The Federal Trade Commission is joining with the National Labor Relations Board (NLRB) in a new agreement that will bolster the FTC’s efforts to protect workers by promoting competitive U.S. labor markets and putting an end to unfair practices that harm workers. The new memorandum of understanding between the two agencies outlines ways in which the Commission and the Board will work together moving forward on key issues such as labor market concentration, one-sided contract terms, and labor developments in the “gig economy.”

“I’m committed to using all the tools at our disposal to ensure that workers are protected from unfair methods of competition and unfair or deceptive practices,” said FTC Chair Lina M. Khan. “This agreement will help deepen our partnership with NLRB and advance our shared mission to ensure that unlawful business practices aren’t depriving workers of the pay, benefits, conditions, and dignity that they deserve.”

 “Workers in this country have the right under federal law to act collectively to improve their working conditions. When businesses interfere with those rights, either through unfair labor practices, or anti-competitive conduct, it hurts our entire nation,” said NLRB General Counsel Jennifer A. Abruzzo. “This MOU is critical to advancing a whole of government approach to combating unlawful conduct that harms workers.”  

The new agreement enables the FTC and the NLRB to closely collaborate by sharing information, conducting cross-training for staff at each agency, and partnering on investigative efforts within each agency’s authority. The FTC is responsible for combatting unfair and deceptive acts and practices and unfair methods of competition in the marketplace. The NLRB is responsible for protecting employees from unfair labor practices which interfere with the rights of employees to join together to improve their wages and working conditions, to organize a union and bargain collectively, and to engage in other protected concerted activity.

The MOU identifies areas of mutual interest for the two agencies, including the extent and impact of labor market concentration; the imposition of one-sided and restrictive contract provisions, such as noncompete and nondisclosure provisions; labor market developments relating to the “gig economy” and other alternative work arrangements; claims and disclosures about earnings and costs associated with gig and other work; the impact of algorithmic decision-making on workers; the ability of workers to act collectively; and the classification and treatment of workers. 

The agreement is part of a broader FTC initiative to use the agency’s full authority, including enforcement actions and Commission rulemaking, to protect workers. The FTC has made it a priority to scrutinize mergers that may harm competition in U.S. labor markets. Research shows that these markets are already highly concentrated, and less competitive labor markets can enable firms to harm workers by lowering wages, reducing benefits, and perpetuating precarious or exploitative working conditions. The FTC is working with the Department of Justice to update the agencies’ merger guidelines, looking to provide guidance on how to analyze a merger’s impact on labor markets.

The FTC has also prioritized cracking down on anticompetitive contract terms that put workers at a disadvantage by leaving them unable to negotiate freely over the terms and conditions of their employment. The agency is scrutinizing whether some of these contract terms, particularly in take-it-or-leave-it contexts, may violate the law. At recent open Commission meetings the agency has heard concerns about noncompete clauses that have been imposed on some workers, and as a result it has opened a docket to solicit public comment on the prevalence and effects of contracts that may harm fair competition. It already has taken action to protect workers in several Commission orders, including:

In addition, the agency will continue to take action to stop deceptive and unfair acts and practices aimed at workers; particularly those in the “gig economy” who often don’t enjoy the full protections of traditional employment relationships. The FTC’s actions in this area include:

• Suing Amazon in 2021 for illegally withholding more than $61 million in tips from drivers for its Amazon Flex program. In that case, the FTC alleged that Amazon had made numerous promises to its drivers that they would receive 100 percent of their tips, but actually withheld tip money from its drivers for years. Amazon agreed to an FTC order requiring them to surrender the full amount owed, which the FTC paid to affected drivers;

• Suing Uber in 2017 for making deceptive earnings claims to potential drivers as well as deceiving them about the terms of a vehicle leasing program. The FTC alleged that the company touted median income levels in various cities that were greatly exaggerated and advertised lease and purchases prices lower than the prices actually available. Uber agreed to a federal court order requiring them to surrender $20 million that the FTC used to compensate drivers;

• Suing online lead seller HomeAdvisor, Inc., alleging it used deceptive and misleading tactics in selling home improvement project leads to service providers, including small businesspeople operating in the “gig” economy; and

• Suing fast-food chain Burgerim, accusing the chain and its owner of enticing more than 1,500 consumers to purchase franchises using false promises while withholding information required by the Franchise Rule.

