Markets Wired

Online advertiser ScanScout has agreed to settle Federal Trade Commission charges that it deceptively claimed that consumers could opt out of receiving targeted ads by changing their computer’s web browser settings to block cookies. In fact, ScanScout used Flash cookies, which browser settings could not block. The proposed settlement bars misrepresentations about the company’s data-collection practices and consumers’ ability to control collection of their data. It also requires that ScanScout take steps to improve disclosure of their data collection practices and to provide a user-friendly mechanism that allows consumers to opt out of being tracked.

The FTC investigated ScanScout as part of its ongoing effort to protect consumers’ privacy online. ScanScout is an advertising network that places video ads on websites for advertisers. ScanScout engages in behavioral advertising – it collects information about consumers’ online activities and then serves video ads targeted to their interests.

According to the FTC complaint, from at least April 2007 to September 2009, ScanScout’s website privacy policy discussed how it used cookies to track users’ behavior. The privacy policy stated, “You can opt out of receiving a cookie by changing your browser settings to prevent the receipt of cookies.” However, changing browser settings did not remove or block the Flash cookies used by ScanScout, the FTC charged. The claims by ScanScout were deceptive and violated the FTC Act, the complaint alleged.

The proposed settlement will bar ScanScout from misrepresenting the extent to which consumers’ data is collected, used, shared, or disclosed. Within 30 days after the settlement order becomes effective, ScanScout must place a prominent notice on its home page stating, “We collect information about your activities on certain websites to send you targeted ads. To opt out of our targeted advertisements, click here.” The hyperlink must take consumers to a mechanism that allows them to prevent the company from collecting information that can identify them or their computer; redirecting their browser to third parties that collect data without their approval; and associating any previously collected data with them. The consumer’s choice must last for at least five years, unless the consumer changes it.

The proposed order also requires that, within close proximity to the consumer opt-out mechanism, the company must disclose that it collects consumer data to send targeted ads; that opting out will halt the collection; the current status of the consumer’s choice – for example, whether he or she had opted in or opted out; and circumstances – such as changing the browser a consumer uses – that could automatically change their choice.

In addition, within or immediately next to its targeted display ads, ScanScout must embed a hyperlink to take consumers to the choice mechanism that allows consumers to opt out of receiving targeted ads. Because technical limitations currently prevent ScanScout from embedding a hyperlink in all of its video ads, the order requires the company to undertake reasonable efforts to develop and implement a hyperlink in its video ads and to report regularly to the FTC on its progress.

During the FTC’s investigation, ScanScout merged with Tremor Video, Inc. Tremor also subject to the settlement order.

The FTC today released a new consumer education article, “Cookies: Leaving a Trail on the Web.” It explains how cookies are used to connect your online activities over time, and how you can control information about your browsing.

The Commission vote to approve the administrative complaint and proposed consent
agreement was 4-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days,
beginning today and continuing through December 8, 2011, after which the Commission will decide whether to make it 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 weblink: https://ftcpublic.commentworks.com/ftc/scanscoutconsent 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 requests 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: The Commission issues an administrative 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. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. 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 and follow us on Twitter.

Telemarketers who peddled medical “insurance” that was actually a bogus medical discount plan have agreed to settle charges by the FTC and Attorney General of Tennessee that they violated federal and state laws. The settlement bars the defendants from engaging in any health care or discount program business; misrepresenting elements of any business they engage in; collecting payment from any of their previous “customers”; and, violating the Telemarketing Sales Rule, including calling consumers on the Do Not Call Registry. It also imposes a judgment of $15.7 million, which is partially suspended.

In August 2010, the FTC and the Tennessee Attorney General charged that United States Benefits, LLC, and its principals deceptively claimed they were offering comprehensive health insurance coverage – even to those with pre-existing conditions – for a one-time enrollment fee and recurring monthly fees of up to $1,300. They also claimed they were selling coverage from major insurance carriers and that the monthly “premiums” provided broad medical coverage, including prescription drug, dental and vision care. Consumers provided credit card or bank account information to sign up.

According to the FTC, instead of medical insurance, what the defendants provided was membership in a benefits association that purportedly offered access to various health care and non-health care-related discounts, but consumers were unable to realize any significant savings or medical discounts. Unlike health insurance, the memberships did not pay for a significant share of consumers’ health care expenses. Consumers who tried to cancel their memberships were often ignored.

