Advertising Law Blog

Many think that the Federal Trade Commission will no longer be the significant enforcement power it has been in recent decades. While time will tell how things play out with the new administration and, presumably, new FTC Commissioners, it is likely that the FTC will remain a very powerful and thoughtful consumer protection agency, focused on protecting consumers from harm. What constitutes consumer harm, however, and the appropriate remedy for noncompliance, may change under the current administration.

From reading FTC Commissioner Ohlhausen's recent presentations it appears that there will be a greater focus on bringing enforcement actions that have caused significant consumer injury, but not necessarily actions that have more of a theoretical harm.  Moreover, the Commissioner believes that innovation and consumer benefit should be factored into an FTC action and resolution. Moreover, there is the possibility that a more practical approach to the financial aspects of FTC matters may ultimately come to bear.

Key insight as to the FTC’s future direction can be gleaned from Chairman Maureen K. Ohlhausen, Opening Keynote Address at the ABA Consumer Protection Conference in Atlanta, Georgia in February 2017. In outlining the FTC’s consumer protection goals, Ms. Ohlhausen expressed that the FTC must strike a balance between protecting consumers from potentially unfair and deceptive market practices, and limiting the encumbrances placed on legitimate businesses to the point where consumers are deprived of potential market-generated benefits. Ms. Ohlhausen implored that the FTC must conduct a cost-benefit analysis each time they decide whether to utilize the regulatory tools at the FTC’s disposal. Through this lens, Ms. Ohlhausen addressed three areas of FTC operation that she will endeavor to reform in the coming months.

First, Ms. Ohlhausen discussed her intention to re-focus resources toward strengthening the FTC’s anti-fraud program, and to bringing anti-fraud enforcement actions where appropriate. Ms. Ohlhausen identified fraudulent schemes targeting military personnel and veterans, and small businesses, as areas of particular interest.

Second, Ms. Ohlhausen spoke of her plan to dedicate enforcement resources to matters that address evident and objective consumer injury, as opposed to speculative injury, or subjective consumer harm. In defining objective harm, Ms. Ohlhausen noted that this may be financial harm, or something more than that. As an example of consumer injury alternative to financial harm, Ms. Ohlhausen cited the FTC’s recent settlement with website Ashley Madison and evidence that several people had committed suicide after their names and other information was exposed.

Ms. Ohlhausen went on to address the negative implications that may affect consumers if the FTC fails to focus its energies toward cases of objective consumer injury. Namely, Ms. Ohlhausen cited the FTC’s settlement with start-up company Nomi. Ms. Ohlhausen spoke of how, through pursing Nomi for their partially inaccurate privacy policy, the FTC was effectively discouraging companies from attempting to improve their privacy policies, thus leaving consumers worse off.

Further, Ms. Ohlhausen opined that consumer injury should be the focus when deciding what remedies to seek. Ms. Ohlhausen noted that in several recent cases, as opposed to seeking a remedy aimed to redress the injury of the consumer, that the FTC has sought disgorgement, the company’s total revenues as monetary relief, even in cases where the company did not exhibit fraudulent behavior. Citing the FTC’s recent $20 million settlement with Uber, Ms. Ohlhausen opined that such disproportionate settlements, disconnected from the actual consumer harm caused, ultimately harms businesses without advancing the consumer’s position. While not discussed in her speech, notably, in Breathometer, Inc., the FTC recently accepted a real consumer redress program, in which consumers could claim a refund if they were dissatisfied, as opposed to the company disgorging all revenue.

Ms. Ohlhausen also addressed several recent advertising substantiation cases, whereby she believes that the FTC’s “more strict than necessary” substantiation standards effectively disadvantage consumers by banning potentially truthful claims by companies to consumers. Ms. Ohlhausen argued that such strict substantiation rules “overprotect” consumers, and restrict their access to information.

Finally, Ms. Ohlhausen talked about her intention to reduce unnecessary regulatory burdens on businesses, in conjunction with added FTC transparency. As a means of achieving this specific reform, Ms. Ohlhausen suggested limiting overbroad information requests to legitimate businesses. In relation to transparency, Ms. Ohlhausen discussed her plan to extract key lessons from closed data security investigations, to then provide businesses with examples of positive compliant practices from which they can base their own practices.

Reports of the FTC’s death have been greatly exaggerated. While the FTC will likely remain a powerful agency addressing unfair or deceptive advertising, it is likely that the FTC intends to shift its focus. Given the Chair’s recent comments, we can reasonably expect a renewed focus toward redressing substantiated consumer injury, while limiting unnecessary burdens on businesses. In regard to advertising, the Acting Chairman intends to scale back certain substantiation standards placed on businesses so as to allow consumers access to more information about the products they are consuming as it becomes available. But, time will tell.