Workers who believe that their labor rights have been violated can call 1-844-762-6572 for assistance filing an unfair labor practice charge. Or they can contact their closest NLRB Field Office or submit a charge on the NLRB’s website.

The memorandum of understanding was signed by FTC Chair Lina M. Khan and NLRB General Counsel Jennifer A. Abruzzo.

The Federal Trade Commission testified before the House Committee on Oversight and Reform Subcommittee on National Security today about the aggressive action the agency is taking to crack down on fraud and related threats against servicemembers and the broader military community.

Testifying on behalf of the Commission, the Associate Director of the FTC’s Division of Financial Practices, Malini Mithal, said fraud against members of the military harms individual members and their families, and undermines military readiness and troop morale. Putting a stop to such nefarious practices is an essential component of the agency’s consumer protection mission, the testimony states. In 2021, the FTC’s Consumer Sentinel consumer complaint database received over 200,000 complaints from military consumers, with reported monetary harm of over $267 million.

According to the testimony, the FTC has responded with enforcement actions combating illegal practices that target military members, including:

• Illegal auto sales and financing practices. Young servicemembers are an attractive target for unscrupulous auto dealers, and representatives from the Armed Forces have repeatedly expressed concern about unscrupulous and predatory auto sales practices, including “payment packing” (slipping unwanted add-ons into a purchase agreement), bait-and-switch tactics, and extra junk fees.In June the FTC proposed a rule to ban junk fees and bait-and-switch advertising tactics and eliminate the tricks and traps that make it hard or impossible to comparison shop or leave consumers saddled with thousands of dollars in unwanted charges.
• Phony promises of earnings or investment opportunities. Some companies try to lure military consumers into fraudulent schemes with military-specific discounts or offers. Earlier this year the FTC took action against a fast-food chain BurgerIM that allegedly targeted veterans with false promises while withholding information required by the FTC’s Franchise Rule. According to the complaint, the chain touted veteran-specific discount programs to lure people into paying tens of thousands of dollars in franchise fees. Although BurgerIM pocketed tens of millions of dollars in such fees, the complaint alleges that the majority of those who paid were never able to open restaurants. In a separate case, in April the FTC sent out $23 million in refunds arising out of its action against a company called MOBE Ltd. that allegedly deceived people, with false claims, including through military-specific pitches, that its “proven” 21-step system would enable them to start their own online business and earn substantial income quickly and easily. In reality, the FTC alleged, the system required selling the same memberships to others in the hopes of earning commissions, with many victims experiencing crippling losses or mounting debts.
• Deceptive claims and recruiting tactics regarding for-profit schools. Some for-profit schools have used deceptive and predatory recruitment methods in marketing themselves to veterans. For-profit schools have also used third party marketers in deceptive campaigns, going as far as to buy leads from marketers who impersonated the military to lure people into enrolling in their schools. Earlier this year the FTC secured $1.2 million in refunds and debt cancellation for students who allegedly were deceived by a for-profit medical school in the Caribbean called the Saint James School of Medicine and its Illinois-based operators. The agency charged that the school deceptively marketed the school’s medical license exam test pass rate and residency matches to lure veterans and other prospective students. 
• Sham charities that exploit the public’s desire to help veterans. Some scammers exploit the goodwill people have toward the Armed Forces to take advantage of the general public by promoting bogus charities with names like “Help the Vets” and “Veterans of America,” or “American Veterans Foundation” and “Saving Our Soldiers.”

The testimony also notes that challenges remain in protecting consumers from fraud and abuse. Returning money to defrauded consumers has been a cornerstone of the FTC’s enforcement work, including over $403 million in redress to harmed consumers during fiscal year 2021. However, the Supreme Court in AMG Capital Mgmt., LLC v. FTC held that the FTC does not have the ability to obtain monetary relief under Section 13(b) of the FTC Act. Federal legislation restoring the FTC’s ability to provide redress to wronged consumers, including servicemembers and veterans, is critical. In addition, a recent court ruling and ongoing lawsuits may affect the Commission’s ability to continue using its administrative process to obtain refunds for harmed consumers – underscoring the pressing need for a 13(b) fix.

