FTC Testifies on Its Work to Protect Consumers and Promote Competition As the Agency Approaches Its 100th Anniversary

The Federal Trade Commission testified before Congress on the agency’s long track record of protecting consumers and promoting competition in the U.S. economy, as well as the agency’s ongoing work and future challenges as it approaches its 100th anniversary next year.

Testifying before the House Energy and Commerce Subcommittee on Commerce, Manufacturing and Trade, FTC Chairwoman Edith Ramirez and Commissioners Julie Brill, Maureen K. Ohlhausen and Joshua D. Wright told lawmakers that the FTC is a highly productive and efficient, small independent agency with jurisdiction to protect consumers and maintain competition in broad sectors of the economy.

“Our agency structure, research capacity, continued commitment to bipartisanship and cooperation, and exceptional staff will allow the FTC to continue to adapt to external changes and successfully fulfill its mission of protecting consumers and competition into its next century,” the testimony states.

President Woodrow Wilson signed the Federal Trade Commission Act and the Clayton Act in 1914, and the FTC opened its doors on March 16, 1915. The Commission was given enforcement authority and was empowered to conduct investigations, gather information, and publish reports. Since then, Congress has expanded the FTC’s responsibilities through a number of other statutes, such as the Fair Credit Reporting Act; the Fair Debt Collection Practices Act; and the 1994 Telemarketing and Consumer Fraud and Abuse Prevention Act, which led to establishment of the popular National Do Not Call Registry.

The testimony outlines the FTC’s current work to protect consumers and promote competition. In recent years, the FTC has emphasized protecting financially distressed consumers from fraud, protecting consumer privacy and data security, prosecuting false or deceptive health claims, and safeguarding children in the marketplace.

In fiscal year 2013, the FTC filed 72 new consumer protection complaints in federal district court and obtained 100 permanent injunctions and orders (including two civil contempt orders) requiring defendants to pay approximately $198 million in consumer redress or disgorgement of ill-gotten gains.

The FTC’s efforts to maintain competition focus on stopping anticompetitive mergers and other anticompetitive business practices in a wide range of industries of critical importance to American consumers, the testimony states. These include health care, technology, energy, consumer goods and services, and manufacturing. This work is critical to protect and strengthen free and open markets – the cornerstone of a vibrant economy.

In fiscal year 2013, the agency pursued 27 new competition law enforcement actions (merger and nonmerger) and undertook several important workshops, reports, and advocacy opportunities to promote competition and educate its stakeholders about the importance of competition to consumers. Over the past three years, the agency estimated that it saved consumers approximately $3 billion in potential price increases by stopping illegal anticompetitive practices and mergers in the marketplace.

Finally, the testimony describes the challenges facing the FTC as it nears its 100th anniversary. In light of resource constraints and a growing workload, the FTC will continue to leverage its resources through careful case selection, by partnering with public and private entities, and by improving its own technological infrastructure to allow its staff to work more effectively, among other things.

The FTC will continue to adapt as technology continues to evolve. The agency convenes public meetings, such as its recent workshop exploring the Internet of Things, that help the agency to identify the consumer protection and competition issues that may be raised by the use of new technology.

In addition, the testimony states, the FTC will seek to address challenges posed by increased globalization and an international marketplace, and will continue its longstanding initiative to review FTC rules and guides to ensure that they enhance consumer welfare without imposing undue burdens on business.

“As we approach our 100th anniversary, the FTC remains committed to finding ways to enhance its effectiveness in protecting consumers and promoting competition, to anticipate and respond to changes in the marketplace, and to meet current and future challenges,” the testimony states.

The Commission vote approving the testimony and its inclusion in the formal record was 4-0.

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 Announces Agenda, Panelists for Native Advertising Workshop

The Federal Trade Commission will host a workshop on December 4, 2013 in Washington, DC to examine the practice of blending advertisements with news, entertainment, and other editorial content in digital media, referred to as “native advertising” or “sponsored content.”

The workshop, “Blurred Lines:  Advertising or Content?” will bring together publishing and advertising industry representatives, consumer advocates, academics, and self-regulatory organizations to explore:  the ways in which sponsored content is presented to consumers online and in mobile apps; consumers’ recognition and understanding of it; the contexts in which it should be identifiable as advertising; and effective ways of differentiating it from editorial content.

