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Home Security Company ADT Settles FTC Charges that Endorsements Deceived Consumers

As part of its ongoing crackdown on misleading endorsements in advertising, the Federal Trade Commission has charged the home security company ADT LLC with misrepresenting that paid endorsements from safety and technology experts were independent reviews. Under an agreed-upon settlement, ADT is prohibited from misrepresenting paid endorsements as independent reviews in the future.

Boca Raton, Florida-based ADT manufactures and markets the ADT Pulse home security and monitoring system and various other security products and services. The FTC’s administrative complaint alleges that ADT paid spokespeople to demonstrate and review the ADT Pulse on NBC’s Today Show, as well as other television and radio news programs and talk shows across the country, and in blogs and other online material. ADT, the FTC alleges, misrepresented that the reviews were independent, and failed to disclose that the experts were being paid by ADT to promote the Pulse system.

“It’s hard for consumers to make good buying decisions when they think they’re getting independent expert advice as part of an impartial news segment and have no way of knowing they are actually watching a sales pitch,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “When a paid endorser appears in a news or talk show segment with the host of that program, the relationship with the advertiser must be clearly disclosed.”

ADT paid three spokespersons, including a child safety expert, a home security expert, and a technology expert, more than $300,000 to promote the ADT Pulse, with one spokesperson receiving more than $200,000. Two of those spokespersons also received a free ADT Pulse security system, valued at approximately $4,000, and free monthly monitoring service, according to the complaint. In exchange, the spokespersons appeared on more than 40 different television and radio programs nationwide and posted blogs and other material online.

ADT set up media interviews for the endorsers through its public relations firms and booking agents – often providing reporters and news anchors with suggested interview questions, and background video, also known as b-roll, according to the complaint. The paid ADT endorsers were introduced by program hosts as experts in child safety, home security, or technology, usually with no mention of any connection to ADT. The endorsers sometimes demonstrated child safety, home security, or technology products other than the ADT Pulse, adding to the impression that they were providing an impartial, expert review of the products.

The proposed order:

prohibits ADT from misrepresenting that any discussion or demonstration of a security or monitoring product or service is an independent review provided by an impartial expert;
requires ADT to clearly and prominently disclose, in connection with the advertising of a home security or monitoring product or service, a material connection, if one exists, between an endorser and the company; and
requires the company to promptly remove reviews and endorsements that have been misrepresented as independently provided by an impartial expert or that fail to disclose a material connection between ADT and an endorser.

The Commission vote to issue the administrative complaint and to accept the agreement containing the proposed consent order for public comment was 4-0. The FTC will publish a description of the complaint and consent agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through April 7, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in electronic form should be submitted using the following Web link: https://ftcpublic.commentworks.com/ftc/adtconsent and following the instructions on the web-based form. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Signs Memorandum of Understanding with UK Privacy Enforcement Agency

The U.S. Federal Trade Commission signed a memorandum of understanding (MOU) with the Information Commissioner’s Office (ICO) of the United Kingdom today to promote increased cooperation and communication between the two agencies in their efforts to protect consumer privacy.

The MOU was signed by FTC Chairwoman Edith Ramirez and the UK’s Information Commissioner and Chief Executive, Christopher Graham. It is designed to bolster their privacy enforcement partnership at a time when more and more consumer information is moving across national borders, increasing the need for cross-border enforcement cooperation.

FTC Chairwoman Edith Ramirez and UK Information Commissioner Christopher Graham seated at a table speaking with each other

FTC Chairwoman and UK Information Commissioner seated at a table signing the memo FTC Chairwoman Edith Ramirez and UK Information Commissioner Christopher Graham signing the Memorandum of Understanding

“As consumer data increasingly crosses borders, the FTC needs to be able to work with privacy enforcers around the globe in investigating potential violations of law,” FTC Chairwoman Ramirez said. “This arrangement with our UK counterpart will help us cooperate on privacy investigations more effectively.”