In addition to the Commission’s law enforcement actions, education and outreach is a critical part of the agency’s consumer protection and fraud prevention work, and one area of outreach focus is identity theft, the testimony states. An FTC analysis suggests that active duty servicemembers experience disproportionate instances of theft from their financial accounts compared to the general population. The FTC has done extensive outreach to veterans and also coordinates closely with the Department of Veterans Affairs (VA) to develop and disseminate information about avoiding scams and recovering from ID theft.

The Commission vote to approve the testimony was 5-0.

The Federal Trade Commission is taking action against grill maker Weber-Stephen Products, LLC, for illegally restricting customers’ right to repair their purchased products. The FTC’s complaint charges that Weber’s warranty included terms that conveyed that the warranty is void if customers use or install third-party parts on their grill products. Weber is being ordered to fix its warranty by removing illegal terms and recognizing the right to repair and come clean with customers about their ability to use third-party parts.

“This is the FTC’s third right-to-repair lawsuit in as many weeks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies that use their warranties to illegally restrict consumers’ right to repair should fix them now.”

Illinois-based Weber manufactures and sells grills and related products worldwide and offers limited warranties to consumers who buy its products that provide for no-cost repair or replacement, should the products have defects or other issues.

The FTC has made it a priority to protect consumers’ right to repair their products. The Magnuson Moss Warranty Act is one of the FTC’s tools to address repair restrictions. It prohibits a company from conditioning a consumer product warranty on the consumer’s using any article or service which is identified by brand name unless it is provided for free. Following the FTC’s right to repair report Nixing the Fix, the Commission issued a Policy Statement on Repair Restrictions Imposed by Manufacturers pledging to ramp up investigations into illegal repair restrictions. The FTC recently announced complaints and orders against Harley-Davidson and the maker of Westinghouse outdoor generators for similar issues.

According to the FTC’s complaint, Weber imposed illegal warranty terms that voided customers’ warranties if they used or installed any third-party parts on their grill products. The FTC alleges that these terms harm consumers and competition in multiple ways, including:

• Restricting consumers’ choices: Consumers who buy a product covered by a warranty do so to protect their own interests, not the manufacturer’s. Weber’s warranty improperly implied that as a condition of maintaining warranty coverage, consumers had to use the company’s parts.

• Costing consumers more money: By telling consumers their warranty will be voided if they choose third-party parts, Weber forced consumers to use potentially more expensive options provided by Weber itself. This violates the Warranty Act, which prohibits these clauses unless a manufacturer provides the required parts for free under the warranty or is granted an exception from the FTC.
• Undercutting independent businesses: The Warranty Act’s tying prohibition protects not just consumers, but also independent repairers and the manufacturers of aftermarket parts. By conditioning its warranty on the use of Weber-branded parts, Weber infringed the right of independent repairers and manufacturers to compete on a level playing field. 
• Reducing resiliency: Robust competition from aftermarket part manufacturers is critical to ensuring that consumers get the replacement parts they need when they need them and are not at the mercy of branded part supply chains. More resilient and repairable products also lead to less waste in the form of products that could otherwise be fixed. 

Enforcement Actions

Under the FTC Act and the Warranty Act, the FTC has the authority to take action against companies violating consumer protection laws, including those engaging in unfair or deceptive acts or practices. The FTC’s order in this case:

• Prohibits further violations: Weber will be prohibited from further violations of the Warranty Act. They will also be prohibited from telling consumers that their warranties will be void if they use third-party parts, or that they should only use Weber-brand parts. If the company violates these terms, the FTC will be able to seek civil penalties of up to $46,517 per violation in federal court.

• Recognizes consumers’ right to repair: Weber will be required to add specific language to its warranty saying, “Using third-party parts will not void this warranty.”

• Comes clean with consumers: Weber must send and post notices informing customers that their warranties will remain in effect even if they use or install third-party parts on their Weber grill products.

The Commission vote to issue the administrative complaint and to accept the consent agreement was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register soon. The agreement will be subject to public comment for 30 days, after which the Commission will decide whether to make the proposed consent order final. Instructions for filing comments appear in the published notice. Once processed, comments will be posted on Regulations.gov.

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. 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 $46,517.

The Federal Trade Commission seeks public comment on its Amplifier Rule (formally known as the Rule Relating to Power Output Claims for Amplifiers Utilized in Home Entertainment Products). First, to help consumers make apples to apples comparisons about sound quality, the Commission proposes requiring that sellers use uniform testing methods before they advertise power output levels. Second, for multichannel home theater amplifiers, the Commission seeks comment about how to set test conditions to reflect typical consumer use.

