blocking Report and Order, several submissions have asked the Commission to revise or postpone the rule and have made a clear showing of the rule’s compliance burden. See, e.g., Letter from attorney for LendingTree to Secretary, FCC (Dec. 6, 2024) (requesting a revision to the new rule to permit “curated comparison shopping”); Letter from attorney for IMC to Secretary, FCC (Dec. 3, 2024) (stating that there would be adverse consequences from the Commission’s “one-to-one” and “logically and topically associated” consent requirements on small businesses); Letter from attorney for REACH to Secretary, FCC (Oct. 21, 2024) (requesting that the Commission change the phrase “one identified seller” to “one identified seller, entity, or brand” to alleviate many of the unintended consequences stemming from the current language of the one-to-one rule); Letter from attorney for QuinStreet to Secretary, FCC (Sept.13, 2024) (requesting that the Commission adopt LendingTree’s proposal for a narrow exception to the one-to-one consent rule for “curated comparison-shopping platforms”); Letter from attorney for LendingTree to Secretary, FCC (Jul. 12, 2024) (“small businesses will suffer a loss when compared to nationwide, name brand providers”); IMC Petition for Stay at 20 (“Absent a stay, IMC and its members will suffer irreparable harm from the Order, including damage to their business operations, significant compliance costs, and chilling of their speech.”).

The submissions the FCC received from commenters since adopting the Second Text Blocking Report and Order “now persuade us that allowing the rule to take effect on January 27, 2025, likely will cause significant burdens for multiple parties at a time when—following oral argument before the Eleventh Circuit on December 18, 2024—judicial review of the rule is likely nearing completion.”

Given the advanced stage of the pending judicial proceeding, the FCC announced that it is in the interest of justice to provide a limited postponement of the effective date of the rule to avoid imposing new burdens on parties while the court is adjudicating challenges to the rule and to avoid subjecting texters and callers acting in good faith to the risk of having to defend themselves against private suits seeking statutory damages for a period in which the rule is still undergoing judicial review.

Further, the announcement states that “providing additional time may facilitate the industry’s compliance with the rule if the court upholds it. And a time-limited postponement to maintain the regulatory status quo while judicial review is completed will not pose any undue harm to the public interest.”

For these reasons, the FCC found that “justice requires postponement of the effective date of the rule” and therefore postponed the effective date for the revised 47 CFR § 64.1200(f)(9) of the Commission’s rules by 12 months, to January 26, 2026, or until, following a decision from the Eleventh Circuit, the Commission issues a Public Notice specifying a sooner date, in which case that sooner date would apply.

Should the Eleventh Circuit uphold the rule (or portions of the rule), the Commission will issue a Public Notice not more than 15 business days from the date on which the court issues its decision, announcing an effective date that is not more than 90 days from the date on which the judicial mandate issues following the court’s decision.

Accordingly, it has been ordered that pursuant to the authority contained in sections 1-4 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151-154, section 10(d) of the Administrative Procedure Act, 5 U.S.C. § 705, and sections 0.141 and 0.361 of the Commission’s rules, 47 CFR §§ 0.141, 0.361, the effective date for the revised 47 CFR § 64.1200(f)(9) is postponed to January 26, 2026 or until the date specified in a Public Notice published in the Federal Register following a decision from the court on the petition filed by the IMC, whichever is sooner.

U.S. Court of Appeals for the Eleventh Circuit Subsequently Vacated TCPA One-to-One Consent Rule

The foregoing FCC Consumer and Government Affairs Bureau order clearly stated that the postponement was based upon the pending Eleventh Circuit matter. Immediately following the GAB issuing its order, the U.S. Court of Appeals for the Eleventh Circuit vacated the portion of the December 2023 TCPA order that announced the TCPA one-to-one consent rule and remanded the matter to the FCC for further proceedings.

In short, the Eleventh Circuit was tasked with considering a challenge by the Insurance Marketing Coalition relating to the legality of the one-to-one consent rule. Specifically, the December 2023 FCC order that amended the definition of “prior express written consent” by requiring a consent agreement to be specific to “no more than one identified seller” and be “logically and topically associated with the interaction that prompted the consent.”

In a unanimous decision by judges that were all appointed by President Trump, on January 24, 2025 it was held that the FCC exceeded its statutory authority under the TCPA because the 2023 Order’s new consent restrictions impermissibly conflict with the ordinary statutory meaning of prior express consent. Importantly, the court opined that the TCPA does not define prior express consent and that common law principles should be considered with analyzing the phrase.

With respect to the one-to-one consent requirement, the court held:

“[O]ur cases show that to give “prior express consent” to receive a robocall, one need only ‘clearly and unmistakably’ state, before receiving the robocall, that he is willing to receive the robocall. One-to-one consent is not required. Because the one-to-one-consent restriction attempts to alter what we have said is the ordinary common law meaning of ‘prior express consent,’ the restriction falls outside the scope of the FCC’s statutory authority to “implement” the TCPA.”