The workshop will be free and open to the public.  It will be held at the FTC’s satellite building conference center, located at 601 New Jersey Avenue, N.W. in Washington, D.C.   
Updates to the agenda, and logistical information for those planning to attend can be found on the workshop website, which will also provide a link to the live webcast.

Reasonable accommodations for people with disabilities are available upon request. Requests should be submitted to Lara Busby via email at [email protected] or by calling 202-326-3388.  Requests should be made in advance, and include a detailed description of the accommodations needed and contact information.

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 to Host Spring Seminars on Emerging Consumer Privacy Issues

This spring, the Federal Trade Commission will host a series of seminars to examine the privacy implications of three new areas of technology that have garnered considerable attention for both their potential benefits and the possible privacy concerns they raise for consumers.

As the tools available to track, market to and analyze consumers – often without their knowledge – grow, businesses are able to meet consumers’ demands more efficiently and effectively. But these tools may also carry significant risks to consumers’ privacy. The seminars, taking place over three months, will shine a light on new trends in Big Data and their impact on consumer privacy. The topics will include:

  • Mobile device tracking – tracking consumers in retail and other businesses using signals from their mobile devices.
  • Alternative scoring products – using predictive scoring to determine consumers’ access to products and offers.
  • Consumer-generated and controlled health data – information provided by consumers to non-HIPAA covered websites, health apps and devices.

The series will bring together academics, business and industry representatives, and consumer advocates for two-hour discussion sessions, which will take place in Washington, D.C. and will be open to the public. The FTC invites comment from the public on the proposed topics, and will issue staff reports following the sessions.

Mobile Device Tracking – 10 a.m. to noon, Feb. 19, 2014
FTC Conference Center, 601 New Jersey Ave., NW, Washington, DC

Recently, retailers and other businesses have begun tracking consumers’ movements throughout and around retail stores and other attractions using technologies that identify signals emitted by their mobile devices. While the technologies differ, many work by identifying and collecting the MAC address – which is unique to a particular device – broadcast when a mobile device searches for Wi-Fi networks. Companies can use these technologies to reveal information about consumers including the path taken throughout a location, length of time in one location, whether a visitor is new or returning, and the frequency of visits to a location. According to media reports, major retailers in the United States are using or have tested the technology in their stores in order to gain insights into the behavior of their customers.

In most cases, this tracking is invisible to consumers and occurs with no consumer interaction. As a result, the use of these technologies raises a number of potential privacy concerns and questions. The seminar will address questions such as:

  • What different types of mobile device tracking are companies currently implementing, how do they work, and where are they used?
  • What are potential future uses of these technologies?
  • What are the similarities or differences between mobile device tracking and online tracking technologies?
  • What types of information and benefits do retailers gain from these technologies?
  • What benefits do consumers derive from these technologies?
  • What are the privacy and security risks associated with these technologies?
  • How are companies addressing these risks?
  • What information and choices are provided to consumers about this type of tracking?
  • How anonymous is the tracking?
  • How can companies implement the principles of privacy by design, simplified consumer choice, and increased transparency when designing and using these technologies?

Alternative Scoring Products – 10 a.m. to noon, March 19, 2014
FTC Conference Center, 601 New Jersey Ave., NW, Washington, DC

Many data brokers offer companies scores to predict trends and the behavior of their customers. Companies are using predictive scores for a variety of purposes, ranging from identity verification and fraud prevention to marketing and advertising.

For example, companies are using scores to predict the likelihood that a person has committed identity fraud; the likelihood that a certain transaction will result in fraud; the credit risk associated with certain mortgage loan applications; whether contacting a consumer by mail or phone will lead to successful debt collection; whether sending a catalog to a certain address will result in an in-store or online purchase; the likelihood that an individual is taking his or her medication; a person’s presence on the Internet and his or her influence over others; or whether a customer is pregnant, and if so, when the baby is due.

According to media reports, these scores are determining whether transactions trigger further scrutiny, the kind of special offers that companies make to certain individuals (and those they don’t), and even whether the customer should speak to a high-ranking customer service agent at a company.

