Category Archives: FTC Law

FTC Cryptocurrency: Marketing Rules Apply

FTC cryptocurrency lawyerThe FTC is going after four people for allegedly promoting “deceptive money-making schemes involving cryptocurrencies.” According to commissioners, the accused promised dramatic gains and delivered squat.

FTC Cryptocurrency: Token Investment Ponzi Scheme?

The FTC accused three defendants of creating a crypto pyramid scheme that promised “big rewards for a small payment of bitcoin or Litecoin.” Specifically, the business’ marketing materials tempted potential investors to turn $100 into $80,000 a month. To join, participants had to make a payment to extant investors. As such, the scheme’s success relied on a constant stream of new investor recruits.

According to the FTC, the scheme leaped out of Ponzi’s playbook, in large part because “the majority of participants would fail to recoup their initial investments.”

When asked about the Crypto Ponzi case, the acting director of the FTC’s Bureau of Consumer Protection Tom Pahl explained :

“This case shows that scammers always find new ways to market old schemes, which is why the FTC will remain vigilant regardless of the platform – or currency used. The schemes the defendants promoted were designed to enrich those at the top at the expense of everyone else.”

FTC Cryptocurrency: Promotional Language Matters

In these recent FTC cryptocurrency actions, commissioners also objected to promotional assertions about doubling your money in 50 days. Remember: Don’t publish guarantees that your business can’t fulfill — it’s against FTC regulations (link). When it comes to marketing materials, faking it till you make it is not OK. All advertising claims must be factually supported with evidence.

While these cases wend their way through the courts, the FTC froze the defendants’ assets and issued temporary restraining orders.

Connect With An FTC Cryptocurrency Lawyer

The cryptocurrency and blockchain markets are relatively young, mostly unregulated, and growing like a Chia Pet on steroids.  If you’re a startup or investor in the space, it’s wise to consult with a cryptocurrency attorney before making moves or launching a project. Though specific industry regulations are currently in limbo, some standing financial, promotional, and business regulations absolutely do apply.

We have been consulting — and investing — in the virtual currency space since the early days of Bitcoin. Moreover, as both attorneys and CPAs, our firm has a unique, holistic, and more nuanced understanding of the crypto ecosystem.

Give us a ring. Let’s talk about what our experienced cryptocurrency legal team can do for you.

G Fuel Lawsuit: Popular Esports Energy Drink At Center Of Controversy

G Fuel LawsuitThe Environmental Research Center (ERC) smacked Gamma Enterprises LLC (“Gamma”), the “Gatorade of Esports” and makers of G Fuel, with a lawsuit over elevated lead levels and non-compliance with California’s health reporting requirements. Will the G Fuel lawsuit affect athlete sponsorships?

G Fuel: An Esports Energy Drink

Gamma Labs makes G Fuel, an energy drink “marketed as a secret sauce to enhance focus and endurance for virtual battles.” To use an analogy: G Fuel is to esports as Gatorade is to football.

Proposition  65: Heath Reporting Requirements

An excerpt from a Californian government page:

In 1986, California voters approved an initiative to address their growing concerns about exposure to toxic chemicals. That initiative became the Safe Drinking Water and Toxic Enforcement Act of 1986, better known by its original name of Proposition 65. Proposition 65 requires the State to publish a list of chemicals known to cause cancer or birth defects or other reproductive harm. This list, which must be updated at least once a year, has grown to include approximately 800 chemicals since it was first published in 1987.

G Fuel Lawsuit: Too Much Lead?

According to authorities, G Fuel drinks contained excessive amounts of lead. Plus, the product label didn’t include proper ingredient warnings.

When it comes to marketing food stuffs, brands must follow regulations outlined by both the FTC and FDA. The financial penalties could be huge, weighing in at $2,500 a day, per violation. Since the allegations date back to 2014, authorities could force Gamma to hand over a whole lot of ducats.

Energy Drink Legal Compliance: A Brief History

This is not G Fuel’s first media hiccup. Back in 2016, a young boy was hospitalized after knocking back too much of the caffeinated beverage on his bus ride home from elementary school.

