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Debt Relief and Payment Processor Defendants Stipulate to Bans in FTC Settlements

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Pursuant to settlements with the Federal Trade Commission and the State of Florida, defendants alleged to have falsely promised to reduce consumers’ credit card interest rates will be banned from telemarketing and from selling debt relief services. The payment processors that allegedly enabled the operation will be banned from the payment processing industry.

The settlements resolve actions brought by the consumer protection agencies against the two groups of defendants in 2015 and 2016.

“Working with the Florida Attorney General’s office, the Federal Trade Commission has stopped yet another telemarketing scam that offered bogus solutions to relieve credit card debt,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.

According to the agencies, the debt relief defendants phoned debt-laden consumers and represented that in exchange for an upfront fee – averaging from $695 to $1,495 – they would reduce consumers’ interest rate and save them thousands of dollars.

The agencies also allege that defendants, including the payment processors, arranged for at least 26 shell merchants to be used to process credit card payments. Respective charges brought against defendants include credit card laundering under the Telemarketing Sales Rule, illegal factoring of credit card transactions under Florida law, violation of the FTC Act and violation of the Florida Deceptive and Unfair Trade Practices Act.

The settlements resolve the charges against all but one defendant.

The stipulated orders can be seen here, here, here, here, here and here.

Respective terms include equitable monetary relief, surrender of frozen assets and various bans, such as selling debt relief services, from outbound telemarketing, from working in the payment processing industry, and from assisting others violate the FTC Act the TSR and the Florida Deceptive and Unfair Trade Practices Act.

The orders prohibit defendants from profiting from consumers’ personal information and failing to dispose of it properly.

Contact a Federal Trade Commission compliance and defense attorney if you are the subject of a regulatory enforcement investigation or action, or if you are interested in implementing preventative compliance measures.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.


Feds Say Homeopathic Products Must Be Labeled Bullshit

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The Feds have decided to go after the advertisers of homeopathic medicine, the stuff like nerve tonics, pain relievers, penis growing pills, claiming that most of their claims are absolute and total bullshit. The FTC says will either have to get scientific backing for the efficacy of their health claims or “effectively communicate the lack of scientific evidence backing them and that their claims are based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts.”

“This is a real victory for reason, science, and the health of the American people,” said Michael De Dora, public policy director for the Center for Inquiry, which had urged the FCC to crack down on what it said was false advertising of homeopathic products. “The FTC has made the right decision to hold manufacturers accountable for the absolutely baseless assertions they make about homeopathic products.”

Consumers are constantly being misled about homeopathics,” Edzard Ernst, an emeritus professor of complementary medicine at the University of Exeter in the United Kingdom, told BuzzFeed News. “They believe that they are natural, safe, and effective — none of this is true.”

Homeopathic products can also pose rare safety risks, according to the FDA. In 2009, for example, the agency received more than 130 accounts of people who lost their sense of smell after taking Zicam homeopathic cold remedies. One expert testified to the FDA that those accounts raised concerns about toxic levels of zinc.

Michelle Rusk, senior staff attorney in the FTC advertising practices division, said in a public hearing Sept. 21 on over-the-counter homeopathic products that advertisements lauding the health benefits of medical products need to be based on competent, reliable, and rigorous scientific support.

“As a general rule, for treatment claims, we expect randomized, double-blind, placebo-controlled human clinical studies—not in vitro studies, not animal studies, not anecdotal evidence, no matter how compelling it is,” she said. “Second, we expect the studies to be internally valid. That means well-designed, reliably conducted, using procedures accepted in the field of research. It also means that results are not just statistically significant but also strong enough to be clinically meaningful.

The law enforcement agency is responding to decades of growth in the market for over-the-counter homeopathy products. And its examination coincides with the Food and Drug Administration’s reconsideration of a 1988 policy that allows, without FDA approval, the manufacture and sale of products listed in the Homoeopathic Pharmacopoeia of the United States.

FTC Complaint Filed Over Google “Influencer Marketing” to Kids

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Influencer prmarketing joins both customary and digital media strategies. Organizations advance their brands and items through purported influencers — people with a significant web-based social networking or online movement draw. The problem is that most “influencer marketers” don’t disclose the relationship between the “influencer” and the company they are promoting. Even worse, when it comes to kids, there are other laws that need to be considered.

The Center for Digital Democracy, Campaign for a Commercial-Free Childhood and Public Citizen filed a complaint with the Federal Trade Commission (FTC) against Google, Disney’s Maker Studios, DreamWorks (owned by Awesomeness TV) and two other companies. The groups allege these firms’ practice of targeting influencer marketing toward children is unfair and deceptive.

Filed on Oct. 21, the complaint alleges that several marketing companies (Collab Creators, Wild Brain, Maker Studios and AwesomenessTV) produce and distribute ads and other commercial material targeted to children that appear as content. The groups say Google both encourages and benefits from the production of child-directed influencer videos and distributes them to children on YouTube and YouTube Kids.

The advocacy groups called on the FTC to investigate and take action against companies that “create and distribute child-directed ‘influencer’ marketing.” They also called on the federal agency to release policy guidance making it clear that using influencer marketing to persuade children to buy a product (or urge their parents to buy it for them) is an “unfair and deceptive marketing practice prohibited by Section 5 of the Federal Trade Commission Act.” In other words, influencer marketing aimed at children violates federal law.