Consumers are largely unaware of these scores, and have little to no access to the underlying data that comprises the scores. As a result, these predictive scores raise a variety of potential privacy concerns and questions. The panel will discuss questions such as:
 

  • What are the current types of predictive scores available to companies and what scores can we expect data brokers to offer in the future?
  • How are companies utilizing these predictive scores?
  • How accurate are these scores and the underlying data used to create them?
  • How can consumers benefit from the availability and use of these scores?
  • What are the privacy concerns surrounding the use of predictive scoring?
  • What legal protections currently exist for consumers regarding the use of predictive scoring, both in the United States and internationally?
  • What consumer protections should be provided; for example, should consumers have access to these scores and the underlying data used to create them? Should some of these scores be considered eligibility determinations that should be scrutinized under the Fair Credit Reporting Act?

Consumer Generated and Controlled Health Data – 10 a.m. to noon, May 7, 2014
FTC Conference Center, 601 New Jersey Ave., NW, Washington, DC

Increasingly, consumers are taking a more active role in managing and generating their own health data. For example, consumers are researching their health conditions and diagnosing themselves online. Consumers are also uploading their information into personal health records and apps that allow them to manage and analyze their data, and utilizing connected health and fitness devices that regularly collect information about them and transmit this information to other entities.

The movement of health data outside the traditional medical provider context has many potential benefits; however, it also raises potential privacy concerns. The seminar will address questions such as:

  • What types of websites, products, and services are consumers using to generate and control their health data, and how are consumers using them?
  • Who are the companies behind these websites, products, and services, what are their business models, and what does the current marketplace look like?
  • How can consumers benefit from these companies’ websites, products, and services?
  • What actions are these companies taking to protect consumers’ privacy and security?
  • What do consumers expect from these companies regarding privacy and security protections? Do consumers differentiate between these companies and those that offer traditional medical products and services that are covered by HIPAA?
  • What restrictions, if any, do advertising networks and others impose on tracking of health data?     

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.

At FTC’s Request, Telemarketer Ordered to Pay $5.1 Million to Reimburse Victims of Car-Buying Scam

At the Federal Trade Commission’s request, a federal court has ordered a Canadian telemarketer and four companies he owns to pay more than $5.1 million to American and Canadian consumers who were duped into paying hundreds of dollars based on false claims that the defendants had buyers lined up for their cars, and that refunds would be provided if the cars weren’t sold.  The court also permanently banned the defendants from telemarketing and payment processing.

According to the FTC’s complaint against Matthew J. Loewen  and his companies, the defendants called consumers who listed vehicles for sale on websites such as craigslist.org or ebay.com.  The defendants falsely claimed that, in exchange for a fee, typically $399, they would put the consumer in touch with a buyer, often telling consumers they had undervalued the vehicle and that the price the buyer was willing to pay would cover the defendants’ fee.  The defendants also offered $99 “refund insurance,” falsely promising consumers who purchased it a risk-free refund of their initial fee if the vehicle was not sold in 90 days.
           
On October 29, 2013, the U.S. District Court for the Western District of Washington found the FTC’s allegations to be true and ruled that the defendants’ telemarketing operation violated the FTC Act and the FTC’s Telemarketing Sales Rule.  According to the Court, the defendants’ promises to match consumers with car buyers was “simply false,” and the impression they conveyed of easily obtainable refunds was “decidedly deceptive.”

The Court also noted that, in order to evade detection, the defendants operated under a series of ever-changing corporate names (including Auto Marketing Group, Secure Auto Sales, and Vehicle Stars).  It also cited the defendants’ high rate of credit card chargebacks – in which consumers dispute charges and get them reversed — as further proof of the fraudulent nature of the defendants’ operation. 

In addition to the Order requiring Loewen and his co-defendants to pay $5.1 million, the Court permanently banned Loewen and his companies from telemarketing and payment processing.  The court order announced today also permanently prohibits the defendants from misrepresenting any material fact in selling used cars, including that they have identified potential buyers for a consumer’s vehicle and that, for a fee, they will put them in touch with the buyers.  The defendants are also barred from misrepresenting that those who buy their services are highly likely to sell their vehicle, and that some or all of the initial fee will be refunded if the consumer buys a refund insurance policy and the vehicle is not sold within some period of time.