UK Information Commissioner Graham said: “The processing of personal information does not stop and start at the national border. In the digital age, national regulators must increasingly work together to protect the rights of consumers. The signing of today’s memorandum of understanding with the Federal Trade Commission is a demonstration of our commitment towards working with our international partners and can only be to the benefit of people in the United States and the United Kingdom.”

The FTC is the chief U.S. consumer privacy agency. The agency’s comprehensive privacy program uses law enforcement, research, policy initiatives, and consumer and business education to protect consumers’ personal information. The UK’s ICO is responsible for protecting its citizens’ privacy through enforcement of the UK Data Protection Act, which implements the European Union’s 1995 Data Protection Directive.

Over the last several years, the FTC and the ICO have worked together on numerous investigations and international initiatives to increase global privacy cooperation. The ICO and the FTC are both founding members of the Global Privacy Enforcement Network (GPEN) and the London Action Plan, an anti-spam initiative.

In addition, earlier today the FTC, together with agency officials from the European Union and Asia-Pacific Economic Cooperation (APEC) economies, announced a project mapping two systems for protecting data transferred across borders. The project maps together the requirements for APEC Cross Border Privacy Rules (CBPRs) and EU Binding Corporate Rules (BCRs). The document, jointly designed by APEC officials and the EU’s Article 29 Data Protection Working Party, is designed to be a practical reference tool for companies that seek “double certification” under these APEC and EU systems, and shows the substantial overlap between the two. FTC Chairwoman Ramirez introduced the project at a press briefing today, along with Isabelle Falque-Pierrotin, President of the French data protection authority and Chair of the Article 29 Working Party.

The Commission vote authorizing Chairwoman Ramirez to sign the MOU on behalf of the agency was 4-0.

FTC Chairwoman Edith Ramirez, UK Information Commissioner Christopher Graham, FTC Commissioner Julie Brill, and FTC staff present for the signing

As more U.S. companies and consumers do business overseas, more FTC work involves international cooperation. The Office of International Affairs serves both as an internal resource to Commission staff on international aspects of their work and as an official representative to numerous international organizations. In addition, the FTC cooperates with foreign authorities through formal and informal agreements. The FTC works with more than 100 foreign competition and consumer protection authorities around the world to promote sound policy approaches. For questions about the Office of International Affairs, send an e-mail to [email protected]. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases and the FTC International Monthly for the latest FTC news and resources.

FTC Increases Deterrence with Stepped Up Enforcement of the Fair Debt Collection Practices Act

Over the last year, the Federal Trade Commission has continued aggressive enforcement of the Fair Debt Collection Practices Act by bringing or resolving nine debt collection cases, according to the agency’s annual summary of debt collection activities.

“When it comes to debt collection, the FTC has many tools in its arsenal, including research, enforcement, and consumer education,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “But in the years since the financial crisis hit, we have increased our emphasis on law enforcement.”

In 2013, the FTC obtained court orders stopping illegal debt collection activities in seven cases, and referred two other debt collection cases to the Department of Justice for civil penalties. In several of the cases, the FTC obtained temporary restraining orders halting the unlawful conduct, freezing the defendants’ assets, and appointing receivers to take over operations while court proceedings progressed (Asset & Capital Management Group and Goldman Schwartz Inc.). The Commission also brought its first enforcement action regarding text message debt collection (National Attorney Collection Services, Inc.), continued to pursue “phantom” debt collectors (Pinnacle Payment Services, LLC and Pro Credit Group, LLC), and placed the largest third-party debt collector under an order that includes the agency’s highest debt collection civil penalty (Expert Global Solutions). For the most egregious violators, the FTC obtained orders banning the responsible parties from ever participating in debt collection again (Forensic Case Management Services, Inc.).

The FTC also filed three amicus briefs in the last year. In its brief for the Seventh Circuit, the FTC argued that a payday lender’s mandatory pre-dispute arbitration clauses may be unconscionable, in part because they require alleged debtors to arbitrate in a remote tribal court, effectively pressuring those consumers to abandon their legal claims or defenses. The FTC joined the Consumer Financial Protection Bureau in filing two other amicus briefs. The first, submitted to the Seventh Circuit, argued that a debt collector violates the law whenever its communications tend to deceive or mislead consumers into believing that a time-barred debt could be the subject of a collection suit. The second, submitted to the Second Circuit, argued that debt collectors whose process servers failed to notify consumers that they were being sued violate the Fair Debt Collection Practices Act, which broadly prohibits deceptive and unfair collection practices in any form.

