Transcript Program Materials - American Bar Association

ABA Consumer Protection
December 2006 Update
Randal Shaheen
Randall Miller
Amy Ralph Mudge
Dominic Vote
January 8, 2007
Agenda
FTC Update
State Attorneys General Update
Private Litigation Update
National Advertising Division Update
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FTC Update – Telemarketing Sales Rule
TSR Safe Harbor
– The FTC’s policy of not bringing actions
against parties delivering prerecorded
messages will be continued until the ongoing
proceedings examining the safe harbor
provision are completed.
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FTC Update – Telemarketing Sales Rule
Global Marketing Group Inc.
– The FTC successfully obtained a TRO and an
asset freeze against a payment processing
company that allegedly helped facilitate crossborder telemarketing fraud (an advance-fee
credit card scheme) in violation of the TSR
and the FTC Act.
– Complaint is pending.
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FTC Update – Telemarketing Sales Rule
DirecTV
– FTC settled with various telemarketers that
allegedly violated the Do Not Call provisions of
the TSR by calling customers on DirecTV's
behalf.
– The orders require the defendants to pay
$100,000 in civil penalties (with $500,000 more
suspended) and bar them from future TSR
violations.
– DirecTV previously settled related charges for
$5.3 million.
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FTC Update – Identity Theft
Federal Identity Theft Task Force
– Established by executive order and chaired by
Attorney General Alberto Gonzales and FTC
Chairman Deborah Platt Majoras.
– Seeking public comment on ways to improve the
effectiveness and efficiency of federal
government efforts to reduce identity theft.
– Comments must be filed by 1/19/07.
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FTC Update – Spanish Language Sweep
Del Sol LLC
– FTC settles case alleging scam targeting Spanish
speakers.
– Telemarketers would tell customers they had been
selected to get a valuable prize (computer/camera
etc.) if they purchased "designer" merchandise, such
as watches and fragrances. In return for payments of
$213-$250 consumers received only cheap knockoffs and outdated electronics.
– A $1.6 million judgment against defendants was
suspended based on inability to pay but defendants
will pay out $235,000 in redress.
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FTC Update – Spanish Language Sweep
Matos/QTX
– The FTC filed an amended complaint adding a new
party to this suit, which alleges that the defendants
violated the FTC Act and the Telemarketing Sales
Rule by making false earnings claims in connection
with the marketing and sale of work-at-home craft
assembly business opportunities through Spanishlanguage advertisements.
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FTC Update – Work-At-Home Scams
Project Fal$e Hope$
– FTC announces a joint federal and state law
enforcement sweep including more than 100 actions
targeting bogus business opportunities and work-athome scams.
– On December 12th, the FTC announced 9 newly filed
cases, described developments in 13 ongoing cases,
and referred 3 civil penalty cases to DOJ for filing.
– More detail on these cases can be found at
http://www.ftc.gov/opa/2006/12/falsehopes.htm
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FTC Update – Funeral Home Sweeps
Funeral Rule Compliance
– Over the past year the FTC has carried out
undercover visits to funeral homes in various states
checking compliance with the Funeral Rule, which
requires funeral homes to give consumers an
itemized general price list at the start of a visit to the
home to make arrangements.
– The FTC found violations at 12 funeral homes that
have elected to participate in a voluntary compliance
program and sent enforcement letters warning 32
other homes to correct technical violations or face
enforcement actions.
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FTC Update – Cross-Border Fraud Initiative
U.S. SAFEWEB Act
– FTC Chairman Majoras released statements
supporting Congress' passage and President Bush’s
signing of the U.S. SAFEWEB Act, which is intended
to help combat cross-border fraud. The Act:
Expands definition of “unfair or deceptive acts” to include
acts which cause reasonably foreseeable injury within the
U.S. or involve material conduct taking place in the U.S.;
Authorizes FTC to coordinate with and share certain
confidential information with foreign law enforcement
agencies;
Shields from liability certain individuals or entities voluntarily
providing information believed to be relevant to unfair or
deceptive acts or assets subject to recovery by the FTC.
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FTC Update – Debt Collection
Capital Acquisitions & Management Corp.
– FTC settled charges alleging that debt
collection companies threatened and
harassed consumers to get them to pay old,
unenforceable debts or debts they did not
owe.
– The companies paid a $300,000 civil penalty
and $1 million in consumer redress.
12
FTC Update – Health Products
Weight-Control Pill Marketers
– FTC settles with marketers of four products alleged to
have made weight-loss and weight-control claims not
supported by competent and reliable scientific evidence.
Xenadrine EFX
– Claimed rapid and substantial weight loss and falsely represented that
results were achieved solely by using Xenadrine EFX.
– $8 - $12.3 million in consumer redress
CortiSlim/CortiStress
– Claimed rapid and substantial weight loss and reduced risk of
osteoporosis, obesity, diabetes, Alzheimer’s disease, cancer and
cardiovascular disease.
– $12 million in consumer redress
TrimSpa
– Claimed rapid and substantial weight loss and suppression of appetite
– $1.5 million to settle charges.