The order also bars the defendants from misrepresenting material facts about any goods or services, selling or otherwise benefitting from consumers’ personal information, failing to properly dispose of customer information, and violating the Telemarketing Sales Rule.

The FTC acknowledges the assistance of Business Practices and Consumer Protection Authority, British Columbia, Canada.

To learn more about telemarketing scams, read Telemarketing Scams.

The Commission vote authorizing the staff to file the complaint was 5-0.  The complaint against Defendants Matthew J. Loewen and his companies 0803065 B.C. Ltd., 0881046 B.C. Ltd., ReadyPay Services, Inc., and Xavier Processing Services, LLC, was filed in the U.S. District Court for the Western District of Washington in Seattle.  The court entered summary judgment against the defendants on October 29, 2013.

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.

As Holiday Shopping Season Gets Underway, FTC Reminds Internet Retailers to Ensure Consumers Have Access to Warranty Information

Federal Trade Commission staff is asking top Internet retailers to review their websites to ensure that they provide complete and accurate information about product warranties before consumers make their online purchases, as required by the FTC’s Pre-Sale Availability Rule.

The Rule requires retailers to make warranties available at the time of purchase for all warranted consumer products that cost more than $15.  However, a recent staff survey found several instances of Internet sellers offering warranted consumer electronics and appliances for sale without disclosing complete warranty information.

“During the busy holiday shopping season, it’s especially important that consumers get the information they need to make informed buying decisions,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “Internet sellers can help by making sure their websites are providing complete and accurate warranty information.”

The letters also inform the Internet sellers that they can comply with these obligations easily online by, for example, using a clearly-labeled hyperlink, in close proximity to the description of the warranted product, such as ‘get warranty information here’ to lead to the full text of the warranty.”

The letters note that FTC staff plan to revisit the websites after 90 days to ensure compliance with the regulations.  The FTC cannot disclose the names of the warning letter recipients, as that is nonpublic information.

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 Approves Final Order Settling Charges that Honeywell’s Acquisition of Intermec was Anticompetitive in U.S. Market for Two-Dimensional Bar Code Scanners

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Honeywell International, Inc.’s acquisition of rival scan engine manufacturer Intermec Inc. was anticompetitive. The FTC’s complaint charged that the proposed acquisition would reduce competition in the U.S. market for two-dimensional (2D) bar code scanners. 2D scan engines are used in products such as retail store scanners to translate an image (often a UPC barcode) into a digital format that can be interpreted and analyzed by a computer.

First proposed in September, the FTC’s order preserves competition in the market for 2D scan engines by requiring Honeywell to license its and Intermec’s patents for 2D scan engines to Datalogic IPTECH s.r.l for the next 12 years. The Commission vote approving the final order was 4-0. (FTC File No. 131-0070; the staff contact is David Morris, Bureau of Competition, 202-326-3156)

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’s 2013 Report Finds U.S. Ethanol Market Remains Unconcentrated

The market for fuel ethanol in the United States is unconcentrated, with 156 firms nationwide either producing ethanol or likely to begin producing ethanol in the next 12 to 18 months, according to the Federal Trade Commission’s 2013 Report on the State of U.S. Ethanol Production. The lack of market concentration in this industry has been the case each year since the FTC began issuing reports in 2005.

This is the FTC’s ninth annual report on ethanol market concentration. FTC staff calculated market concentration for ethanol production using two different measures of market share – production capacity and actual production. This year’s report concludes that concentration levels in the U.S. ethanol industry are essentially unchanged from last year. The staff also concluded that as of September 2013, there were two more ethanol producers in the United States than at the time of the FTC’s 2012 report on U.S. ethanol production. The largest ethanol producer’s capacity share decreased slightly to 10.9 percent of domestic ethanol production capacity – below the largest producer’s 11.1 percent share in 2012.

The low levels of concentration and the large number of market participants in the U.S. ethanol production industry suggest that the exercise of market power to set prices, or coordination on price or output levels, is unlikely. Staff also concludes that ease of entry and availability of ethanol imports into the United States provide additional constraints on the ability of any group of domestic firms to exercise market power.

The annual reports are required by the Energy Policy Act of 2005. The 2013 report is available on the FTC’s website and as a link to this press release. It was submitted to Congress and the Administrator of the U.S. Environmental Protection Agency, as required by the Act. The Commission vote to issue the report, which was prepared by the staff of the Bureaus of Competition and Economics, was 4-0. (FTC File No. P063000; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702)

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.