It’s only fair to note that G Fuel isn’t the only energy drink to face ingredient-related lawsuits. 5-Hour Energy and Monster Energy have both found themselves in the legal ring over marketing issues. In 2016, Morgan & Morgan sued Monster Energy five times over health deterioration allegations. However, all the cases were eventually dismissed. In 2017, the FTC dinged 5-Hour Energy for $4.3 million over deceptive advertising practices.

Will the G Fuel Lawsuit Affect Sponsorship Deals?

Will esports athletes sponsored by Gamma feel any ramifications because of this lawsuit? Most likely, no. In fact, to combat the negative press, Gamma may even amp up their advertising efforts. However, if authorities come out on top in this legal battle, Gamma may have to fork over a hefty fine, which could have a negative budget impact.

Esports and Marketing Lawyers

Gordon Law Group works with esports athletes and vendors on everything from contract negotiations to sponsorship agreements to product and marketing compliance. Let’s talk. Get in touch today to begin the conversation.

How Can An FTC Defense Attorney Help Me?

FTC defense lawyerAn FTC defense attorney can provide legal assistance with enforcement actions against individuals and businesses charged with unfair and deceptive advertising and marketing practices or fraud. Penalties associated with FTC violations can have substantial monetary consequences.

FTC Violations

The Federal Trade Commission (FTC) is a federal agency that is responsible for enforcing the prohibition of unfair or deceptive advertising and marketing practices by individuals and businesses. Its primary goal is to promote consumer protection and prevent or eliminate anti-competitive business practices, such as coercive monopolies. By overseeing and regulating specific guidelines, the FTC protects consumers against fraud. The Bureau of Consumer Protection works to stop unfair, deceptive and fraudulent business practices by:

According to FTC regulations, claims used in advertising and marketing must be truthful and based on facts and evidence. Endorsements used in advertising and marketing must meet the standards of the FTC Act. False advertising and marketing practices are deemed to be unfair or deceptive to consumers and constitute consumer fraud. Individuals and businesses charged with FTC violations and fraud are subject to serious penalties, often with life-long consequences.

Penalties for FTC Violations

Penalties associated with FTC violations can be substantial. In August 2016, the FTC approved final amendments to increase the maximum amount imposed for civil penalties to adjust for inflation. The maximum civil penalty amount has increased from $16,000 to $40,000. The new maximum for civil penalties applies to all affected violations, even if the violation date is prior to August 1, 2016. Moving forward, the maximum amount of civil penalties will be automatically adjusted each January to meet annual inflation rates.

Due to the way civil penalties are calculated by the FTC according to certain statutes, some violations will be highly impacted by increased maximums. Under provisions of the Clayton Act and HSR Act, the statute sets civil penalties on a daily basis, so the maximum total civil penalty of $40,000 could be multiplied by the number of days an individual or business is in violation. For violations that remain unresolved, the FTC considers each day as a separate violation of the statute. When determining civil penalties to be imposed, the court and the FTC will consider the history of previous violations or unethical conduct, the degree of culpability, the impact to the individual or business, and the ability to pay civil penalties. To reduce financial hardship, the FTC has a civil penalty leniency program for small businesses that are not in compliance with the law.

In addition to civil penalties, the FTC often seeks monetary restitution for consumers who have been harmed by unfair or deceptive practices. The FTC will often seek to disgorge a business’s net total revenue for the entire time that the offending practice was in use. An individual business owner may be held personally liable for restitution because a corporation does not shield decision-makers from deceptive business practices claims.

Temporary Restraining Orders

Most FTC enforcement actions are initially filed under seal along with an ex parte application for a Temporary Restraining Order (TRO). Typically, a TRO seeks to freeze all assets associated with merchant funds, and usually extends to all third parties in possession or control of such funds, such as banks and payment facilitators. Most TROs also seek appointment of a temporary receiver to take control of the marketer’s business and assets. This is done to prevent further consumer fraud and ensure that adequate funds are preserved for the purposes of consumer restitution.

Since most enforcement actions are filed under seal, an FTC attorney is essential for proper defense against enforcement actions. Once the court unseals a complaint, the action becomes a matter of public record, however, the defendants’ assets have already been frozen. The TRO is followed by a motion for a preliminary injunction that prohibits the individual or business from engaging in further deceptive practices and fraud. If the FTC prevails on the preliminary injunction motion, the defendant is often left with no funds to defend the action.