Additionally, the court held that the FCC’s own brief provides even more support for the court’s conclusion because it concedes that a consumer could give “prior express consent” to numerous intermediaries under the TCPA where its 2023 Order states otherwise.

The court then turned its attention to the “logically and topically related” issue. In doing so, the court held that the FCC exceeded its authority under the TCPA. “[W]hether a consumer can be presumed to consent to robocalls in a particular situation says nothing about whether a consumer has in fact consented to robocalls in that situation. As long as the consumer clearly and unmistakably states, before receiving the robocall, that he is willing to receive the robocall, he has given prior express consent under the TCPA.”

In summary, the court noted that the FCC has decreed a duty that the statute does not require and that the statute does not empower the FCC to impose. “The FCC therefore exceeded its statutory authority in redefining ‘prior express consent’ to include the additional ‘prior express consent’ restrictions.”

The court concluded that the FCC exceeded its authority:

“Agencies have only those powers given to them by Congress, and enabling legislation is generally not an open book to which the agency can add pages and change the plot line.”

The ruling by the Eleventh Circuit vacates the TCPA One-to-One Consent Rule in its entirety, with massive implications for lead generators. It is anticipated that the FCC will address the Eleventh Circuit ruling, shortly.

Richard B. Newman is an FTC compliance and defense attorney at Hinch Newman LLP. Follow FTC defense lawyer on National Law Review.

Informational purposes only. Not legal advice. This article is not intended to and should not be construed as legal advice. May be considered attorney advertising.

2025-01-072025-01-07

How to Narrow the Scope of Information Sought by an FTC Civil Investigative Demand (CID)

A civil investigative demand (“CID”) is the instrument by which the Federal Trade Commission exercises its compulsory process authority in connection with investigations. CIDs may require the production of documents – including electronically stored information – or tangible things, the provision of testimony, and the providing of written responses to questions.

A CID must state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation. This will be set forth via a section entitled “Subject of the Investigation” and in the “Resolution(s) Directing Use of Compulsory Process” that accompany the CID. The FTC is not required to disclose whether the recipient of a CID is a target or to explain the circumstances that prompted the investigation.

FTC civil investigative demands are often extensive and broad. A skilled FTC CID attorney may be able to narrow the scope of information and documentation being sought, and/or the time frame within which to comply, and thus modify the breadth and cost of the investigative process.

The recipient of CID is required to “meet and confer” with FTC staff counsel within a very tight timeframe. During meet and confer sessions, many CID recipients and their counsel object to one or more areas of inquiry without possessing an accurate understanding of the legal standards and thresholds underlying the objection(s).

For example, threadbare objections such as relevance, burden, cost and breadth are unlikely, by themselves, to persuade staff counsel or FTC Directors. When attempting to modify or narrow the scope of a CID, FTC CID lawyers should be prepared to amply demonstrate, as the case may be and without limitation, why a specific specification is outside the scope of the investigation, unnecessary and abusive in breadth, lacks of reasonable time frame within which to comply, threatens disruption and serious hinderance of business operations, includes voluminous records searches, involves increased costs and lost manpower, does not further the FTC’s legitimate inquiry into matters of public interest, involves unreasonable diversion of personnel and financial resources, and/or seeks disclosure of confidential or proprietary information.

Some common objections include relevance, undue burden and over breadth.

An objection premised upon the CID improperly seeking irrelevant information must set forth persuasive facts that the information being sought is objectively outside the scope of the FTC’s investigation.

FTC compulsory process is permissible “if the inquiry is within the authority of the agency, the demand is not too indefinite and the information sought is reasonably relevant.” The standard for judging relevancy in an agency investigation is more relaxed than in an adjudicatory” proceeding. At the investigatory stage, the FTC can investigate merely on suspicion that the law is being violated, or even just because it wants assurance that it is not. The requested material, therefore, need only be relevant to the investigation – the boundary of which may be defined quite generally.

Put another way, the requested information must not be plainly incompetent or irrelevant to any lawful purpose’ of the agency. The agency’s own appraisal of relevancy must be accepted so long as it is not obviously wrong. It is a CID recipient’s burden to show that the information is irrelevant.

The FTC will possess a great deal of discretion on the issue of relevance because the agency is not required to explain all the nuances of its investigation to a recipient.

The gist of an undue burden or overbreadth objection is that the disclosures sought are unreasonable and indefinite.

FTC investigation process is not unduly burdensome unless compliance threatens to unduly disrupt or seriously hinder the normal operations of a recipient’s business. A CID recipient bears the burden to show how a CID interferes with its ability to operate its business. For example, a recipient that may wish to challenge one or more specifications contained within a civil investigative demand by evaluating the time and expense associated with compliance, and whether compliance threatens to unduly disrupt or seriously hinder normal business operations.

A challenger must be prepared to set forth facts underlying such a conclusion. Courts may reject a claim of undue burden where a recipient fails to enunciate how a CID constitutes a fishing expedition. CID recipients that fail to produce factual support to substantiate contentions that compliance would result in the virtual destruction of a successful business (e.g., affidavit or other documentation) are unlikely to persuade FTC staff counsel to modify or narrow a request. Mere statements by FTC defense practice counsel do not provide factual support.

