FTC Issues Notice of Penalty Offenses to Over 700 Retailers: Companies Now on “Notice” of Civil Penalty Jeopardy

As we speak, the FTC announced it had despatched “Notices of Penalty Offense” to over 700 businesses, together with prime shopper merchandise corporations, giant retailers, tech platforms, media and gaming corporations, and advert businesses, warning them towards participating in misleading and unfair practices when it comes to utilizing endorsements and testimonials in adverts.

This transfer was not fairly the everyday announcement from the FTC, which regularly makes use of its Enterprise Weblog and press releases to assist educate enterprise about their truth-in-advertising obligations. Slightly, the FTC appears to have reached again (method again) into its toolkit out there to it as an administrative enforcement company and dusted off a rarely-used method.

You see, the FTC usually doesn’t have authority to search civil penalties for a primary violation of the FTC Act, its major governing statute. Such authority is barely triggered below sure circumstances – when an administrative cease-and-desist order, an company rule, or the requirements articulated by the Fee, are violated. It’s that final class – prior acts or practices – that the Fee is relying on right here.

The FTC’s civil penalty authority may be triggered the place the Fee: (1) has already issued a written choice that sure conduct is unfair or misleading, and (2) {that a} specific firm knew the conduct was unfair or misleading. In that case, the Fee can file actions in federal court docket in search of to receive civil penalties from different corporations that commit related violations. These written choices the Fee is utilizing as authority? Effectively, the earliest was issued in 1941, and the newest got here out in 1984, all lengthy earlier than the arrival of the Web, e-commerce, social media, or influencer advertising and marketing.

By sending these 700+ Notice of Penalty Offenses, the Fee is hoping to create the requisite information now to pin on recipients later. This technique was presaged by FTC Commissioner Rohit Chopra and Client Safety Director Samuel Levine in an October 2020 article, “The Case for Resurrecting the FTC Act’s Penalty Offense Authority.” It’s clear that, within the wake of the Supreme Courtroom’s choice in April 2021 rejecting the FTC’s means to use the FTC Act to receive restitution and disgorgement from corporations that have interaction in unfair or misleading promoting practices, the company is in search of new methods to, within the phrases of Chopra and Levine, “substantially increase deterrence and reduce litigation risk by noticing whole industries of Penalty Offenses, exposing violators to significant civil penalties, while helping to ensure fairness for honest firms.”

In accordance to the FTC’s Business Blog, the truth that an organization has acquired a Notice now doesn’t point out that the Fee has purpose to imagine it’s breaking the legislation. The company has not reviewed the recipients’ promoting for violations, a minimum of not proper now. Nevertheless, corporations that obtain this Notice now have information that participating in conduct described therein may face a federal lawsuit by the FTC and be subjected to civil penalties of up to $43,792 per violation.

As we speak’s motion, which builds upon an identical strategy taken by the FTC last week concentrating on claims for for-profit schools, has the potential to considerably alter the enforcement panorama going ahead. Issues to do now?

  • Examine the list to see whether or not your organization was despatched a Notice;

  • Familiarize your self with the endorsement and testimonial practices described as prohibited within the Notice; and

  • Assessment your inner insurance policies for utilizing endorsements and testimonials in adverts, and ensure they adjust to the FTC’s necessities.


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