“Child-directed influencer marketing is misleading to children because their developing brains do not process or understand advertisements the way adults do—especially advertisements disguised as content,” Laura Moy, director of the Institute for Public Representation at Georgetown University Law Center, which represents the groups, said in a statement.

“Corporate predators are using young Internet influencers, admired by kids, to hawk their wares to children, even to young children,” added Rob Weissman, president of Public Citizen. “The marketers and the advertising platforms enabling and promoting this activity should be ashamed. But since they’re not, we need the FTC to act to end their outrageous practice.”

Children have buying power of about $1.2 trillion, either through what they buy themselves or what they persuade their parents to buy. So, companies are tripping over themselves to reach children and influence them to buy their products. The complaint cites several cases of how companies target children with influencer marketing. One case involves the Collab Creators who make videos with influencers, including Baby Ariel who has 1.6 million subscribers on YouTube. In a few videos, Baby Ariel “unboxes and touts toys and games for children in a fun and entertaining manner,” the complaint describes.

Other cases include:

Disney’s Maker Studios has a popular YouTube influencer show called EvanTubeHD, which features 8-year-old Evan and his 5-year-old sister Jillian “as they review and play with the most popular kids toys currently on shelves.” They also taste test and review snack foods. The show’s videos “blur the line between commercial and non-commercial content, targeting young children,” the groups allege.

DreamWorks, owned by AwesomenessTV, has a show on YouTube called Swamp Talk which features the animated character Shrek. Life Hacks for Kids is another show that features “life hacks” designed for kids, and many of the show’s videos include product placements.

Online advertising as a whole is a game-changer. Or as Common Sense Media described it in a 2014 report, online advertising “has fundamentally changed the nature of marketing to children and youth.” The company-funded YouTube shows targeted to children demonstrate just what a game-changer online advertising really is and how it is geared to influencing kids to buy toys and junk food. When it comes to junk food, those YouTube shows can contribute to the childhood obesity epidemic. And on the whole, they may run afoul of the law. Stay tuned.

Lube King Scott Fraser of Las Vegas Charged by SEC For Fraud in Fake Reviews

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Scott Fraser, the CEO and a main shareholder in Las Vegas-situated Empowered merchandise Inc., and paid promoter Nathan Yeung were charged by using the SEC for orchestrating fraudulent promotional campaigns to tout the manufacturer’s stock.

In step with the company, Fraser individually ran a publication publishing industry and hired Yeung to secretly support him promote Empowered merchandise by way of on-line publication articles that were supposedly authored by impartial writers.

Unbeknownst to traders, nevertheless, Fraser and Yeung virtually wrote, licensed and allotted these glowing articles about Empowered products themselves, working under such pseudonyms as “Charlie Buck” and then hiring different promoters to disseminate the promotions to their respective subscriber lists in trade for prices. And of direction the promotions failed to disclose that Empowered merchandise and Fraser approved and paid for the ads.

Lack of Standing Results in Dismissal of TCPA Suit

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A federal district judge in California recently ruled that a TCPA plaintiff lacked standing to bring her TCPA claims because she failed to set forth evidence that she suffered an injury-in-fact with respect to each telephone call. The matter is Romero v. Department Stores National Bank, et al., No. 15-CV-193 (S.D. Cal. Aug. 5, 2016).

In Romero, the plaintiff alleged that the defendant, a creditor that attempted to call the plaintiff on her cell phone number after she failed to make payments on her credit card, was responsible for initiating approximately more than 300 telephone calls to her cell phone via an automatic dialing system. The plaintiff only answered a few of the calls, yet alleged that she suffered “severe and substantial emotional distress.”

The defendant moved to dismiss, based in large part upon the recent ruling by the Supreme Court in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (A statutory violation alone is not sufficient to establish the injury-in-fact requirement of Article III. If the defendant’s actions would not have caused a concrete, or de facto, injury in the absence of a statute, the existence of the statute does not automatically give a plaintiff standing).

In response, the plaintiff asserted that the harm suffered was grounded in privacy and the aggravation associated with unwanted telephone calls. The court disagreed, stating that “one singular call, viewed in isolation and without consideration of the purposes of the call, does not cause any injury that is traceable to the conduct for which the TCPA created a private right of action, namely the use of an ATDS to call a cell phone.”

The court found that the plaintiff was unable to establish evidence that the use of an ATDS by the defendant “caused her greater lost time, aggravation, and distress than she would have suffered had the calls she answered been dialed manually, which would not have violated the TCPA.”

According to the court, distress related to telephone calls could potentially be an injury-in-fact to establish standing, so long as the harm has a nexus with the each specific call. The argument being, the plaintiff could not connect an injury to telephone calls that were not answered. Thus, standing could only potentially exist for the small handful of calls that were actually answered

This defense-oriented decision based upon Article III standing for each individual call is a small victory for marketers.

Please contact an advertising compliance lawyer if you are interested in discussing the design and implementation of telemarketing campaigns, or if you are the subject of a telemarketing related investigation or enforcement action.

Richard B. Newman is an Internet law, online marketing compliance, telemarketing compliance and regulatory defense attorney at Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing and defending clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, complex commercial litigation defense, SPAM law compliance and litigation defense, intellectual property transactional and litigation matters, advising clients on promotional marketing programs, and negotiating and drafting legal agreements.

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

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