Importantly, absent a showing of disruption, the sheer amount of responsive materials does not demonstrate undue burden (or overbreadth). Often CID recipients unsuccessfully attempt to merely allege that because a CID calls for thousands of documents that constitutes an undue burden. Some burden on CID recipients is, of course, to be expected and is considered necessary in furtherance of the agency’s legitimate inquiry and the public interest.

Any civil investigative demand places a burden on the person to whom it is directed. Time must be taken from normal activities and resources must be committed to gathering the information necessary to comply. Nevertheless, the presumption is that compliance should be enforced to further the agency’s legitimate inquiry into matters of public interest.

In terms of an overbreadth objection, broadness alone is not sufficient justification to refuse enforcement of and compliance with FTC compulsory process. Courts have held that the FTC should be accorded extreme breadth in conducting its investigations. Courts have struck down overbreadth challenges where no showing was made that the inquiries sought any information beyond that necessary to determine whether recipients have engaged or are engaging in unlawful acts or practices.

Further, broad CIDs have been justified in comprehensive investigations, particularly where that breadth is in large part attributable to the magnitude of the subject’s business operations.

If you or your company have received an FTC CID, consult with an experienced FTC defense lawyer from the start to position your response for an optimal resolution.

Richard B. Newman is an FTC compliance lawyer at Hinch Newman LLP. Follow FTC defense lawyer on National Law Review.

Informational purposes only. Not legal advice. This article is not intended to and should be construed as legal advice. May be considered attorney advertising.

2025-01-072025-01-07

Did Your Company Receive a Letter From the FTC? FTC Warning Letters and Notices of Penalty Offense

Recipients of FTC warning letters and notices of penalty offense should be on high alert and act quickly. Their advertising and marketing practices could be in violation of applicable legal regulations.

What is an FTC Warning Letter?

Federal Trade Commission “warning letters” are intended to warn companies that their conduct is likely unlawful and that they can face serious legal consequences, such as a federal investigation or lawsuit, if they do not immediately stop.

According to the FTC, “[o]verwhelmingly, companies that receive FTC warning letters take steps quickly to correct problematic advertising or marketing language and come into compliance with the law. In many cases, warning letters are the most rapid and effective means to address the problem.”

Eliminating false or misleading information from the marketplace is a key objective of the FTC. As is ensuring compliance with the FTC Act and various legal regulations that the agency enforces.

The Federal Trade Commission has sent warning letters across a number of industries pertaining to myriad legal regulatory issues. From companies allegedly selling unapproved products that may violate federal law by making deceptive or scientifically unsupported claims about their ability to treat or cure coronavirus, to companies and influencers over disclosures in posts.

Some Things to Keep in Mind About FTC Warning Letters

When FTC warning letters are sent to companies, their purpose is to warn of possible law violations. Warning letters are not formal enforcement actions, and they may or may not be followed by FTC legal action. The letters typically include an explanation of why the company is receiving the letter and examples of problematic advertising or marketing language. They require the recipients to correct the problem immediately and may also require the recipients to contact the FTC within several days to confirm that they have made the required changes.

The FTC may send warning letters unilaterally or jointly with other enforcement agencies. For example, the FTC joined the FDA in sending letters to the marketers of products and treatments falsely claiming they could either treat or cure COVID-19. The FTC also joined the FCC in sending warning letters to VoIP service providers about facilitating illegal robocalls. The FTC also issued its own warning letters to MLM marketers regarding false COVID-19 treatment or cure claims and earnings claims made by the marketers and their participants.

Additionally, while FTC or joint agency warning letters may be public, recipients’ responses to them usually are not. After sending the letters, the FTC will not comment on whether a company or individual has received them, whether they have contacted the agency within the amount of time required, or what they told the agency about their planned response.

What is an FTC Notice of Penalty Offense?

Civil penalties are designed to help the FTC deter conduct that harms consumers. One way that the FTC can obtain monetary penalties against a company that acted unfairly or deceptively is through the Penalty Offense Authority, found in Section 5(m)(1)(B) of the FTC Act, 15 U.S.C. §45(m)(1)(B).

Pursuant to this authority, the FTC can seek civil penalties if it proves that: (i) the company knew the conduct was unfair or deceptive in violation of the FTC Act; and (ii) the FTC had already issued a written decision that such conduct is unfair or deceptive.

In order to trigger this authority, the FTC can send companies a “Notice of Penalty Offenses.” This Notice is a document listing certain types of conduct that the FTC has determined, in one or more administrative orders (other than a consent order), to be unfair or deceptive in violation of the FTC Act.

Companies that receive this Notice and nevertheless engage in prohibited practices can face civil penalties of more than $50,000, per violation. As required by federal statute, the FTC adjusts the amounts of its civil penalty maximums for inflation every January.