“Clear choices for consumers and a level playing field for manufacturers are critical in today’s marketplace,” said Samuel Levine, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “This request for comment on amendments to the Amplifier Rule will help the FTC foster those safeguards in the audio industry.” 

The Amplifier Rule requires uniform measurements and disclosures for home entertainment amplifiers so consumers can easily compare amplifier characteristics. It was enacted by the FTC in 1974 in response to amplifier advertisements that relied on widely disparate and, at times, deceptive testing methods, leaving consumers without a way to reliably shop for amplifiers. The Rule was last reviewed and revised in 2008.

As detailed in a notice of proposed rulemaking that will be published shortly, the FTC is currently in the process of reviewing the Rule, and has issued a Federal Register notice seeking comments regarding public support for the rule and proposed changes or modifications the FTC should consider. Commenters overwhelmingly support the rule, but some have recommended amendments. After evaluating the comments received, the FTC is now seeking additional comments on:

• whether the Commission should amend the Rule to simplify power output measures by standardizing the test parameters used by amplifier sellers as follows: a load impedance of 8 ohms, a power band of 20 Hz to 20 kHz, and a THD limit of less than 0.1%; and

• the parameters of consumers’ normal use of multichannel home theater amplifiers.

The Commission vote approving publication of the notice of proposed rulemaking was 5-0. It will be published in the Federal Register shortly. Written comments must be received within 60 days of the date the notice is published. Comments can be filed electronically at https://www.regulations.gov.

The Federal Trade Commission has finalized an administrative consent order against two Texas-based companies and their owner who are permanently banned from advertising or selling dietary supplements, and from making claims that their products treat, cure, or reduce the risk of disease. Today’s action stems from an administrative complaint the FTC filed in November 2020 against Health Research Laboratories, LLC, Whole Body Supplements, LLC, and their owner and officer Kramer Duhon.

The complaint alleged the Health Research Laboratories respondents made unsubstantiated claims that their supplements — The Ultimate Heart Formula (UHF), BG18, and Black Garlic Botanicals — prevent or treat cardiovascular and other diseases, and that their supplement Neupathic cures, mitigates, or treats diabetic neuropathy.

The Commission vote approving final consent order was 5-0. The FTC responded to one public commenter.

The Federal Trade Commission is sending 176,028 checks, totaling more than $5.4 million, to consumers who were charged for “free trial” offers for cosmetics and weight loss supplements, including products called Amabella Allure, Adelina, Parisian Glow, and Tone Fire Garcinia.

Consumers who receive checks should cash them within 90 days, as indicated on the check. Recipients who have questions about their refund, or who didn’t receive a check and believe they may be eligible, should call the refund administrator, Rust Consulting, at 1-833-711-0291. The Commission never requires people to pay money or provide account information to get a refund.

The FTC sued AH Media Group in September 2019, alleging that since at least April 2016, the company marketed supposedly “free trial” products with claims that the products promote younger-looking skin or weight loss. While the company claimed consumers would pay only a small shipping and handling fee for the trial, they buried the true cost behind “terms” links in small font and faded background text. After two weeks, the defendants charged unsuspecting consumers around $90 for the trial product and also enrolled them in unwanted subscription plans with additional monthly charges.

The FTC’s interactive dashboards for refund data provide a state-by-state breakdown of Commission refunds. In 2020, Commission actions led to more than $483 million in refunds to consumers across the country, but the U.S. Supreme Court ruled in 2021 that the Commission lacks authority under Section 13(b) to seek monetary relief in federal court going forward. The Commission has urged Congress to restore the Commission’s ability to get money back for consumers.

The Federal Trade Commission today sued Walmart for allowing its money transfer services to be used by fraudsters, who fleeced consumers out of hundreds of millions of dollars. In its lawsuit, the FTC alleges that for years, the company turned a blind eye while scammers took advantage of its failure to properly secure the money transfer services offered at Walmart stores. The company did not properly train its employees, failed to warn customers, and used procedures that allowed fraudsters to cash out at its stores, according to the FTC’s complaint. The FTC is asking the court to order Walmart to return money to consumers and to impose civil penalties for Walmart’s violations.