One-A-Day WeightSmart
– Claimed weight loss through increased metabolism
– $3.2 million civil penalty
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FTC Update – Public Workshop
Negative Option Marketing
– On 1/25/07 the FTC will host a workshop analyzing
the marketing of goods and services that present an
opportunity to consent in advance to continue to
receive products or services in the future. The
workshop will address:
Pros and cons of such arrangements;
Consumer behavior;
Applicable standards for making such offers; and
Appropriate disclosures.
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State Attorneys General Update
YP Corp.
– Thirty-Four states reached settlement with YP
Corp. resolving allegations that the company
deceived consumers by automatically signing
them up for its on-line yellow pages through a
scam involving "activation checks."
– YP will cease using the checks and will pay
$2 million in restitution and investigatory
costs.
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State Attorneys General Update
Chase Bank & Trilegiant
– Seventeen states reached settlement resolving
allegations that Chase & Trilegiant deceived
consumers into paying for membership programs that
claimed to offer discounts on automotive service,
home repair, shopping, and other services.
Consumers were automatically enrolled in the
programs after cashing small checks that were
included with membership offers.
– Trilegiant was required to pay $8.325 million in
restitution and Chase was required to pay $6.175
million to cover civil penalties, legal costs and fees.
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Private Litigation Update – New Filings
Time Warner v. DirecTV
– Suit filed in S.D.N.Y. in December.
– Alleges that DirecTV falsely advertised that
viewers could not see certain games unless
they subscribed.
– Other ads featured Jessica Simpson and
William Shatner saying that DirecTV’s highdefinition TV service provides superior picture
quality than Time Warner’s cable HD service.
– Money damages sought---illustrative of trend?
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Private Litigation Update - Settlements
Cingular Wireless v. T-Mobile
– Cingular sued T-Mobile for “lowest dropped
calls” claim.
Jackson Hewitt pays $4M
– Same-day loans called “Money Now!”
advertised as a quicker way to get money at
tax time.
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Private Litigation Update –
Reported Decisions
Van Buskirk v. Greenlight Financial Services (Cal.App.)
– Plaintiffs alleged home loan program had hidden points.
– California Court of Appeals affirmed summary judgment
against plaintiffs for failure to establish injury.
Physicians Committee for Responsible Medicine v. General
Mills, Inc., (E.D.Va.)
– Plaintiffs sued dairy producers for falsely advertising the
weight loss benefits of consuming dairy products.
– Claims dismissed under doctrine of primary jurisdiction –
i.e., because of concurrent proceedings addressing
essentially the same claims at the FDA and FTC.
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National Advertising Division Update
Youth Enhancement Systems, Inc.
– A challenger filed a proceeding on the grounds that
current advertising for the hair product "ProCede" did
not comply with a previous NAD decision.
– NAD found that advertising for ProCede violated the
previous decision by using "before and after"
photographs, impliedly claiming that ProCede grows
hair and failing to disclose effectively that ProCede is
not intended to grow hair.
– NAD received written assurance from the advertiser
that it will modify its advertising to comply with the
NAD decision.
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National Advertising Division Update
Advanced Body Care Solutions
– A challenger filed a proceeding on the grounds that
current advertising for the hair product "Follicare" did
not comply with a previous NAD decision.
– NAD found that, despite a few "inadvertent" slip ups,
the advertiser substantially complied with the previous
decision by withdrawing representations that all
consumers will experience hair growth and modified
"before and after" pictures to disclose that results may
vary.
21
National Advertising Division Update
Proctor & Gamble Company
– Kimberly-Clark Corporation (maker of Huggies
diapers) challenged advertising claims of "superior
overnight absorbancy" made by P&G (maker of
Pampers diapers).
– The NAD found that P&G's claims of superiority were
supported by the evidence but nevertheless
recommended that a side by side demonstration in
the commercial be discontinued because it bore little
relevance to actual usage or the underlying tests
done to support the claim.
22
National Advertising Division Update
Romfab
– Romfab claimed its Range of Motion Exercise
Machine could achieve in 4 minutes, the
same results as 20-45 minutes of aerobic
exercise, 45 minutes of weight training and 20
minutes of stretching combined.
– Romfab refused to provide substantiation for
its claims and NAD referred the matter to the
FTC for review.
23
National Advertising Division Update
S.C. Johnson & Sons, Inc.
– Reckitt Benckiser, Inc. (maker of Lysol products)
challenged S.C. Johnson's (maker of Oust Air
Sanitizer) claim that Lysol is ineffective on odors in
the air.
– NAD found that S.C. Johnson's representation
regarding Lysol's ineffectiveness was misleading and
recommended that the commercial be discontinued or
modified.
– S.C. Johnson disagreed with the decision but agreed
to take in into account when considering future
advertising.
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National Advertising Division Update
DermaDoctor
– NAD sought substantiation of claims of
effectiveness of "Picture Perfect Pore
Minimizing Solution."
– NAD found that DermaDoctor provided a
reasonable basis to support a general efficacy
claim and found that the product works to
remove excess skin oils and smooth out pore
edges.
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National Advertising Division Update
Wright Medical Technology, Inc.
– NAD referred Wright Medical Technology to the FTC
and the FDA for failing to comply with a previous NAD
decision regarding the advertisement of a wound-care
product called "GraftJacket."
– The advertiser provided a "clinical comparison" on its
website that suggested that the various products
listed were comparable and subject to the same
regulatory standards of proof when the clinical
methodology's and testing criteria were significantly
different.
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