That a company is sent a Notice does not necessarily indicate that the FTC has reason to believe it is breaking the law. Rather, the FTC sends these Notices to ensure that companies understand the law – and that they are deterred from breaking it.

Recently distributed Notices and the administrative determinations cited in the Notices pertain to, without limitation, misuse of information collected in confidential contexts, claim substantiation, business and money-making opportunities, endorsements and education.

Richard B. Newman is an FTC compliance lawyer at Hinch Newman LLP. Follow FTC defense lawyer on National Law Review.

Informational purposes only. Not legal advice. This article is not intended to and should be construed as legal advice. May be considered attorney advertising.

2024-12-172024-12-17

FTC Sends Warning Letters to Healthcare Lead Generators

The Federal Trade Commission is watching the healthcare lead generation industry closely.

On December 10, 2024, the Federal Trade Commission announced that it has sent warning letters to 21 companies that market or generate leads for healthcare plans. The letters were sent as open enrollment season for healthcare plans is ongoing. They provide guidance and provide about deceptive or unfair claims that likely violate laws enforced by the FTC.

The letters were sent to companies that provide marketing or advertising, including lead generation, related to Affordable Care Act Marketplace health insurance and healthcare-related products, such as limited benefit plans and medical discount programs.

“It is critical for consumers’ health and financial well-being that marketers of health plans be honest about the plans they and their partners are offering,” said FTC attorney Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC has been watching this important sector closely, especially during open enrollment season, and these warning letters put companies on notice that unlawfully marketing or advertising health plans to consumers can result in serious legal consequences.”

Based on information collected by FTC staff and the agency’s enforcement experience in this area, the types of claims FTC staff has warned about include those that may:

misrepresent the benefits included in a healthcare plan, including any insurance benefits;
misrepresent that a healthcare plan is major or comprehensive medical health insurance or the equivalent of such health insurance;
misrepresent the costs of healthcare plan; and
falsely claim that consumers who enroll in a healthcare plan will receive free offers, cash rewards, rebates, or other incentives.

The letters provide examples of prior relevant FTC actions against marketers and lead generators that operate in this field, including Simple Health, Benefytt Technologies, Partners in Healthcare Association, and Consumer Health Benefits Association.

While the letters do not allege any wrongdoing by any of the recipients, they encourage the companies to conduct a thorough review of their advertisements to ensure they are complying with applicable laws and rules, and the letters note that the FTC is closely monitoring this marketplace for unlawful conduct that is harming consumers.

Richard B. Newman is an FTC inve stigation attorney at Hinch Newman LLP. Follow FTC defense attorney on National Law Review.

Informational purposes only. Not legal advice. May be considered attorney advertising.

2024-08-192024-08-19

What Digital Marketers Need to Know About New York Attorney General’s New Website Privacy Guides for NY Consumers and Businesses

On July 30, 2024, New York Attorney General Letitia James announced the launch of two privacy guides on the Office of the Attorney General (OAG) website: a Business Guide to Website Privacy Controls and a Consumer Guide to Tracking on the Web.

The Business Guide is intended to help businesses better protect visitors to their websites by identifying common mistakes the OAG’s office believe businesses make when deploying tracking technologies, processes they can use to help identify and prevent issues, and guidance for ensuring they comply with New York law.

The Consumer Guide is intended to assist New Yorkers by offering tips they can use to protect their privacy when browsing the web, including how to safeguard against unwanted online tracking.

The OAG issued the guides following a review that purportedly uncovered unwanted tracking on more than a dozen popular websites, collectively serving more than 75 million visitors per month.

“When New Yorkers visit websites, they deserve to have the peace of mind that they won’t be tracked without their knowledge, and won’t have their personal information sold to advertisers,” said Attorney General lawyer James. “All too often, visiting a webpage or making a simple search will result in countless ads popping up on unrelated websites and social media. When visitors opt out of tracking, businesses have an obligation to protect their visitors’ personal information, and consumers deserve to know this obligation is being fulfilled. These new guides that my team launched will help protect New Yorkers’ privacy and make websites safer places to visit.”

While many websites provide visitors with information about the tracking that takes place and controls to manage that tracking, not all businesses have taken appropriate steps to ensure their disclosures are accurate and their privacy controls work as described, according to the OAG. “Most tracking on the internet relies on cookies, which are small text files created by a web browser when visiting a website. Cookies often contain an identifier unique to a user’s device which helps websites and other online services recognize the user as they click from one webpage to the next. Cookies can also be used by advertising companies to track the websites a user visits, the buttons a user clicks, and the searches a user runs, and then be used to serve highly targeted ads to that person.”

To help businesses better protect New Yorkers and comply with New York consumer protection laws, Attorney General James has launched a Business Guide to Website Privacy Controls. This new guide identifies common mistakes that businesses make and includes steps that can be taken to identify and prevent issues. The Business Guide also provides information to help businesses comply with relevant New York laws, including ensuring that the representations made about tracking, whether express or implied, are truthful and not misleading.

The Business Guide provides areas where businesses have run into trouble and tips for avoiding these issues.