When the FTC is successful in proving unfair or deceptive advertising or marketing practices or fraud, the business charged with violations will usually agree to a permanent injunction that bans them from engaging in similar conduct and practices for life. To settle the action, the business or individual will be required to pay a substantial monetary judgment and file annual reports with the FTC regarding their future business activities for a period of at least ten years. An FTC attorney can create favorable settlement terms and negotiate reduced monitoring and reporting requirements in FTC litigation.

 

What Are The Possible Penalties If I’m Found Guilty of FTC Violations?

To adjust for inflation, authorities increased the maximum FTC civil penalty amount from $16,000 to $40,000 for all violations listed in the Federal Register Notice. These increases will affect 16 provisions that the FTC enforces.

The Federal Trade Commission

Under the Federal Trade Commission Act of 1914, the Federal Trade Commission (FTC) was established as an independent government agency. The main goal of the FTC is to protect consumers from unfair or deceptive business practices and fraud. Originally, its purpose was to prevent unfair competition in commerce, but through the years Congress has passed additional laws giving the agency greater authority to police anti-competitive business practices. The FTC also enforces federal antitrust laws that prohibit unethical business practices such as business mergers that could lead to higher prices and fewer choices for consumers and less innovation for new business.

Civil Penalties

Beginning August 1, 2016, the maximum dollar amount for civil penalties on certain FTC violations increased from $16,000 to $40,000. Changes were mandated to adjust for maximum inflation under provisions of the Federal Civil Penalties Inflation Adjustment Act. Beginning August 1, 2016, new maximum civil penalties apply to all affected violations, even if the date of the associated violation is prior to that date. After August 1, 2016, the maximum civil penalty will be adjusted each January to meet annual inflation.

Certain violations will be highly impacted by increased penalties due to the way the FTC computes and enforces penalties under certain statutes. Under the Clayton Act and HSR Act, the statute sets the civil penalty on a daily basis, so the maximum total civil penalty of $40,000 could be multiplied by the number of days a person is in violation. For violations that continue without resolve, the FTC looks at each day as a separate violation of the order or statute.

Although the FTC has no power to assess civil penalties, the statutes that they enforce authorize federal courts to assess civil penalties in civil actions brought by an FTC attorney. Courts are allowed to assess civil penalties up to specified maximum dollar amounts against persons found guilty of associated FTC statute violations. To determine a dollar amount, the FTC and court look at the degree of culpability, effect on continued business, history of previous violations or similar conduct, and ability to pay. To ease financial hardship, small businesses may apply for a leniency program.

In addition to civil penalties, the FTC often seeks monetary restitution for customers. Under the FTC Act, the FTC can seek not only business profits but any ill-gotten revenue.

FTC files Suit Against ISO, Merchant Processor – FTC v. Electronic Payment Solutions of America, Inc., et al.

The FTC recently filed suit against Electronic Payment Solutions of America, Inc., et al., seeking to hold Independent Sales Organizations and their sales reps liable under the FTC Act (and other statutes). The case is significant because the FTC takes a stance against ‘Independent Business Organizations’ involvement in affiliate marketing operations, stating that: “[t]he practice of processing credit card transactions through another company’s merchant accounts is called “credit card laundering” or “factoring” in the credit card industry. It is strictly forbidden by the credit card companies and is illegal under the TSR.”[1]

The liability at issue in this case is largely based upon the alleged fraudulent scheme in a prior case, FTC v. Money Now Funding, LLC et al. The initial Complaint in that case alleges that from 2011 to 2013, the principals of Money Now Funding, LLC (“MNF”) operated a deceptive telemarketing scam, charging thousands of consumers more than $7 million for worthless business opportunities and related upsells.[2] In 2013, the FTC sued MNF for telemarketing worthless business opportunities to consumers and falsely promising that consumers would earn thousands of dollars in income.[3] In 2015, the court entered summary judgment and default judgments against certain MNF defendants, finding that MNF was a multi-million dollar scheme to defraud consumers.[4]