Two I Works Billing Scheme Marketers Agree to Settle FTC Charges

Two key players in the I Works scheme that allegedly took more than $275 million from consumers via deceptive “trial” memberships for bogus government-grant and money-making schemes have agreed to settle Federal Trade Commission charges that they violated federal law.

Bryce Payne and Kevin Pilon, along with Jeremy Johnson and seven others, were named in a complaint the FTC filed against the operation in December 2010. The court subsequently froze the assets of Johnson and 61 corporate defendants, and appointed a receiver over their assets to help ensure that money can be returned to consumers if the case is resolved in the FTC’s favor.

The settlement order against Payne bans him from selling, and from owning or having a financial interest in any business that sells: grant-related products; investment opportunities; products with negative-option features or continuity programs; or forced upsells (extra products automatically bundled with a purchase). The order also bans him from being an officer, director, or manager of any business, or acting as a signatory on any account for any business, or applying for any merchant account for any business, unless he controls, participates in, or has knowledge of the daily operations of the business.

In addition, the order permanently prohibits Payne from:

  • making any of several types of material misrepresentations, including misrepresenting the total cost to buy a product, or any associated risks;
  • debiting consumers’ bank accounts without first obtaining their express verifiable authorization;
  • failing to make any of several key disclosures about material information, including the total cost to buy a product;
  • misrepresenting that an endorser is an independent, ordinary consumer; and
  • failing to disclose any material connection, when one exists, between an endorser and any individual or entity involved in the manufacture, advertising, sale, or distribution of the product or service being endorsed.

The settlement order against Pilon bans him from selling, and from owning or having a financial interest in any business that sells “forced upsells.” It also bans him from being an officer, director, or manager of any business, or acting as a signatory on any account for any business, or applying for any merchant account for any business, unless he controls, participates in, or has knowledge of the daily operations of the business.

The order also permanently prohibits Pilon from misrepresenting material facts about any product, and from making any of several types of specific misrepresentations, including misrepresentations:

  • related to the total cost to buy a product, or any associated risks;
  • related to the income or sales volume likely to come from an investment opportunity;
  • that government grants are available to pay personal expenses, that consumers can find such grants using materials provided by Pilon, or that consumers who buy an investment opportunity from him are likely to make money; and
  • related to any material aspect of a negative-option feature or continuity program.

In addition, the order prohibits Pilon from failing to make the same disclosures required in the order against Payne, and from failing to disclose all material terms and conditions of any negative-option feature or continuity program.

The orders also prohibit Payne and Pilon from selling or otherwise benefitting from consumers’ personal information, and failing to dispose properly of any customer information in their possession.  The settlement orders also prohibit them from making misrepresentations in order to obtain account services from payment processors, banks, and other third parties, and from failing to disclose to them any material information about a merchant account.

The settlement orders against Payne and Pilon impose monetary judgments of more than $289 million and $7.5 million, respectively.  The judgments will be suspended based on their inability to pay, provided they surrender certain assets to the FTC, including $20,000 from Payne and $1,000 from Pilon. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition. The FTC’s lawsuit against Johnson and his 61 companies is ongoing.

The Commission vote approving the proposed consent judgments was 4-0.  The judgments were entered by the U.S. District Court for the District of Nevada on October 21, 2013.

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

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 Settlement Bars Marketers from Using Deception to Sell Business Opportunities

The operators of a scheme to market a government insurance refund processing business are permanently prohibited from deceptive sales practices under a settlement with the Federal Trade Commission. The case is one of the first actions the FTC brought under its updated Business Opportunity Rule, which requires business opportunity sellers to provide specific information on a simple, one-page disclosure form to help consumers evaluate a business opportunity.

In November 2012, the FTC charged Smart Tools LLC and Kirstin Hegg with deceptively selling a home-based business opportunity that promised buyers they could earn up to $38,943 per year as “Government Insurance Refund Processors” – by finding persons eligible for refunds of their mortgage loan insurance premiums and charging a fee for telling them how to get the refunds.