In addition to a guide for businesses, Attorney General James launched a guide to help New Yorkers understand how to better protect themselves from unwanted tracking online. The OAG’s Consumer Guide to Tracking explains how website visitors are tracked, what cookie pop-ups do, and to what extent websites’ privacy controls can be relied on to protect users’ privacy.

The Consumer Guide discusses that on many websites, tracking cookies are created as soon as the first webpage loads, often before consumers have a chance to opt out. Attorney General James wants New Yorkers to appreciate that using a website’s privacy controls to opt out will not delete cookies that already exist on a consumer’s computer, including those created before a webpage visitor had the chance to opt out. “This means consumers can be tracked and targeted by personalized ads even if they seemingly opted out.”

The online privacy guides released by Attorney General James are part of OAG’s ongoing work to protect New York consumers and help businesses enhance their privacy and data security.

Attorney General James also recently issued a consumer alert to raise awareness about free credit monitoring and identity theft protection services available for millions of consumers impacted by the Change Healthcare data breach.

In March 2024, Attorney General James led a bipartisan coalition of 41 attorneys general in sending a letter to Meta Platforms, Inc. (Meta) addressing the purported recent rise of Facebook and Instagram account takeovers by scammers and frauds. In April 2023, Attorney General James released a comprehensive data security guide to help companies strengthen their data security practices. In January 2022, Attorney General James released a business guide for credential stuffing attacks that detailed how businesses could protect themselves and consumers.

Takeaway: The Business Guide identifies numerous “unfair and deceptive practice” investigation and enforcement avoidance issues that should be considered by those that operate on the Internet, including those pertaining to: (i) uncategorized or miscategorized tags and cookies; (ii) misconfigured consent-management tools; (iii) hardcoded tags; (iv) tag privacy setting; (v) incomplete understanding of tag data collection and use; (vi) cookieless tracking; (vii) identification and prevention of problems when deploying tacking technologies; (viii) ensuring privacy controls and disclosures comply with New York law; and (ix) providing effective disclosures and easy-to-use controls, including “do’s” and “don’ts”. The Consumer Guide discusses, for example, how websites track online activity, what a cookie pop-up is, how consumers can use cookie pop-ups and how consumers can limit online tracking.

Contact the author with questions or if you require assistance with developing and implementing measures designed to comply with the New York OAG’s Website Privacy Guides.

Richard B. Newman is a digital advertising practices attorney at Hinch Newman LLP. Follow FTC defense lawyer on X.

Informational purposes only. Not legal advice. This article is not intended to and should be construed as a complete summary or discussion of the Website Privacy Guides, and all of its obligations and restrictions. May be considered attorney advertising.

2024-08-152024-08-15

FTC Announces Final Rule Banning Fake Reviews and Testimonials

On August 14, 2024, the Federal Trade Commission announced a Final Rule combatting bogus consumer reviews and testimonials by prohibiting their sale or purchase. The Rule allows the FTC to strengthen enforcement, seek civil penalties against violators and deter AI-generated fake reviews.

“Fake reviews not only waste people’s time and money, but also pollute the marketplace and divert business away from honest competitors,” said FTC attorney Chair Lina M. Khan. “By strengthening the FTC’s toolkit to fight deceptive advertising, the final rule will protect Americans from getting cheated, put businesses that unlawfully game the system on notice, and promote markets that are fair, honest, and competitive.”

The Rule announced on August 14, 2024 follows an advance notice of proposed rulemaking and a notice of proposed rulemaking announced in November 2022 and June 2023, respectively. The FTC also held an informal hearing on the proposed rule in February 2024. In response to public comments, the Commission made numerous clarifications and adjustments to its previous proposal.

What Does the FTC Final on the Use of Consumer Reviews and Testimonials Prohibit?

The FTC Final Rule on the Use of Consumer Reviews and Testimonials prohibits:

Writing, selling, or buying fake or false consumer reviews.

The Rule prohibits businesses from writing or selling consumer reviews that misrepresent they are by someone who does not exist or who did not have actual experience with the business or its products or services, or that misrepresent the reviewers’ experience. It also prohibits businesses from buying consumer reviews that they knew or should have known made such a misrepresentation. Businesses are also prohibited from procuring from certain company insiders such reviews about the business or its products or services for posting on third-party sites, when the businesses knew or should have known about the misrepresentation. The prohibitions on buying or procuring reviews do not cover generalized review solicitations to past customers or simply hosting reviews on the business’s website. Neither will a retailer or other entity be liable for sharing consumer reviews unless it would have been liable for displaying those same reviews on its own website.

Writing, selling, or disseminating fake or false testimonials.

Businesses are similarly prohibited from writing or selling consumer or celebrity testimonials that make the same kinds of misrepresentations. The are also prohibited from disseminating or causing the dissemination of such testimonials when they knew or should have known about the misrepresentation. The prohibition on disseminating testimonials does not cover the type of generalized solicitations to past customers discussed above with respect to reviews.

Buying positive or negative reviews.