The MNF case is significant because the defendants in the present case of FTC v. Electronic Payment Solutions of America, Inc., et al. are alleged to have processed victim credit card charges through merchant accounts established in the names of MNF’s fictitious companies, rather than through a single merchant account in the name of MNF.[5] Specifically, in 2012 and 2013, Electronic Payment Solutions, LLC served as the ISO for the entities involved in the MNF scam.[6] MNF transactions were also alleged by the FTC to have been laundered through at least two merchant accounts set up in the name of companies created by defendants in the Electronic Payment Solutions of America, Inc., et al. case.[7]

The present case involves two groups of defendants: the “KMAWigdore Defendants” and the “EPS Defendants” (the two groups collectively the, “Defendants”). The KMA-Wigdore Defendants are three individuals who acted as Independent Sales Organization (“ISO”) sales agents to other Defendants, and four entities associated with these individuals. The EPS Defendants are the ISO, their two principals, and risk manager.

The FTC’s pleadings state that EPS Defendants marketed ISO and payment processing services to prospective merchants.[8] They also: (1) did the underwriting for MNF and (2) using the services of two payment processors, processed more than $5,895,035 in MNF transactions through these and other merchant accounts. [9] Furthermore, the Complaint alleges that EPS Defendants used ISO “sales agents” to market the processing services to merchants.[10] Three of these sales agents, Defendants Jay Wigdore, Michael Abdelmesseh, and Nikolas Mihilli, directly participated in the MNF credit card laundering scheme.[11] Defendant Wigdore submitted the merchant applications for the MNF fictitious companies to the EPS Defendants.[12] Once the EPS Defendants processed MNF’s transactions through the fictitious company accounts, the MNF sales revenues were transferred to companies controlled by the ISO sales agents and others.[13]

Most significant from this case is the conduct the FTC took issue with. The FTC is alleging the Defendants failed to sufficiently screen incoming merchants that were applying for merchant accounts with Merrick, the acquirer.[14] As an ISO for Merrick, the FTC claims that the EPS Defendants were contractually required to comply with Merrick’s underwriting rules for screening merchants, which included strict guidelines designed to verify the identity of the merchant and the legitimacy of the merchant’s business, and to screen out merchants potentially engaged in fraud.[15] The FTC is also alleging that the EPS Defendants had a duty to adequately monitor its merchants’ transactions, update merchant information in the merchant database, and ensure that its merchants complied with the card networks’ rules and various fraud monitoring programs.[16]

Thus, the FTC claims that, rather than verify its merchants’ identities, the EPS Defendants opened merchant accounts in the names of numerous fictitious companies for the same underlying merchant, and thereby falsely represented the true identity of the fictitious companies.[17] Additionally, the Commission asserts that the Defendants: (a) ignored obvious warning signs of fraud, including the likely presence of credit card laundering; (b) concealed from Merrick (the acquirer) and the card networks the true identity and nature of the MNF Fictitious Companies; and (c) made every effort to continue processing for the MNF Fictitious Companies, and other merchants related to the KMA-Wigdore Defendants, even after Merrick noticed signs of fraud and instructed EPS to stop.[18]

The FTC’s allegations in this case against merchant processing entities, and definition of “credit card laundering”, highlight the FTC’s level of scrutiny that ISOs and acquirers face moving forward. Regardless of how the case concludes, it shows a decreasing level of tolerance by the FTC for those that play even more passive/secondary/indirect roles in the traditional affiliate marketing operational structure.

 

 

[1] FTC v. Electronic Payment Solutions of America, Inc. Complaint ¶ 6.

[2] See e.g., Final Judgment and Order for Permanent Injunction and Equitable Monetary Judgment as to Defendant Leary Darling.

[3] See FTC v. Money Now Funding, LLC, et al., CV 13-01583-PHX-ROS (D. Ariz. 2013) Complaint

[4] See e.g., Final Judgment and Order for Permanent Injunction and Equitable Monetary Judgment as to Defendant Leary Darling.

[5] FTC v. Electronic Payment Solutions of America, Inc. Complaint ¶ 5.

[6] Id. at ¶ 12.

[7] Id. at ¶ 5.

[8] Id. at ¶ 10.

[9] Id. at ¶ 18.

[10] Id. at ¶ 12.

[11] Id.

[12] Id.

[13] Id. at ¶ 13.

[14] Id. at ¶ 82.

[15] Id.

[16] Id. at ¶ 83.

[17] Id.