Besides enforcement, the FTC’s debt collection program includes education and public outreach as well as research and policy initiatives. The FTC’s consumer education work in debt collection, includes the launch last year of its Financial Educators site. The site addresses personal finance topics, including credit and debt, among other things. The FTC also collaborated with ChildFocus, Inc. and the Annie E. Casey Foundation to help produce the free guide, Youth and Credit: Protecting the Credit of Youth in Foster Care, which discusses credit issues facing the more than 26,000 children in the United States who age out of foster care every year. Finally, as part of the FTC’s Legal Services Collaboration project, FTC staff met with legal services providers in cities around the nation to discuss various consumer protection issues, including the FTC’s work in the debt collection arena.

The FTC’s research and policy activities include the Life of a Debt Roundtable Event, which examined data integrity in debt collection and the flow of consumer data throughout the debt collection process.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to submit annual reports to Congress on the Fair Debt Collection Practices Act. The FTC shares federal jurisdiction for enforcing the act with the CFPB. The FTC’s summary of its own recent work on debt collection issues assists the CFPB in preparing the report to Congress.

The Commission vote approving the letter was 4-0.

FTC Approves Final Order Settling Charges that Fidelity National Financial’s Acquisition of Lender Processing Services Was Anticompetitive

Following a public comment period, the Federal Trade Commission has approved a final consent order settling charges that Fidelity National Financial’s acquisition of Lender Processing Services was anticompetitive.

According to the FTC’s December 2013 complaint, the proposed combination of Fidelity’s and LPS’s title plant assets in six individual Oregon counties and the tri-county Portland, Oregon, metropolitan area is likely to substantially lessen competition, in violation of U.S. antitrust laws. Oregon law requires title insurers to own an interest in a title plant in each county in which they issue policies. This requirement creates a barrier to entry for new firms seeking to provide title insurance underwriting.

The proposed acquisition would eliminate one of only a few available title plants in six Oregon counties. In addition, under the rules that govern access to a jointly owned title plant in the Portland metropolitan area, the acquisition would give Fidelity and just one other underwriter the power to deny competitors continued access.

To preserve competition, the final settlement order requires Fidelity to sell a copy of LPS’s title plants in six Oregon counties and an ownership interest equivalent to LPS’s share of a jointly owned title plant in the Portland, Oregon, metropolitan area.

The Commission vote approving the final consent order was 3-1, with Commissioner Wright dissenting. Two comments were received during the public comment period and the FTC staff’s responses are posted here. (FTC File No. 131-0159; the staff contact is Jessica Drake, Bureau of Competition, 202-326-3144)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20001. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Approves Tesoro Corporation’s Application to Divest Boise, Idaho, Terminal Business and Related Assets to Sinclair Transportation Co.

Following a public comment period, the Federal Trade Commission has approved an application by Tesoro Corporation and Tesoro Logistics Operations LLC (Tesoro) to sell its petroleum-related terminaling business and related assets in Boise, Idaho, to Sinclair Transportation Co. The divestiture is required under a final FTC consent order approved in August 2013 to settle charges that Tesoro’s acquisition of Chevron Corporation’s Northwest Products Pipeline assets was likely to substantially lessen competition.

According to the FTC’s June 2013 complaint, the transaction as originally proposed would have likely led to higher prices by giving Tesoro ownership of two of the three full service light petroleum terminals in Boise. Tesoro’s divestiture to Sinclair will restore the competition lost through its acquisition of the Chevron assets.