“While scammers used its money transfer services to make off with cash, Walmart looked the other way and pocketed millions in fees,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Consumers have lost hundreds of millions, and the Commission is holding Walmart accountable for letting fraudsters fleece its customers.”  

In addition to its retail business, Walmart offers financial services to consumers in its stores, including money transfers, credit cards, reloadable debit cards, check cashing, bill payments and more. Walmart acts as an agent for multiple money transfer services, including MoneyGram, Ria and Western Union, offering some services under its own brand, like “Walmart2Walmart” and “Walmart2World.” According to the complaint, tens of millions of money transfers are sent or received at Walmart stores each year, where they are processed by Walmart employees.

Money transfers are services that people use to send money to a recipient in another location. They are frequently used by fraudsters across a wide variety of scams because they are nearly impossible to retrieve after the money has been picked up. The FTC has brought multiple cases against money transfer services in recent years, including against MoneyGram and Western Union, alleging they failed to protect consumers who used their services.

Walmart’s practice of turning a blind eye to fraud had grave consequences for consumers, according to the complaint. The complaint cites numerous instances in which law enforcement investigations found that scammers relied on Walmart money transfers as a primary way to receive payments, including in telemarketing schemes like IRS impersonation schemes, relative-in-need “grandparent” scams, sweepstakes scams, and others. Based on information from fraud databases maintained by MoneyGram, Western Union, and Ria, from 2013 to 2018 more than $197 million in payments that were the subject of fraud complaints were sent or received at Walmart, with more than $1.3 billion in related payments also possibly connected to the fraud.

The FTC’s investigation of Walmart’s money transfer practices showed, according to the complaint, that Walmart knew about the role money transfer services play in scams and frauds. Despite that, the company’s money transfer services harmed consumers in numerous ways, including:

• Allowing the payout of suspicious transfers: For years, according to the complaint, it was Walmart’s stated policy for its employees to issue payouts even in the case of a suspicious money transfer, making it easy for scammers to retrieve fraud proceeds at a Walmart location. The complaint cites a Walmart reference guide for employees that stated: “If you suspect fraud, complete the transaction.”  Walmart did not begin training employees to deny fraudulent payouts until at least May 2017, but even then it provided this training only to employees at a limited number of locations.

• Having no anti-fraud policy or an ineffective, poorly enforced policy: According to the complaint, despite offering money transfer services for many years, Walmart did not have a written anti-fraud or consumer protection program until November 2014. After that time, the complaint cites numerous instances in which Walmart failed to have an effective program or violated its own policies, as well as the policies of its partners, like MoneyGram, that were ostensibly in place to protect consumers from fraud.

• Allowing cash pickups for large payments: The complaint notes that Walmart, unlike most other outlets where money transfers can be received, pays even large payments in cash. In addition, the complaint notes that scammers were often able to retrieve their payments from Walmart by using fake IDs. This made it an attractive option for fraudsters looking to conceal their identities.

• Not providing materials to prevent consumers from sending fraudulent payments: According to the complaint, Walmart failed to display or provide required materials to consumers at many of its locations that could have warned them about potential frauds and stopped them from sending money to scammers. More recently, the company stopped using a paper “send form” that included important information for consumers to help them realize they may be making a bogus payment, replacing it with a printout that contains only small print warnings.

• Failing to effectively train or retrain staff: The complaint alleges that Walmart’s training materials for the tens of thousands of employees who worked with money transfers was often contradictory or unclear. In many cases, employees who were authorized to handle money transfers as “backups” received no anti-fraud training at all or only limited training related to transfers. The complaint notes that in some instances Walmart staff were complacent or complicit in scams, accepting cash tips from scammers in exchange for processing fraudulent payments or being directly involved in the scams themselves.

• Allowing money transfers to be used for telemarketing purchases: The FTC’s Telemarketing Sales Rule has since 2016 prohibited money transfers from being used to pay for telemarketing purchases because of the high risk of fraud. But the complaint alleges that, for years, Walmart failed to take steps to comply with that provision.

The Commission vote to file the civil penalty complaint was 3-2, with Commissioners Noah Joshua Phillips and Christine S. Wilson dissenting. The FTC filed the complaint in the U.S. District Court for the Northern District of Illinois.