Businesses are prohibited from providing compensation or other incentives contingent on the writing of consumer reviews expressing a particular sentiment, either positive or negative. Violations here include situations in which such a contingency is express or implied. So, for example, while it prohibits offering $25 for a 5-star review, it also prohibits offering $25 for a review “telling everyone how much you love our product.”

Failing to make disclosures about insider reviews and testimonials.

The Rule prohibits a company’s officers and managers from writing reviews or testimonials about the business or its products or services without clearly disclosing their relationship. Businesses are also prohibited from disseminating testimonials by company insiders without clear disclosures, if the businesses knew or should have known of the relationship. A similar prohibition exists for officer or manager solicitations of reviews from their immediate relatives or from employees or agents of the business, and when officers or managers ask employees or agents to seek such reviews from relatives. For these various solicitations, the Rule is violated only if: (i) the officers or managers did not give instructions about making clear disclosures; (ii) the resulting reviews – either by the employees, agents, or the immediate relatives of the officers, managers, employees, or agents – appear without clear disclosures; and (iii) the officers or managers knew or should have known that such reviews appeared and failed to take steps to have those reviews either removed or amended to include clear disclosures. All of these prohibitions hinge on the undisclosed relationship being material to consumers. These disclosure provisions also clarify that they do not cover mere review hosting or generalized solicitations to past customers.

Deceptively claiming that company-controlled review websites are independent.

Businesses are prohibited from misrepresenting that websites or entities they control or operate are providing independent reviews or opinions, other than consumer reviews, about a category of businesses, products, or services that includes their own business, product, or service.

Illegally suppressing negative reviews.

The Rule prohibits using unfounded or groundless legal threats, physical threats, intimidation or public false accusations (when the accusation is made with knowledge that it is false or with reckless disregard as to its truth or falsity) to prevent the posting or cause the removal of all or part of a consumer review. Legal threats are “unfounded or groundless” if they are unwarranted by existing law or based on allegations that have no evidentiary support, according to the FTC. Also, if reviews on a marketer’s website have been suppressed based on their rating or negative sentiment, the Rule prohibits that business from misrepresenting that the reviews on a portion of its website dedicated to receiving and displaying such reviews represent most or all submitted reviews.

Selling and buying fake social media indicators.

The Rule prohibits the sale or distribution of fake indicators of social media influence, like fake followers or views. A “fake” indicator means one generated by a bot, a hijacked account, or that otherwise does not reflect a real individual’s or entity’s activities or opinions, according to the FTC. The Rule also bars anyone from buying or procuring such fake indicators. These prohibitions are limited to situations in which the violator knew or should have known that the indicators were fake and which involved misrepresentations of a person’s or company’s influence or importance for a commercial purpose.

The Rule does not specifically refer to AI. However, according to the FTC, these prohibitions cover situations when someone uses an AI tool to generate the deceptive content at issue.

According to the FTC, case-by-case enforcement without civil penalty authority might not be enough to deter clearly deceptive review and testimonial practices. The Supreme Court’s decision in AMG Capital Management LLC v. FTC has hindered the FTC’s ability to seek monetary relief for consumers under the FTC Act. The Rule is intended to enhance deterrence and strengthen FTC enforcement actions.

The Rule will become effective 60 days after the date it’s published in the Federal Register.

Takeaway: The FTC will aggressively enforce the new Rule. The agency has challenged illegal practices regarding consumer reviews and testimonials for several decades. The agency has also issued guidance to help businesses to comply. According to the FTC, online marketplaces and social media companies could and should do more when it comes to policing their platforms. Consult with a seasoned FTC Endorsement Guidelines and social media influencer attorney if you are interested in discussing how the Final Rule may apply to your company, or if you are the subject of an FTC CID investigation or enforcement action. Note that any “deceptive or unfair” practice involving reviews or testimonials which the Rule does not cover is still subject to the FTC Act.

Richard B. Newman is a digital advertising practices attorney at Hinch Newman LLP. Follow FTC defense lawyer on X.

Informational purposes only. Not legal advice. This article is not intended to and should be construed as a complete summary or discussion of the Rule and all of its obligations and restrictions. May be considered attorney advertising.

2011-08-042011-08-04

Payday Loan Marketers Charged by FTC

At the request of the Federal Trade Commission, a federal court has halted an online operation that allegedly debited consumers’ bank accounts without their consent when consumers visited the defendants’ websites seeking payday loans. The court also froze the defendants’ assets, pending further court proceedings.

According to the Commission’s complaint, the defendants’ websites, such as mypaydayangel.com and juniperloans.com, asked for consumers’ personal and financial information, such as social security, driver license, and bank account numbers. Near the end of the application form, the defendants offered unrelated “Direct Benefits” and “Voice Net” programs for food, travel and merchandise discounts, or for long distance calling and Internet access. Many consumers who clicked to “submit” a payday loan application were enrolled, unknowingly, into the programs, which initially charged their bank accounts up to $59.90 per month, and later charged up to $99.90 per year. Consumers often did not notice the program offers, and some people who declined the offers were allegedly charged for the programs anyway.