The Commission vote to approve the proposed divestiture was 4-0. (FTC File No. 131-0052, Docket No. C-4405; the staff contact is Roberta Baruch, Bureau of Competition, 202-326-2861)

FTC Settlement Bans Precious Metal Marketers from Selling Investment Opportunities

The operator of a bogus precious metals investment scheme that bilked millions of dollars from investors, including many senior citizens, is permanently banned from selling any investment opportunities under a settlement with the Federal Trade Commission.

The settlement resolves FTC charges that Anthony J. Columbo and his companies, Premier Precious Metals Inc., Rushmore Consulting Group Inc., and PPM Credit Inc., conned consumers into buying precious metals on credit without clearly disclosing significant costs and risks, including the likelihood that consumers would subsequently have to pay more money or lose their investments.

In addition to banning the defendants from selling investment opportunities, the settlement order permanently prohibits them from misrepresenting material facts about any products and services, violating the FTC’s Telemarketing Sales Rule, failing to provide consumer information to the FTC so it can administer consumer redress, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information. The order also requires them to record all of their telemarketing calls for ten years.

The order imposes a judgment of more than $3.6 million against the defendants, which will be partially suspended after Columbo relinquishes to the FTC assets estimated to be worth about $3 million, including Florida real estate, personal property, and bank and investment accounts. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

For information about investing in precious metals, read the FTC’s Message sent, message received: Precious metal marketers agree to FTC settlement, Investing in Gold?, Investing in Bullion and Bullion Coins, and Investing in Collectible Coins.

The Commission vote authorizing the staff to file the proposed stipulated order was 4-0. It was entered by the U.S. District Court for the Southern District of Florida on February 25, 2014.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

National Consumer Protection Week 2014 Begins Sunday

The Federal Trade Commission, in collaboration with 74 federal, state and local agencies, consumer groups, and national organizations, celebrates National Consumer Protection Week, beginning Sunday, March 2, and running until Saturday, March 8.

Now in its 16th year, NCPW encourages American consumers to learn about their rights in the marketplace and to recognize and report scams, identity theft, and unfair business practices. Visitors to NCPW.gov can find information about a range of consumer topics, including managing credit and debt, staying safe online, stopping telemarketing calls, and the latest scam alerts.

“As our NCPW partnerships and outreach continue to grow, we encourage consumers to participate in their communities too,” said Jessica Rich, director, FTC’s Bureau of Consumer Protection. “Consumers can help by checking out our toolkit from the NCPW site, and sharing the materials with family and friends to help people be more informed.”

NCPW partners and hundreds of community groups across the country host events to promote general consumer education or highlight a specific issue, such as a shred-a-thon to reduce the risk of identity theft.

This new video explains more about NCPW:

Twitter Chat

To highlight NCPW, the FTC will host a Twitter chat to answer consumers’ questions about common scams on Tuesday, March 4 at 2:00 p.m. ET. Follow @FTC, and use the hashtag: #NCPW2014. See FTC Twitter chats to learn more.

The NCPW website has more information for consumers including how to subscribe to updates and the blog, and order free resources.

In Debt Collection Case, FTC Sends Refund Checks to Consumers

An administrator working for the Federal Trade Commission is mailing 8,352 checks averaging $91.14 each to consumers who were deceived into paying unnecessary “convenience fees” to Jacob Law Group, PLLC, on behalf of debt buyer Security Credit Services, LLC.

In 2013, the FTC charged both companies with violating the FTC Act and the Fair Debt Collection Practices Act for allegedly deceiving consumers by charging them an extra fee for paying by telephone, and falsely threatening to sue consumers in order to get them to pay.

The checks, which total more than $761,000, range in amount from $14.93 to $1,218.21 and will be mailed to consumers who paid convenience fees. The checks must be cashed within 60 days after they are issued.

Consumers who have questions should call the refund administrator, Analytics Consulting, LLC, at 1-855-763-9450. For general information, see www.FTC.gov/refunds. The FTC never requires consumers to pay money or provide information before redress checks can be cashed.

For consumer information about dealing with debt collectors, see Debt Collection.