The Federal Trade Commission and the State of Florida are taking action against Grant Bae and its owner, Traeshonna P. Graham, a COVID-19 scammer preying on minority-owned small businesses seeking pandemic relief. The complaint alleges that the fictitious grant-writing service scammed each business out of thousands of dollars with false promises of easy access to “guaranteed” grant funding and COVID-19 economic benefits that did not materialize. In response to a complaint filed by the FTC and the State of Florida, a federal court has temporarily shut down the company and frozen the defendants’ assets.

The complaint alleges that Florida-based Grant Bae violated multiple laws, including the COVID-19 Consumer Protection Act, the FTC Act, and the Florida Deceptive Unfair Trade Practices Act by in targeting minority-owned small businesses with claims that they could access millions of dollars in grant funding if they paid for the company’s services.

“These scammers targeted minority-owned businesses and misused public funds meant to support honest businesses during the pandemic,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Working with our state partners and with new authority granted by Congress, we will continue to shut down frauds that prey on people during the pandemic.” 

According to the complaint, C Lee Enterprises LLC and Graham, who refers to herself as “The Grant Bae,” have marketed grant writing and consulting services to minority-owned small businesses through the Grant Bae brand. The false claims about the company’s services and Graham’s own background have been pitched on Facebook, Instagram, and in the Clubhouse audio app where Graham joined social media influencers. The complaint alleges that a handful of influencers and their close associates were the only people who actually received money from Grant Bae.

The FTC’s investigation found that, since at least October of 2020, Graham has deceived consumers about nearly every aspect of Grant Bae and her own qualifications as part of an effort to convince minority-owned businesses she could secure grant funding for them. The complaint alleges that these deceptions, which cost small businesses thousands of dollars, included:

• Falsely promising significant returns. Grant Bae’s marketing has included multiple misleading guarantees of the amounts that businesses would receive from using their services. Grant Bae has claimed that all minority-owned businesses qualified for grant funding of at least $25,000. It also has falsely guaranteed returns based on the package purchased, including claiming that a business buying the $6,999 “Elite” package would receive at least $250,000 in grant funding, and that all customers would receive at least four grants in the first year.

• Misleading customers about grant status. The defendants have provided customers deceptive messages through their online portal that grants have been “awarded” or were “pending.” According to the complaint, the money was never actually sent to customers, and customers often realized this too late to request chargebacks for the upfront money they paid to Grant Bae.

• Deceiving customers about access to grants. Grant Bae has claimed in marketing that it had access to $268 million in grant funding to “disperse throughout all our great clients,” even though no such funds existed. It also has claimed to have secured grant funds from major non-profit foundations and government agencies to distribute to clients.

• Lying about prior success. The defendants’ marketing falsely leads businesses to believe that Grant Bae is a successful enterprise and had provided tens of millions of dollars in grants. Graham also falsely holds herself out as having eight years of experience developing the “gift” of grant writing, but her last known employment was in 2018 at a Krystal fast food restaurant, where she pled guilty to two felony counts of theft for stealing from the restaurant’s cash deposits.

• Failing to provide promised refunds. The complaint alleges that while Grant Bae offers a “money-back guarantee” to the businesses who bought their service, the company often goes silent and blocks contact with customers when they complain about losing money. In one online video, Graham said, “I will block anyone and everyone who feels that they are investing their money in a scam.”

The complaint also alleges that Graham relied on funds she acquired through the federal Paycheck Protection Program COVID-19 stimulus program to start Grant Bae. A month after its founding, the company was approved for a Paycheck Protection Program (PPP) loan, and. Later that summer, Graham herself was approved for another PPP loan as an “independent contractor.” At times, the complaint alleges, Grant Bae said it would apply for COVID-19 Economic Injury Disaster Loans on behalf of customers.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Middle District of Florida.

The Federal Trade Commission finalized an order against CafePress over allegations that it failed to secure consumers’ sensitive personal data including Social Security numbers and covered up a major data breach. The Commission’s order requires the company to bolster its data security and requires its former owner to pay a half million dollars to compensate small businesses.