[18] Id. at ¶ 84.

FTC Charges Online Marketers and Merchant Account Entities

negative option marketingThe FTC fired warning shots that could affect affiliate marketers, publishers, and merchant account signers. The FTC filed suit against RevGuard, LLC and 60 other defendants. What’s the charge? Negative option marketing (FTC Act, 15 U.S.C. § 45(a), and ROSCA, 15 U.S.C. § 1843).

Negative Option Marketing At Center of RevGuard FTC Lawsuit

The lawsuit asserts that RevGuard, et al. deceptively billed people who bought a tooth-whitening product.[1] A negative option plan generally refers to transactions in which a seller interprets the customer’s failure to take an affirmative action — typically cancelling an offer — as consent to be charged for goods or services on a recurring basis.

In the FTC v. RevGuard case, the FTC alleges that the defendants’ checkout pages were structured so that once a customer made a purchase, they were instantly redirected to another page that displayed a large yellow “complete checkout” button. The commission further alleges that when customers clicked to “complete checkout” they were enrolled in a second negative option plan for additional products. According to the FTC, the offending checkout page looked like an order confirmation.

Who Does This Decision Affect?

Though the FTC commonly cracks down on negative option schemes, this case has significant implications for merchant transaction companies. Specifically, the FTC’s co-defendants list included: (1) service providers that perform the fraud’s “back office” functions; (2) intermediate holding companies that obscure financial transactions; and (3) merchant entities that obtain merchant accounts, web domains, and credit-card settlement bank accounts.[2] In essence, this case raises concerns for entities that did nothing more than open merchant accounts.

Furthermore, and far more troubling, is that the asset freeze applied to the aforementioned three groups of co-defendants, not just the affiliate marketers who actually profited from the scheme.[3] In particular, the Ex Parte Temporary Restraining Order issued by the Court declared that the asset freeze applied to “. . . [d]efendants and their officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly . . . .”[4]

This case should serve as a lesson for entities involved in similar arrangements. While the FTC v. RevGuard, LLC case is just getting started (it has not even been posted to the FTC website as of the date of this post), it promises to shake up the industry and force affiliate marketers to get creative with structuring future payment processing arrangements.

Sources

[1] FTC v. RevGuard, LLC et. al. Complaint at 21.

[2] FTC v. RevGuard, LLC et al. Emergency Motion for a Temporary Restraining Order at 12.

[3] FTC v. RevGuard, LLC et al. Ex Parte Temporary Restraining Order Granting Asset Freeze, Appointment of a Temporary Receiver, and other Equitable Relied, and Order to Show Cause Why a Preliminary Injunction Should Not Issue § 5.

[4] Id. at § V(A).

The Recent Crackdown on Tech Support Scams

tech support scams lawyerBetween 2012 and 2014,  40,000 people complained to the FTC about tech support scams. Since then, the agency has carefully monitored the situation and stepped up efforts to prosecute scammers.

Though the commission’s efforts may help prevent future problems, current tech support scam victims may need legal assistance. If you’re one such person, an FTC attorney can explain your legal options.

In the meantime, let’s take a look at some common tech support scams.

Large Company Popup Scams

The FTC recently settled with defendants who ran a popup ad scam. A “computer virus” warning would splash on victim’s screen, prompting the person to call in and be “shown” the problems. To add verisimilitude, the scammers claimed to be from large companies, like Apple, Google, and Microsoft.

This is one of the most common ways for tech support scammers to steal, but it is easily avoided by keeping anti-viruses software current and ignoring online popups claiming that your computer is infected.

Facebook Tech Support Scams

Facebook has tech support staff, but they don’t contact users. So, if someone from Facebook tech support calls claiming you must pay to change a service, hang up. Because once they have the victim’s financial information, they can use the person’s account for illegal purchases.

License Agreement Violations

This scam relies on the victim not understanding how computer licenses work. Perpetrators tend to target companies but they also sting individuals.

How does it work? The scammer accuses the victim of violating a licensing agreement. Many companies do not track this kind of information on such a detailed level and just pay up.

Connect With An FTC Lawyer About Tech Support Scams

Despite their best efforts, people will continue to fall victim to these types of scams. Even the most knowledgeable user can slip up. When this happens, an FTC attorney can help.