Appeals Court Affirms Ruling in Favor of FTC, Upholds $163 Million Judgment Against ‘Scareware’ Marketer

In a victory for the Federal Trade Commission in its efforts to protect consumers from spyware and malware, a federal appeals court has upheld a district court ruling that imposed a judgment of more than $163 million on Kristy Ross for her role in an operation that used computer “scareware” to trick consumers into thinking their computers were infected with malicious software, and then sold them software to “fix” their non-existent problem.

“This is a huge victory for consumers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “As this case shows, scareware causes enormous economic injury. We remain committed to protecting consumers against this kind of scam.”

In October 2012, in addition to the imposing monetary judgment, the U.S. District Court for the District of Maryland permanently prohibited Ross from selling computer security software and any other software that interferes with consumers’ computer use, and from any form of deceptive marketing. In 2008, the FTC had charged Ross and six other defendants with conning consumers into buying software to remove malware supposedly detected by computer scans. The other defendants either settled the charges or had default judgments entered against them.

Ross appealed the district court ruling, including its finding in favor of the FTC on the issue of whether Ross was a “control person” who could be held liable for the deceptive practices. On February 25, 2014, the U.S. Court of Appeals for the Fourth Circuit upheld the lower court’s findings, stating, in part, that to rule in her favor “would effectively leave the Commission with the ‘futile gesture’ of obtaining ‘an order directed to the lifeless entity of a corporation while exempting from its operation the living individuals who were responsible for the illegal practices’ in the first place.”

To learn more about these kinds of scams, read the FTC’s “Free” Security Scans.

Another Group of Marketers Behind Phony ‘Gift Card’ Text Spam Settles FTC Complaint

A group of affiliate marketers has agreed to settle Federal Trade Commission charges that they took part in a scheme that bombarded consumers with tens of millions of spam text messages that lured consumers with phony gift card offers, and then directed recipients to deceptive websites.

The Chicago-based defendants in the case, operating through two companies called CPA Tank, Inc. and Eagle Web Assets, Inc., are the latest to settle FTC charges as a result of the agency’s crackdown on deceptive affiliate marketing on the Internet.

In its complaint, the FTC charged that CPA and Eagle paid affiliates to send out the spam text messages promoting supposedly “free” merchandise, such as $1,000 gift cards for Wal-Mart and Best Buy.

“Sending illegal text messages will get you in hot water with the FTC,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “You can’t avoid responsibility by hiring a third-party to send them for you.”

People who clicked on the links in the text message did not receive the promised items, the FTC charged. Instead, they were taken to websites that requested they provide personal information and sign up for numerous additional offers – often involving other purchases or paid subscriptions.

Earlier this month, the operators behind one of these websites agreed to pay $2.5 million to settle FTC charges. Another website operator was sued by the FTC in July 2013. In addition, the FTC sued a number of affiliates responsible for many of the underlying text messages in a sweep of enforcement cases in March 2013.

The FTC alleged the defendants’ deceptive and unfair practices violated the FTC Act. The final order against CPA Tank, Eagle Web Assets, and their respective principals, Vito Glazers and Ryan Eagle, prohibits them from making misrepresentations in marketing any good or service, including misrepresentations that a product or service is “free” or without cost or obligation.

It also requires defendants, if they offer products or services in the future, to disclose all material terms and conditions of such offers, and prohibits them from making, or initiating the transmission of, unauthorized or unsolicited commercial electronic text messages to mobile telephones or other wireless devices.

The settlement imposes a $200,000 judgment against the defendants, most of which is suspended, due to their inability to pay. It requires them to turn over $30,000 in cash plus the proceeds from the sale of Glazers’ 2007 Bentley automobile and Eagle’s 2006 Range Rover.

Information for Consumers and Business

The FTC has a new blog post for consumers, advising them how to recognize and avoid text-messaging scams, as well as information for businesses on this issue.

The Commission’s vote authorizing staff to file the stipulated final order was 4-0. The FTC filed the stipulated final order for permanent injunction in the U.S. District Court for the Northern District of Illinois, Eastern Division, and it was entered on February 26, 2014.

NOTE: Stipulated orders have the force of law when signed and approved by the District Court judge.

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