The FTC also alleged that the defendants called consumers on the Do-Not-Call Registry and used illegal robocalls. The complaint alleged that the defendants violated the Federal Trade Commission Act, the Tennessee Consumer Protection Act, and the FTC’s Telemarketing Sales Rule.

The settlement order bans the defendants from selling or promoting any health care-related benefits or discount programs or assisting others who do so. It bars them from misrepresenting the benefits, costs, performance, restrictions or cancellation policy of any good or service that they provide, and from misrepresenting that they are affiliated with, endorsed or approved by or affiliated with the federal government or a state government. They also are prohibited from collecting money from their former customers and violating the Telemarketing Sales Rule. Finally, the order imposes a judgment of $15,738,941, which will be suspended upon their surrender of various assets worth approximately $1 million, including all corporate assets, a parcel of land, bank accounts, seat licenses for Tennessee Titans season tickets, a Harley Davidson motorcycle, and a wine collection. The defendants also must surrender a Hummer H2 and Lexus back to their lenders.

The Commission vote authorizing the stipulated final orders settling the court actions against United States Benefits LLC, Timothy Thomas, and Kennan Dozier was 5-0. It was filed in the U.S. District Court for the District of Tennessee, Nashville Division, on September 1, 2011, and signed by the U.S. District Judge Kevin H. Sharp.

The FTC wishes to thank the Tennessee Department of Commerce and Insurance for its invaluable investigative assistance in this matter.

NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated final orders have the force of law when signed by the 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 and follow us on Twitter.

As part of its ongoing efforts to stop bogus health claims, the Federal Trade Commission settled charges brought against three people and two companies for deceptively advertising a supposed weight-loss supplement ingredient. One defendant is banned from making any weight-loss claims related to foods, drugs, or dietary supplements and must turn over a vacation home and other assets to the FTC; another is banned from the dietary supplement business; and all defendants are barred from making any more deceptive claims. The marketers were part of a scheme that supplied manufacturers of weight-loss supplements with a substance they claimed was a derivative of the plant Hoodia gordonii (“hoodia”), which is native to southern Africa.Under the settlements:

• David J. Romeo, and two companies he controlled, Nutraceuticals International LLC and Stella Labs LLC, are banned from making any weight-loss claims while marketing foods, drugs, and dietary supplements. The settlement imposes a $22.5 million judgment against Romeo and the two companies, which will be suspended when Romeo forfeits his vacation home in Vermont, and assigns to the FTC the right to collect on $635,000 in business loans owed to him. If it is later determined that the financial information Romeo gave the FTC was false, the full amount of the judgment will become due.
• Nutraceuticals International principal Craig Payton is banned from marketing any foods, drugs, or dietary supplements. The order against Payton does not require him to forfeit any assets, as they were already seized in an unrelated federal drug case.
• Nutraceuticals International marketing executive Deborah B. Vickery is required to pay a $4 million judgment, which has been suspended due to her inability to pay. If it is later determined that the financial information she gave the FTC was false, the full amount of the judgment will become due.
• All five defendants are prohibited from making any false or unsupported claims about foods, drugs, or dietary supplements, and from helping others to make these claims. They also are barred from misrepresenting the results of any scientific study.

In its 2009 complaint, the FTC alleged that the defendants made false and deceptive claims about hoodia and its effectiveness as a treatment for obesity, and falsely claimed that their ingredient was hoodia when it was not.

The complaint also alleged that the defendants falsely and deceptively claimed their product would enable consumers to lose weight and suppress appetites; was scientifically proven to suppress appetite, resulting in weight loss; and was clinically proven to reduce caloric intake by 1,000 to 2,000 calories per day.

The defendants also provided deceptive advertising and promotional materials to trade customers, who then had the means to deceive consumers that bought the purported weight-loss products.

The FTC dropped its charge against a fourth individual, Zoltan Klivinyi, who served as an officer of Nutraceuticals International, but is no longer residing in the United States.

The FTC has more information on this topic for consumers. See Weighing the Evidence in Diet Ads.