E-commerce Law: Price Scraping Can Lead To Legal Troubles

price scraping legal mattersPrice scraping tools help companies match competitors’ prices. But be warned: using them can lead to FTC anti-competition allegations.

What Is Price Scraping?

Price scrapping programs mine product and pricing information from competitor websites. Popular brands include Upstream Commerce and Mozenda.Typically, businesses use them to ensure that their prices stay in-line with the market; some companies manually change prices based on the price scraping data, while others set it up to change automatically, based on a predetermined metric.

Though helpful to many businesses, the problem with these systems is twofold.

  1. Businesses that become overly dependent on the price scraping data may not develop their own (potentially more profitable) sale program and only lower prices when competitors do.
  2. The FTC may classify excessive price scraping initiatives as anti-competitive since one company’s price increase has a market-wide ripple effect. In a market in which demand is inelastic, one company’s price increase could result in all of the companies raising their prices if all are using a similar price-scraping software.

While regulations have not yet been put into effect to control online price-scraping technologies in the U.S., some regulatory efforts in the European Union have already begun, leading an FTC attorney to believe that it is only a matter of time before the use of these technologies falls under similar scrutiny in the U.S.

Potential Antitrust Problems

E.U. authorities have opened two investigations into companies that have allegedly used price scraping tools for anti-competitive reasons. Though U.S. authorities have yet to follow suit, the potential for private antitrust litigation looms.

Take Uber. The ride share company is currently on the hot seat for its price surge algorithm. Some people say it’s a price-fixing scheme. Why? Because the algorithm reportedly manipulates price based on the demand of all Uber drivers in a given area.

Uber’s case is similar to a DOJ action targeting online poster sellers. In that case, several poster companies agreed to use the same algorithm to standardize prices. What made the case slightly different, however, was that it featured a prior agreement.

Potential Robinson-Patman Problems For Distributors

The Robinson-Patman Act forbids sellers for charging buyers who are competing for products different prices for the same products. If that occurs, a buyer who is disfavored by the use of the pricing algorithm may be able to successfully sue the company under the Robinson-Patman Act.

The FTC has decreased its enforcement of violations under the Robinson-Patman Act in the past few years. Before the presidential election, however, some folks were calling for stepped-up enforcement. Even if the FTC does not pursue enforcement, private actors still could file lawsuits.

A longstanding Supreme Court decision barred manufacturers from forcing distributors to charge specific prices. To get around it, manufacturers started the “suggested retail price” program. And though the Supreme Court overturned that decision in 2007, companies must still contend with state laws that forbid vertical price-fixing.

Price scraping tools aren’t all bad. However, as FTC attorneys, we advise companies to be careful with pricing algorithms. Again, though the Federal Trade Commission may not take action, the risk of private antitrust lawsuits may simply outweigh the potential benefits.

Connect With An FTC Lawyer About A Price Scraping Matter

Do you have a price scraping question? Want to make sure your pricing algorithm complies with federal, state, and local laws? Our e-commerce legal team can do that for you. Get in touch today.

FTC v. Qualcomm: Motion to Dismiss FTC Patent Antitrust Claim

The Federal Trade Commission (FTC) and technology giant Qualcomm are at loggerheads. And the kerfuffle involves Apple.

(Article continues below Infographic)

Qualcomm FTC Patent Antitrust Lawsuit_FTC Attorney

Discovery Phase

FTC v. Qualcomm: The FTC’s Side

The FTC asserted that Qualcomm grossly and illegally overcharged for patent chip technology. The agency also suggested that Qualcomm abused its market position.

Additionally, agents alleged that because Qualcomm is a major baseband chip provider it can force companies, like Apple, to sign expensive licensing deals for technology not even used in its chips.

By pursuing the issue, the FTC believes it’s protecting innovation, competition, and consumer pricing.

During discovery on April 12, 2017, the FTC expressed concerns that if discovery (and the rest of the suit) did not move along at a good pace, their ability to obtain equitable and effective relief would be jeopardized.

FTC v. Qualcomm: Qualcomm’s Side

One of Qualcomm’s arguments is that Apple allegedly put the FTC up to an unsubstantiated lawsuit. This is something they say Apple has done before. Apple is presently withholding billions of dollars in royalty payments from Qualcomm.