Consumers incurred a recurring monthly charge of $29.99 (after a free trial period) for access to lists of refund-eligible persons and some refund-processing software. Although Smart Tools and Hegg led consumers to believe that the lists of those eligible for refunds were not available free of charge, the Department of Housing and Urban Development offers the same lists for free online.

Under the settlement order, the defendants, including newly added defendant, Curtis Dawn, are barred from failing to provide the disclosure form required under the business opportunity rule at least seven days before a contract is signed or a payment is made when selling business and work-at-home opportunities. The form includes information such as the seller’s name, address, phone number, and the salesperson’s name.

The disclosure form includes any earnings claims and must disclose the start and end dates when the earnings were made, and the number and percentage of people who bought the business opportunity and earned at least that amount. The form also must include any legal actions against the seller, or cancellation and refund policies, as well as references for all buyers of the business or work-at-home offer in the past three years, or if there are more than 10 former buyers, the names, states, and phone numbers of at least 10 of them.

The defendants also are prohibited from making any earnings claim directly to a buyer or in general media advertising unless they have a reasonable basis for making the claim and provide written substantiation upon request by a prospective buyer. The order also bars the defendants from misrepresenting material facts about any products and services and failing to comply with the Business Opportunity Rule.

In addition, the order requires the defendants to give the FTC a list of all of their customers, from January 1, 2009, until the date of the order, who have not canceled or are still being charged or billed. They must notify those customers of the order, immediately cancel their subscriptions, and stop charging them unless the consumers notify the defendants, in writing, that they wish to continue their subscriptions with Smart Tools, and agree to pay the ongoing credit or debit card charges. In addition, defendants are prohibited from selling or otherwise benefitting from customers’ personal information, and failing to properly dispose of customer information.  

The order imposes a $7.4 million judgment that will be suspended when defendants have paid $234,847. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

To help avoid these kinds of scams, visit the FTC’s Business Opportunity Scams and read Bogus Business Opportunities, Government Job Scams, Work-at-Home Businesses, and Mystery Shopper Scams, or go to the FTC’s Telemarketing Scams page.

The Commission vote authorizing the staff to refer the proposed amended complaint and proposed consent judgment to the Department of Justice was 4-0. The DOJ filed the amended complaint and proposed consent judgment on behalf of the Commission in U.S. District Court for the District of Oregon, Portland Division, November 25, 2013.

NOTE:  The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Consent judgments have the force of law when signed by the District Court judge.

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 Extends Deadline for Comments on Proposed Changes to Wool Products Labeling Rules

In response to requests from stakeholders, the Federal Trade Commission has extended the deadline for the public to submit comments on proposed changes to its Wool Products Labeling Rules as part of its systematic review of all current FTC rules and guides.  The deadline to submit comments will be extended from November 25, 2013 to December 3, 2013.

The Wool Products Labeling Rules require that labels on wool products disclose the manufacturer’s or marketer’s name, the country where the product was processed or manufactured, and information about the fiber content.

In response to public comments the FTC received last year, the agency is proposing changes designed to clarify and update the rules, to make them more flexible, and to align them with the Commission’s proposed amendments to the Textile Rules.  The proposed changes include incorporating the Wool Act’s new definitions for cashmere and very fine wools, clarifying descriptions of products containing virgin or new wool, and revising the Rules to allow certain hang-tags disclosing fiber trademarks and performance even if they do not disclose the product’s full fiber content.

The FTC first issued the Rules under the Wool Products Labeling Act of 1939, known as the Wool Act.  The agency completed its last review of the Rules in 1998 and modified the Rules in 1998 and 2000.  In 2006, Congress amended the Wool Act with the Wool Suit Fabric Labeling Fairness and International Standards Conforming Act, which provides that wool products identified as cashmere, or as containing very fine wools, are misbranded unless they have no more than the average fiber diameter specified in the Act

The Commission vote to extend the deadline for filing comments was 4-0.  Instructions for filing comments appear in the Federal Register Notice.  All comments received will be posted on the FTC’s website.  (FTC File No. P124201; the staff contact is Robert M. Frisby, Bureau of Consumer Protection, 202-326-2098)

For more information, read Threading Your Way Through the Labeling Requirements Under the Textile and Wool Acts and Cachet of Cashmere: Complying with the Wool Products Labeling Act.

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.