The Commission votes authorizing the staff to file the stipulated orders were 5-0. The U.S. District Court for the District of New Jersey entered the orders against Craig Payton and Deborah B. Vickery on August 2, 2010. The court entered the order against David J. Romeo, Nutraceuticals International LLC, and Stella Labs LLC on October 27, 2011.

NOTE: A consent decrees is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated. Consent decrees 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 and follow us on Twitter.

(FTC File No. X090043)
(Stella Nutraceuticals NR)

The Federal Trade Commission has extended the deadline for the public to submit comments on a proposed settlement with Phusion Projects, LLC, the company that markets the beverage Four Loko, until December 2, 2011.

In a complaint announced on October 3, 2011, the FTC alleged that the marketer made deceptive claims about Four Loko. Under the proposed administrative settlement, Phusion Projects is required to re-label and repackage Four Loko to resolve FTC charges of deceptive advertising.

The comment period originally was set to expire on November 2, 2011. It will be extended by 30 days, after which the Commission will decide whether to make the settlement order final.

The Commission vote to extent the public comment period was 4-0. The FTC has published a description of the consent agreement package in the Federal Register. 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 by clicking here 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 requests 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. mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. FTC File No. 1123084; The staff contacts are Janet Evans or Carolyn L. Hann, Bureau of Consumer Protection, 202-326-2125 or 202-326-2745; see press release dated October 3, 2011.

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 and follow us on Twitter.

At the request of the Federal Trade Commission, a U.S. district court has halted a debt collection operation that allegedly deceived and abused consumers – making bogus threats that consumers had been sued or could be arrested over debts they often did not owe.  As part of its continuing crackdown on scams that target consumers in financial distress, the FTC charged two individuals and seven companies in a Corona, California-based debt-collection operation doing business as Rincon Debt Management.  The court order stops the illegal conduct, freezes the operation’s assets, and appoints a temporary receiver to take over the defendants’ business while the FTC moves forward with the case.

Operating since March 2009, the defendants have been unjustly enriched by at least $9.4 million, according to documents the FTC filed with the court.

The FTC complaint alleges that the defendants targeted both English- and Spanish-speaking consumers.  The defendants called consumers and their employers, family, friends, and neighbors, posing as process servers seeking to deliver legal papers that purportedly related to a lawsuit.  In some instances, the defendants threatened that consumers would be arrested if they did not respond to the calls.  The defendants also posed as attorneys or employees of a law office, and demanded that consumers pay “court costs” and “legal fees.”  However, according to the FTC, the debt collectors making calls to consumers were not actually process servers, attorneys, or their employees, and the defendants did not file lawsuits against consumers.  In addition, in many instances, consumers did not even owe the debt the defendants were trying to collect.

The FTC charged that the defendants’ false and misleading claims that they were process servers or attorneys who had filed – or were about to file – a lawsuit against a consumer violated the FTC Act.  In addition, the FTC alleged that the defendants violated the Fair Debt Collection Practices Act by:

• improperly contacting third parties about consumers’ debts;
• failing to disclose the name of the company they represented, or the fact that they were attempting to collect on a debt, during telephone calls to consumers;
• misrepresenting the existence of a debt, the amount, and other facts about the debt; and
• failing to notify consumers of their right to dispute and obtain verification of their debts.

Last month, at the FTC’s request, a U.S. district court halted another debt collection operation that allegedly deceived and abused consumers.

 For consumer information about dealing with debt collectors, see Debt Collection FAQs: A Guide for Consumers.

The Commission vote authorizing the staff to file the complaint was 4-0.  The FTC filed the complaint and request for a temporary restraining order in the U.S. District Court for the Central District of California on October 11, 2011.  On the same day, the court granted the FTC’s request.

The complaint names as defendants Jason R. Begley; Wayne W. Lunsford; Rincon Management Services, LLC; Prime West Management Recovery, LLC; Pacific Management Recovery, LLC; City Investment Services, LLC; Global Filing Services, LLC; National Filing Services, LLC; and Union Management Services, LLC.

NOTE: The Commission files 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.  The complaint is not a finding or ruling that the defendant has actually violated the law.

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 and follow us on Twitter.

(FTC File No. 1123142)
(Rincon NR)