Qualcomm has been under worldwide scrutiny with fines in South Korea ($854 million), China ($975 million), the EU, and elsewhere. Additionally, Blackberry was awarded $814.89 million in a similar dispute with Qualcomm.

Qualcomm maintains that the FTC has no evidence of anticompetitive harm to its rivals. The motion to dismiss is based on the fact that competitors have not yet produced a single instance where they have suffered loss as a result of Qualcomm’s patent royalties. After the FTC responds to the motion on May 12, 2017, Judge Lucy Koh will decide whether to dismiss.

Connect With An FTC Compliance Lawyer

Is the FTC knocking on your door? Do you want to make sure the FTC doesn’t come knocking? Either way, we can help. Get in touch today with our FTC defense team to begin the conversation. The consultation is on us.

Gordon Law Moves Court to File Counterclaim against FTC

FTC lawyer

DOTAuthority.com and Affiliates File A Counterclaim Against the Federal Trade Commission (“FTC”) for Defamation and Tortious Interference

March 21, 2017 – Fort Lauderdale, FL – Gordon Law Group has moved the court on behalf of clients DOTAuthority, Inc. et al.(“Plaintiffs”) for leave to file a counterclaim against the Federal Trade Commission (“FTC”) alleging defamation and tortious interference (CIVIL ACTION NUMBER: 0:16-cv-62186-WJZ) in the United States District Court for the Southern District of Florida.

Business to FTC: Derogatory Alerts Caused Undue Harm

On March 20, 2017, the Plaintiffs filed an action for declaratory and injunctive relief against the FTC to correct press releases, blog posts, a scam alert listing, and public comments by the FTC and its designated representatives. The materials at issue allegedly injured the Plaintiffs’ reputations and revenue streams. The Counterclaim also asserts a cause of action for the FTC’s alleged tortious interference with Plaintiffs’ business relationships.

Business to FTC: We Used Proper Disclaimers

The newly filed countersuit arises from the FTC’s September 2016 lawsuit accusing DOTAuthority.com and its affiliates of deceptive business practices. Specifically, commissioners argued that DOTAuthority.com purposefully tried to mislead consumers into believing it was a government entity (CIVIL ACTION NUMBER: 0:16-cv-62186-WJZ). The Plaintiffs’ court filing states thatDOTAuthority.com’s marketing materials, websites, and shopping carts featured pre-existing, adequate good faith disclaimers explaining that the company is a third party and “not the Department of Transportation.”

On September 15, 2016, the FTC obtained an ex parte temporary restraining order without DOTAuthority.com’s knowledge. The agency froze the personal and business assets of DOTAuthority.com and its owner James Lamb. The court also appointed a receiver to wrest control of the company away from Lamb during the proceeding’s pendency.

Overruling the FTC’s objections, on September 28, 2016, the Federal court took witness testimony from Lamb and heard arguments. In defense of Lamb and his business, the Gordon Law Group argued that:

Gordon Law Group Convinces Court To Unfreeze Client’s Millions

Gordon Law Group prevailed at the September 29, 2016 hearing. The court immediately unfroze $4 million in assets and terminated the receivership.

Ultimately, the FTC issued a significantly modified preliminary injunction, which the Plaintiffs accepted. In fact, the revised order was nearly identical to the original restrictions voluntarily offered to the FTC.

Did The FTC Commit An Act of Defamation?

Specifically, DOTAuthority.com’s March 20, 2017 counterclaim against the FTC alleges that several of the agency’s pre-trial publications falsely characterized the Plaintiffs as “scammers” and “crooks” and exaggerated their culpability by using inflammatory language in the absence of a final judgment.

The countersuit explicitly alleges that the FTC’s publications intentionally mischaracterize the substance of the September 29, 2016 court order, causing proximate and irreparable injury to the Defendants’ reputations and revenues.

According to one of the members of DOTAuthority.com’s legal team, Attorney Andrew Gordon:

“The FTC’s publications at issue in the Counterclaim collectively mischaracterize the substance of the preliminary injunction order. The language caused proximate and irreparable injury to the Defendants’ reputations and revenues.”