In a complaint, first announced in March 2022, filed against Residual Pumpkin Entity, LLC, the former owner of CafePress, and PlanetArt, LLC, which bought CafePress in 2020, the FTC alleged that the online customized merchandise platform failed to implement reasonable security measures to protect the sensitive information of buyers and sellers stored on its network and failed to adequately respond to several security breaches. The FTC alleged CafePress:

• Stored Social Security numbers and password reset answers in clear, readable text;
• Retained the data longer than was necessary;
• Failed to apply readily available protections against well-known threats and adequately respond to security incidents; and
• Covered up a major data breach resulting from its shoddy security practices.

Under the order finalized by the Commission, Residual Pumpkin and PlanetArt must implement comprehensive information security programs that require them, among other things, to:

• Replace inadequate authentication measures with multifactor authentication methods;

• Minimize the amount of data they collect and retain:
• Encrypt Social Security numbers; and
• Have a third party assess their information security programs and provide the Commission with a redacted copy of that assessment suitable for public disclosure.

In addition, Residual Pumpkin must pay $500,000, which will be used to provide redress to victims of the data breaches. PlanetArt will be required to notify consumers whose personal information was accessed as a result of the data breaches and provide specific information about how consumers can protect themselves.

After receiving three comments, the Commission voted 5-0 to finalize the orders with Residual Pumpkin and PlanetArt and send responses to the commenters.

The Federal Trade Commission has proposed a rule to ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience. As auto prices surge, the Commission is seeking to eliminate the tricks and traps that make it hard or impossible to comparison shop or leave consumers saddled with thousands of dollars in unwanted junk charges. The proposed rule would protect consumers and honest dealers by making the car-buying process more clear and competitive. It would also allow the Commission to recover money when consumers are misled or charged without their consent.

“As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

In the last ten years alone, the FTC has brought more than 50 law enforcement actions related to automobiles and helped lead two nationwide law enforcement sweeps that included 181 state-level enforcement actions in these areas. In spite of these actions, complaints from consumers related to automobiles remain in the top ten complaint types received by the FTC, with more than 100,000 complaints from consumers annually over the past three years.

Today, the FTC is taking a first step toward establishing a set of guidelines that would provide consumers with key protections against dealers who unlawfully charge junk fees without their consent or engage in bait-and-switch advertising. In the Notice of Proposed Rulemaking announced today, the Commission is seeking comment on proposed measures that would:

• Ban bait-and-switch claims: The proposal would prohibit dealers from making a number of deceptive advertising claims to lure in prospective car buyers. This deal deception can include the cost of a vehicle or the terms of financing, the cost of any add-on products or services, whether financing terms are for a lease, the availability of any discounts or rebates, the actual availability of the vehicles being advertised, and whether a financing deal has been finalized, among other areas. Once in the door or on the hook, consumers face the fallout of false promises that don’t pan out.

• Ban fraudulent junk fees:  The proposal would prohibit dealers from charging consumers junk fees for fraudulent add-on products and services that provide no benefit to the consumer (including “nitrogen filled” tires that contain no more nitrogen than normal air).

• Ban surprise junk fees: The proposal would prohibit dealers from charging consumers for an add-on without their clear, written consent and would require dealers to inform consumers about the price of the car without any of optional add-ons.

• Require full upfront disclosure of costs and conditions: The proposal would require dealers to make key disclosures to consumers, including providing a true “offering price” for a vehicle that would be full price a consumer would pay, excluding only taxes and government fees. It would also require dealers to make disclosures about optional add-on fees, including their price and the fact that they are not required as a condition of purchasing or leasing the vehicle, along with disclosures to consumers with key information about financing terms.

The notice includes questions for public comment to inform the Commission’s decision-making on the proposal. These include questions about provisions in the proposed rule and whether other provisions should or should not be included in the rule, as well as questions related to the costs and benefits to consumers and auto dealers of the proposed rule. In addition, the notice includes a preliminary regulatory analysis estimating that the net economic benefit of the rule would be more than $29 billion over ten years. After the Commission reviews the comments received, it will decide whether to proceed with issuance of a final rule.

The Commission vote to approve the Federal Register notice announcing the notice was 4-1. Chair Lina M. Khan, Commissioner Noah Joshua Phillips, Commissioner Rebecca Kelly Slaughter, and Commissioner Alvaro M. Bedoya issued a joint statement. Commissioner Wilson issued a dissenting statement. The notice will be published in the Federal Register soon. Instructions for filing comments appear in the notice. Comments must be received 60 days from the publication date of the Notice.