As alleged in the complaint filed in the U.S. District Court for the Middle District of Florida, the defendants sent consumers’ bank account information to Landmark Clearing Inc. and other payment processors to electronically generate remotely created payment orders that debited consumers’ bank accounts. Consumers typically discovered the problem when an unexpected debit appeared on their bank statement, or when their bank told them their account was overdrawn. They learned that Direct Benefits or Voice Net received the payments only after they contacted their bank or saw an online copy of the payment order. Consumers called the defendants for a refund but more often than not, received the run-around. Many consumers had to dispute the transaction or close their bank accounts to get a refund or stop the defendants from debiting their accounts.

The defendants are charged with violating the FTC Act by obtaining consumers’ bank account information and debiting their accounts without their consent, and failing to adequately disclose that, in addition to using consumers’ financial information for a payday loan application, they would use it to charge consumers for enrollment in unrelated programs and services. The FTC complaint names Direct Benefits Group LLC, also doing business as Direct Benefits Online and Unified Savings; Voice Net Global LLC, also doing business as Thrifty Dial; Solid Core Solutions Inc.; WKMS Inc.; Kyle Wood; and Mark Berry.

If you are currently engaged in the online marketing of payday loan services, or contemplate doing so, be sure to consult with your Internet attorney in order to minimize legal and regulatory risks.

2011-07-252011-07-25

$4.8 Million FTC Action against Swish Marketing

At the request of the Federal Trade Commission, the U.S. District Court for the Northern District of California has ordered Swish Marketing, Inc. to pay more than $4.8 million for misleading hundreds of thousands of payday loan applicants into paying for an unrelated debit card. For some time, the Commission has been closely monitoring payday lending and other financial services in order to protect financially distressed consumers.

According to the FTC’s complaint, Swish Marketing and three individuals operated websites advertising short-term, or “payday,” loan services that allegedly matched loan applicants with lenders. The websites included an online loan application form that tricked online loan applicants into unknowingly ordering a debit card.

On many sites, clicking the button for submitting loan applications led to four product offers unrelated to the loan, each with minuscule “Yes” and “No” buttons. “No” was pre-checked for three of them, while “Yes” was pre-checked for a debit card, with inconspicuous disclosures asserting consumers’ consent to have their bank account debited. Consumers who clicked a prominent “Finish matching me with a payday loan provider!” button were subsequently charged for the debit card. Additional websites represented that the card was a “bonus” and disclosed the fee only in inconspicuous fine print below the submit button. Consumers were each improperly charged up to $54.95.

The Commission charged Swish Marketing, VirtualWorks LLC (the seller of the debit card), and principals of the operation with deceptive business practices in 2009. The FTC filed an amended complaint against the Swish Marketing defendants in 2010, including allegations that they sold consumers’ bank account information to VirtualWorks without consumer consent, and that the principals were aware of consumer complaints about the unauthorized debits.

Three principals, as well as the VirtualWorks defendants, settled the charges against them.

The court order announced last week requires Swish Marketing to pay more than $4.8 million and bans it from marketing any product with a “negative-option” program, in which a consumer’s silence or failure to reject a product is treated as an agreement to make a purchase. The order also requires the company to obtain consumers’ informed consent before it can use their personal information collected for a particular purpose for any other purpose or by a different entity, and bars the company from: (1) misrepresenting material facts about any product or service, such as the cost or the method for charging consumers; (2) misrepresenting that a product or service is free or a “bonus”, without disclosing all material terms and conditions; (3) charging consumers without first disclosing what billing information will be used, the amount to be paid, how and on whose account the payment will be assessed, and all material terms and conditions; and (4) failing to monitor their marketing affiliates to ensure that they are in compliance with the order.

Richard B. Newman is the premier Internet Attorney and FTC Compliance and Litigation Defense Lawyer at Hinch Newman LLP. He has made a name for himself in the interactive advertising and affiliate marketing industries and can be contacted at rnewman@hinchnewman.com

2011-07-102011-07-25

FTC Announces Accelerated Review of Six Rules & Guides

On July 7, 2011, the Federal Trade Commission (“FTC”) announced an updated regulatory review schedule of numerous rules and guides in order to keep pace with the current technological landscape and rapidly evolving marketplace, while at the same time promoting greater efficiency and transparency. For the first time, the FTC is seeking public comments on how the regulatory review process can be enhanced to better serve consumers and businesses, including how often it should review rules and guides and how it can modify its regulatory review program to make it more responsive to the needs of consumers and businesses.

The updated regulatory rules and guides review schedule for the next decade was published concurrently with a hearing on potential rulemaking reforms called by Rep. Cliff Stearns (R-Fla.), who chairs the House Energy and Commerce Committee’s Oversight and Investigations Subcommittee. The initiatives are intended to ensure its regulations are current and not overly burdensome, including launching a new regulatory review web page. The FTC’s healthy regulatory review docket includes thirteen (13) rules and guides currently under review, as well as ten (10) additional rule reviews scheduled to commence sometime in 2011. In sum, more than one-third of the FTC’s sixty-six (66) rules and guides will be under review, or will have just been reviewed, by the end of 2011.

