After the United States Supreme Court last year decision limiting the Federal Trade Commission’s ability to obtain financial relief, the FTC was forced to look for new ways to give its enforcement action some teeth.
Last fall, the FTC mentioned that he planned to start using his little-known and little-used system Criminal Offenses Authority, which gives the FTC the ability to seek civil penalties in cases where the marketer knew that its conduct was unfair or deceptive and the FTC had previously issued a written determination that such conduct was, in fact , unfair or misleading. The FTC then quickly issued notices of criminal violations on Money-making opportunities, Amendmentsand Educationwarning marketers of business opportunities and for-profit educational institutions, as well as anyone using endorsements in their advertising, that they better ensure their practices comply with the law.
Then, last week, in a surprise move, the FTC brought enforcement measures using its Criminal Violations Authority which was not based on these Criminal Violations Notices, but instead was based on prior actions taken by the FTC. As part of the announcement of these actions, the FTC said it is “reviving Supplemental Criminal Infringement Notices that were issued in the 1970s or 1980s but remain valid and relevant today.” These notices cover textiles, energy saving, fur products, home improvement products, car rentals, baits and switches, toys and weight reduction. The FTC warned that “companies in these industries should familiarize themselves with the Commission’s decision in these areas.” It is unclear, however, whether the FTC plans to review the practices of companies that received these notices decades ago, whether the FTC plans to re-send these notices to certain companies, or whether it plans to take other action to invoke his “Penalty Offense Authority”.
Here are some of the highlights from those older reviews.
In 1978, the FTC issued a Notice of Criminal Offenses Regarding Auto Rental Practices. This review is largely focused on advertising car rental prices. The FTC said that when car rental companies advertise prices, they must clearly disclose any other charges renters may be required to pay “to ensure that the consumer will not be misled by the advertisement as to the car rental costs”. The FTC has also warned car rental companies against “bait and switch” practices (see below).
Bait and Switch
In 1975, the FTC issued a Notice of Criminal Offenses Regarding Bait and Switch Selling Practices, which declared “bait and trade” practices illegal. In the Notice, the FTC defined “bait and switch” as “the advertising of a product without the bona fide intent to sell it, with the intent of entering into a contract with a potential customer in order to induce him or ‘change’ it to buy another product.” The FTC has declared the following types of “bait and switch” practices to be illegal:
- Denigrate an advertised product with the aim of tipping a customer towards the purchase of another product;
- Advertise a product whose actual appearance or performance discourages its purchase by being inferior to the advertised quality;
- Switching a customer to a more expensive product by refusing to show or sell the advertised product;
- Switching a customer to another product by claiming that the advertised product is not available or by not having the advertised product in reasonable supply; and
- Switching a customer to another product by refusing to take orders for delivery or failing to make delivery, if an order is taken, within a reasonable time.
In 1979, the FTC issued a Notice of Criminal Offenses Regarding Energy Savings Claims. In the notice, the FTC said the following practices are unfair or deceptive with respect to advertising home improvement materials or products:
- Misrepresent expected fuel or energy savings; and
- Represent energy savings or reductions in fuel bill prices where consumers would not ordinarily realize such savings or reductions.
In 1978, the FTC issued a Notice of criminal offenses regarding the labelling, billing and advertising of fur products. The notice contains information about the types of practices the FTC deems illegal in connection with the marketing and sale of fur, including such things as misidentifying fur, not disclosing that fur was occasion, failing to disclose when the fur was dyed, failing to disclose when the fur contains “legs, tails, bellies, or trash” and using misleading price claims.
In 1977, the FTC issued a Notice of Criminal Offenses Regarding the Advertising and Sale of Home Improvement Products. The notice identifies a number of practices that it believes are unfair or deceptive with respect to the advertising and sale of residential siding, storm windows and doors, swimming pools and other home improvement products, particularly :
- Engage in “bait and switch” practices;
- Falsely advertise that a product is offered at a special price or for a limited time;
- False advertising that consumers will receive a “free gift”;
- Misrepresenting the fuel or energy savings expected from the residential siding;
- Misrepresent the seller’s relationship with the manufacturer;
- Misrepresent the durability or maintenance characteristics of a product; and
- Misrepresenting that because a home can be used as a “model home”, the home will be available at a discounted price.
The FTC issued an undated advisory Notice of criminal offenses regarding textile fiber products. The notice identifies a number of practices, related to the marketing of textile fiber products, that the FTC says violates both the FTC Act and the Textiles Act, including mislabeling or misidentifying misrepresentation of textile fiber products and misrepresentation of the amount by which a fabric will shrink in the wash.
In 1976, the FTC issued a Notice of Criminal Offenses Regarding Toy Advertising and Packaging. In the notice, the FTC said it was unfair or misleading to:
- Distort the performance of a toy; and
- Use oversized containers or use pictures, representations, or written materials on containers to create a false and misleading impression of the contents or quantities they contain.
In 1983, the FTC issued a Notice of Criminal Offenses Regarding the Promotion of Weight Control Products and Plans. The notice identifies a number of practices that the FTC says are deceptive, including:
- Advertising that the use of appetite suppressants allows a person to lose weight or fat without dieting or restricting caloric intake;
- Misrepresenting that a product contains a single ingredient;
- Use testimonials to misrepresent the typical user experience of the product; and
- Making weight loss claims without proper scientific evidence to back them up.
While some of the practices identified in these reviews aren’t the biggest concern right now (whether your fur coat contains tails or paws, for example), there are plenty of things marketers should pay attention to. if they want to avoid FTC scrutiny in the future.
“Companies in these industries should familiarize themselves with the Commission’s determination in these areas”