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FTC Testifies Before Senate Commerce Subcommittee About Consumer Protection Efforts

The Federal Trade Commission recently issued its annual report, providing insight into the agency’s enforcement priorities. The report touches upon fraud, substantiating claims, technological innovation, endorsement guidelines, dietary supplements, disease prevention claims, sponsored content, and privacy and data security.

The FTC also recently testified before the Senate Commerce Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security. The prepared statement focused upon the agency’s consumer protection achievements in 2018.

FTC Chairman Joseph J. Simons testified on behalf of the Commission. He and Commissioners Phillips, Chopra, Slaughter and Wilson stated that during fiscal year 2018, the FTC’s law enforcement actions led to more than $1.6 billion in refunds to consumers and collected more than $8.5 million for the Treasury. According to the FTC, $83.3 million in redress was returned to consumers, including matters such as Volkswagen, Amazon, and NetSpend.

In September 2018, the FTC began holding its widely publicized Hearings on Competition and Consumer Protection in the 21st Century to explore whether broad-based changes in the economy, evolving business practices, new technologies or international developments might require adjustments to competition and consumer protection law and enforcement priorities. The public hearings shall continue through early 2019.

Privacy and data security has been, and shall remain, a focal point for the Commission. To date, the FTC has brought more than 60 data security cases alleging that companies failed to implement reasonable safeguards, as well as more than 60 general privacy cases.

The FTC recently gave final approval to an expanded settlement with the ride-sharing company Uber Technologies Inc. related to allegations that the company failed to reasonably secure sensitive consumer data stored in the cloud. The Commission also approved a settlement with PayPal, Inc. to resolve allegations that its peer-to-peer payment service misled consumers about their ability to control the privacy of their transactions and the extent to which their financial accounts were protected. The FTC has also aggressively enforced the EU-U.S. Privacy Shield framework and has initiated four cases in the last few months.

“The Commission has challenged numerous privacy and security practices under Section 5 of the FTC Act. Our program in these areas – which includes enforcement, as well as consumer and business education – has been highly successful within the limits of our authority,” Simons said in separate oral remarks before the subcommittee. “But Section 5 is an imperfect tool. In my view, we need more authority.” The FTC continues to call for comprehensive data security legislation that would cover the collection, use and sharing of consumer their data.

The testimony also outlined the FTC’s work to ensure that advertising is truthful and not misleading. In 2018, the FTC brought a number of enforcement actions challenging false and unsubstantiated health claims, including those targeting students, elderly consumers, consumers affected by the opioid crisis and consumers with serious medical conditions. The FTC has also challenged misleading claims in the financial marketplace. For example, the agency recently announced settlement of an FTC complaint with online student loan refinancer Social Finance over allegations that it made deceptive claims about the average savings members could achieve by refinancing their student loans.

Bread-and-butter fraud enforcement continues to be a major focus of the FTC’s agenda. For example, in September 2018, the Commission brought an action against Sunkey Publishing, alleging that the lead generation operation falsely claimed to be affiliated with the military and promised to use consumers’ information only for military recruitment purposes. Instead, the FTC alleged that Sunkey used the information it collected to make millions of illegal telemarketing calls and sold the information to post-secondary schools.

Unlawful robocalls remain a significant consumer protection problem and consumers’ top complaint to the FTC, which received more than 3.7 million robocall complaints in FY 2018, according to the testimony. The FTC uses numerous methods to combat illegal calls, including 136 enforcement actions to date.

Interestingly, in response to growing concerns about call spoofing and other illegal forms of robocalls, two U.S. senators have introduced a bill titled the “Telephone Robocall Abuse Criminal Enforcement and Deterrence Act.” The TRACED Act is designed to provide the FCC and other federal agencies acting in concert with the FCC with additional tools to combat illegal robocalling operations by amending Section 227 of the Communications Act to provide for enhanced civil penalties for violation of TCPA rules.

The bill would provide the FCC with the authority to assess civil penalties of up to $10,000 per illegal robocall violation and extend the current FCC statute of limitations to investigate TCPA violations. It also creates new criminal fines of up to $10,000 per violation that can be trebled for intentional activity.

Lastly, the FTC’s testimony detailed its work to preserve and promote competition. According to the testimony, the FTC has challenged 45 mergers since the start of 2017. In 2018, the FTC voted to initiate litigation to block five mergers.

Contact the author at rnewman@hinchnewman.com to discuss current FTC enforcement priorities and how to avoid regulatory scrutiny, in the first place.

Richard B. Newman is an FTC attorney at Hinch Newman LLP.  Follow him on Twitter.

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Richard B. Newman

Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

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