The FTC is currently in the process of assessing its Children’s Online Privacy Protection Rule. Particularly relevant to eCommerce business, the FTC plans on reviewing several of its guides in 2012, including the interpretation of just how Section 5 of the FTC Act applies to specific trade practices, its Guides Against Deceptive Pricing, Guides Against Bait Advertising, and Guides Concerning Use of the Word “Free” and Similar Representations. It is anticipated that the FTC will revisit its Telemarketing Sales Rule in 2013.

The FTC’s agenda in 2014 is expected to include a review of its Standards for Safeguarding Customer Information, followed by its review of the CAN-SPAM Act in 2015. The FTC will review its identity theft Red Flag rules in 2018. In 2020, regulators plan to revisit the Use of Endorsements and Testimonials in Advertising Guidelines, Privacy of Consumer Financial Information Rule, Health Breach Notification Rule, and Affiliate Marketing.

Richard B. Newman is an highly-respected Internet Lawyer and FTC Defense Lawyer at Hinch Newman LLP. He has made a name for himself in the industry having been the lead attorney on several well known cases. He can be contacted at rnewman@hinchnewman.com

2011-06-012011-07-23

FTC Cracking Down on Testimonials: What Affiliates Need to Know

The Federal Trade Commission (“FTC”) continues its assault on Internet-based false and deceptive advertising, including enforcement of recently published guidelines concerning the use of endorsements and testimonials. On May 31, 2011, the FTC announced its first settlement with an individual consumer charged with deceptive representations made in relation to a product or service testimonial.

The matter pertains to a “pitchman” defrauding consumers via a money-making scheme by misrepresenting the earning potential of a so-called “wealth building” program called “Winning in the Cash Flow Business.” The defendants allegedly misled consumers about how much money they could make using the program and how quickly and easily they could make it. The initial cost of the program ranged between $40 and $160. Consumers “were later encouraged to spend hundreds or thousands of dollars more on additional products or services, such as multi-day seminars, coaching sessions, and promissory note holder lead lists.”

The Complaint was filed in the U.S. District Court for the District of Colorado and alleges that the defendants’ actions violated FTC Act §5, the Telemarketing Sales Rule (“TSR”), and the Colorado Consumer Protection Act. In 2002, one of the defendants used a thirty-minute infomercial as the primary method to advertise the program. It was broadcast nationwide. The FTC also states that the program was marketed online, as well as through direct mail. The infomercial claimed that consumers could earn substantial income successfully by finding, brokering, and earning commissions on seller-financed promissory notes.

The alleged false and misleading claims included “testimonials” purportedly from consumers claiming to have made “$1.2 million in 30 days,” “$79,000 in a few hours,” and “$262,216 part time.” The FTC and the state allege that this was far from the “typical consumer experience.” One consumer in particular who provided a testimonial in an infomercial reached a settlement with the Agency amid charges that she falsely claimed earning $79,975.01 from one promissory note transaction using defendants’ program and that her total earnings were over $134,000. The complaint alleges that the consumer made this statement, even though she earned $50,000 less than what she claimed. She agreed to a consent judgment prohibiting her from making several types of misrepresentations in the future, and has agreed to cooperate with law enforcers in their case against the remaining defendants.

The Colorado Attorney General joined the FTC in prosecuting this case, both seeking to preclude the individual and corporate entities they control from continuing to make the allegedly misleading claims, as well as consumer redress. The federal and state plaintiffs charged that consumer testimonials in the defendants’ advertising are inaccurate and do not reflect the results that customers are “likely to achieve” if they buy the program. Instead, some of the testimonials reflect earnings claims that were total earnings figures accumulated over several years, rather than in one year. Since the defendants made similar misrepresentations to consumers during sales calls, they also were charged with violating the FTC’s TSR.

What Affiliates Need to Know
With the recent increased state and federal regulatory scrutiny, everyone who markets a product or service online should be on notice – when someone is selling a program designed to help people make money they have to accurately describe how much consumers can expect to make and be truthful about how quickly they will be able to do so.

In fact, the FTC has recently announced that an update to federal advertising rules pertaining to Internet marketing is imminent.

The original Dot Com Disclosures were issued more than a decade ago and do not take into account technological advancements in the Internet, mobile marketing, and social marketing sectors. So, while the FTC continues to vigilantly patrol online marketing and advertising practices, it also appears to be keeping an eye on current technological issues. Regardless of the direction the “revamped” advertising rules may take, one requirement will remain a constant – clear & conspicuous disclosures so that consumers can make fully informed online purchasing decisions. Factors such as the context of the disclosure, its prominence, placement and proximity to the language it limits, are but a few critical considerations that must be mindfully addressed.

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“Richard Newman is one of the top, most respected attorneys for Interactive Advertising and Affiliate Law. He has his finger on the pulse of the industry.”– Pace Lattin, InsideOV