Attorneys Andrew Gordon, Aaron Wiener, and Bradley Gross represented DOTAuthority.com. Attorneys Karen S. Hobbs, Danielle Estrada, Connell McNulty and Collot Guerard represented the FTC. The case is expected to go to trial in October 2017.

FTC Compliance: Internet Advertising Campaign Regulations

FTC defense lawyer for Internet advertising campaignA well-executed Internet advertising campaign can make a business, but it must comply with Federal Trade Commission marketing and advertising regulations.

When the FTC catches companies shirking promotional rules, it can dole out devastating fines. Want to keep the agency off your back? Hire an FTC attorney for a marketing compliance review.

Rules For Internet Advertising Campaigns

The Federal Trade Commission, which derives its power from the Federal Trade Commission Act, promulgates and enforces Internet advertising regulations. Primarily, the commission bars businesses from using deceptive and misleading advertising strategies.

Situations vary and the devil is typically in the details, but the top three Internet advertising campaign don’ts are as follows.

  1. Don’t make false claims.
  2. Paid promoters, influencers, and affiliate marketers who promote brands in exchange for money or products must conspicuously disclose this material relationship. If they don’t, the brand can be held responsible.
  3. Don’t make scientific claims without substantive proof to back them up.

Factual Omissions Can Qualify As “False Claims”

Failing to provide pertinent information in a marketing campaign also falls under “noncompliance.”  If companies fail to disclose information that could impact consumers’ product understanding, the FTC can hold them liable for deceptive advertising.

Potential Enforcement Actions

The FTC uses a number of enforcement actions depending on the severity of the matter. It may issue cease-and-desist orders, fencing-in provisions, corrective advertising orders, or numerous other informational remedies, including bans and fines.

Connect With An Internet Marketing Attorney

Is the FTC investigating your marketing campaign? Want to avoid future run-ins with the agency? Either way, we can help. Get in touch today to begin the conversation. The consultation is on us.

FTC Acknowledges Crusade Against Health-Related Deceptive Advertising

Health-Related Deceptive AdvertisingThe FTC initiated a “dietary sweep” to combat health-related deceptive advertising in the weight loss, hair growth, opiate addiction relief, and cognitive supplement industries.

The FTC Made A Chart of 14 Health-Related Deceptive Claims

As part of its crusade, the Commission released a chart detailing fourteen health-related deceptive advertising lawsuits. Featured products included the Green Coffee Bean, W8-B-Gone, CITRI-SLIM 4, Elimidrol, and Procera AVH. And although the initiative targeted a variety of goods— ranging from hair growth gels to memory enhancement pills — the primary focus seems to be dietary weight-loss supplements.

FTC Warning Letter: Don’t Use Health-Related Deceptive Claims

Just yesterday, the FTC sent out a warning letter to twenty companies in the weight-loss supplement space. It emphasized the importance of using realistic product descriptions and citing scientific studies used in efficacy claims. Specifically, such studies must be randomized, double-blind, placebo-controlled, and conducted by qualified researchers. (See, e.g., FTC v. Nat’l Urological Group, Inc., 645 F. Supp. 2d 1167, 1190, 1202 (N.D. Ga. 2008), aff’d, 356 Fed. Appx. 358 (11th Cir. 2009); FTC v. SlimAmerica, Inc., 77 F. Supp. 2d 1263, 1274 (S.D. Fla. 1999); Schering Corp., 118 F.T.C. 1030, 1080, 1115-16 (1991).) The letter further cautioned that testimonials are insufficient evidence to support weight-loss claims and instructs marketers on how to properly implement non-deceptive reviews.

National Prevention Council & FTC Partnership

The FTC’s heightened interest in health-related products may stem from the Commission’s partnership with the National Prevention Council. A federal task force, the NPC provides coordination and leadership regarding prevention, wellness, and health promotion practices.

Affiliate Marketers: Invest In A Marketing and Advertising Audit

This latest FTC health marketing crackdown should serve as a wake up call to affiliate marketers. If you’ve received one of the above-mentioned warning letters or are worried that your marketing compliance measures may be out-of-date, now is the time to invest in a marketing and advertising legal audit.

Contact A Marketing and Advertising Lawyer

Gordon Law Group prides itself on staying current with the evolving regulatory landscape of online and affiliate marketing law. We’ll keep you one step ahead of enforcement measures.