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Program Materials

  1. 1. ABA Consumer Protection December 2006 Update Randal Shaheen Randall Miller Amy Ralph Mudge Dominic Vote January 8, 2007
  2. 2. Agenda <ul><li>FTC Update </li></ul><ul><li>State Attorneys General Update </li></ul><ul><li>Private Litigation Update </li></ul><ul><li>National Advertising Division Update </li></ul>
  3. 3. FTC Update – Telemarketing Sales Rule <ul><li>TSR Safe Harbor </li></ul><ul><ul><li>The FTC’s policy of not bringing actions against parties delivering prerecorded messages will be continued until the ongoing proceedings examining the safe harbor provision are completed. </li></ul></ul>
  4. 4. FTC Update – Telemarketing Sales Rule <ul><li>Global Marketing Group Inc. </li></ul><ul><ul><li>The FTC successfully obtained a TRO and an asset freeze against a payment processing company that allegedly helped facilitate cross-border telemarketing fraud (an advance-fee credit card scheme) in violation of the TSR and the FTC Act. </li></ul></ul><ul><ul><li>Complaint is pending. </li></ul></ul>
  5. 5. FTC Update – Telemarketing Sales Rule <ul><li>DirecTV </li></ul><ul><ul><li>FTC settled with various telemarketers that allegedly violated the Do Not Call provisions of the TSR by calling customers on DirecTV's behalf. </li></ul></ul><ul><ul><li>The orders require the defendants to pay $100,000 in civil penalties (with $500,000 more suspended) and bar them from future TSR violations. </li></ul></ul><ul><ul><li>DirecTV previously settled related charges for $5.3 million. </li></ul></ul>
  6. 6. FTC Update – Identity Theft <ul><li>Federal Identity Theft Task Force </li></ul><ul><ul><li>Established by executive order and chaired by Attorney General Alberto Gonzales and FTC Chairman Deborah Platt Majoras. </li></ul></ul><ul><ul><li>Seeking public comment on ways to improve the effectiveness and efficiency of federal government efforts to reduce identity theft. </li></ul></ul><ul><ul><li>Comments must be filed by 1/19/07. </li></ul></ul>
  7. 7. FTC Update – Spanish Language Sweep <ul><li>Del Sol LLC </li></ul><ul><ul><li>FTC settles case alleging scam targeting Spanish speakers. </li></ul></ul><ul><ul><li>Telemarketers would tell customers they had been selected to get a valuable prize (computer/camera etc.) if they purchased &quot;designer&quot; merchandise, such as watches and fragrances. In return for payments of $213-$250 consumers received only cheap knock-offs and outdated electronics. </li></ul></ul><ul><ul><li>A $1.6 million judgment against defendants was suspended based on inability to pay but defendants will pay out $235,000 in redress. </li></ul></ul>
  8. 8. FTC Update – Spanish Language Sweep <ul><li>Matos/QTX </li></ul><ul><ul><li>The FTC filed an amended complaint adding a new party to this suit, which alleges that the defendants violated the FTC Act and the Telemarketing Sales Rule by making false earnings claims in connection with the marketing and sale of work-at-home craft assembly business opportunities through Spanish-language advertisements. </li></ul></ul>
  9. 9. FTC Update – Work-At-Home Scams <ul><li>Project Fal$e Hope$ </li></ul><ul><ul><li>FTC announces a joint federal and state law enforcement sweep including more than 100 actions targeting bogus business opportunities and work-at-home scams. </li></ul></ul><ul><ul><li>On December 12th, the FTC announced 9 newly filed cases, described developments in 13 ongoing cases, and referred 3 civil penalty cases to DOJ for filing. </li></ul></ul><ul><ul><li>More detail on these cases can be found at http://www.ftc.gov/opa/2006/12/falsehopes.htm </li></ul></ul>
  10. 10. FTC Update – Funeral Home Sweeps <ul><li>Funeral Rule Compliance </li></ul><ul><ul><li>Over the past year the FTC has carried out undercover visits to funeral homes in various states checking compliance with the Funeral Rule, which requires funeral homes to give consumers an itemized general price list at the start of a visit to the home to make arrangements. </li></ul></ul><ul><ul><li>The FTC found violations at 12 funeral homes that have elected to participate in a voluntary compliance program and sent enforcement letters warning 32 other homes to correct technical violations or face enforcement actions. </li></ul></ul>
  11. 11. FTC Update – Cross-Border Fraud Initiative <ul><li>U.S. SAFEWEB Act </li></ul><ul><ul><li>FTC Chairman Majoras released statements supporting Congress' passage and President Bush’s signing of the U.S. SAFEWEB Act, which is intended to help combat cross-border fraud. The Act: </li></ul></ul><ul><ul><ul><li>Expands definition of “unfair or deceptive acts” to include acts which cause reasonably foreseeable injury within the U.S. or involve material conduct taking place in the U.S.; </li></ul></ul></ul><ul><ul><ul><li>Authorizes FTC to coordinate with and share certain confidential information with foreign law enforcement agencies; </li></ul></ul></ul><ul><ul><ul><li>Shields from liability certain individuals or entities voluntarily providing information believed to be relevant to unfair or deceptive acts or assets subject to recovery by the FTC. </li></ul></ul></ul>
  12. 12. FTC Update – Debt Collection <ul><li>Capital Acquisitions & Management Corp. </li></ul><ul><ul><li>FTC settled charges alleging that debt collection companies threatened and harassed consumers to get them to pay old, unenforceable debts or debts they did not owe. </li></ul></ul><ul><ul><li>The companies paid a $300,000 civil penalty and $1 million in consumer redress. </li></ul></ul>
  13. 13. FTC Update – Health Products <ul><li>Weight-Control Pill Marketers </li></ul><ul><ul><li>FTC settles with marketers of four products alleged to have made weight-loss and weight-control claims not supported by competent and reliable scientific evidence. </li></ul></ul><ul><ul><ul><li>Xenadrine EFX </li></ul></ul></ul><ul><ul><ul><ul><li>Claimed rapid and substantial weight loss and falsely represented that results were achieved solely by using Xenadrine EFX. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>$8 - $12.3 million in consumer redress </li></ul></ul></ul></ul><ul><ul><ul><li>CortiSlim/CortiStress </li></ul></ul></ul><ul><ul><ul><ul><li>Claimed rapid and substantial weight loss and reduced risk of osteoporosis, obesity, diabetes, Alzheimer’s disease, cancer and cardiovascular disease. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>$12 million in consumer redress </li></ul></ul></ul></ul><ul><ul><ul><li>TrimSpa </li></ul></ul></ul><ul><ul><ul><ul><li>Claimed rapid and substantial weight loss and suppression of appetite </li></ul></ul></ul></ul><ul><ul><ul><ul><li>$1.5 million to settle charges. </li></ul></ul></ul></ul><ul><ul><ul><li>One-A-Day WeightSmart </li></ul></ul></ul><ul><ul><ul><ul><li>Claimed weight loss through increased metabolism </li></ul></ul></ul></ul><ul><ul><ul><ul><li>$3.2 million civil penalty </li></ul></ul></ul></ul>
  14. 14. FTC Update – Public Workshop <ul><li>Negative Option Marketing </li></ul><ul><ul><li>On 1/25/07 the FTC will host a workshop analyzing the marketing of goods and services that present an opportunity to consent in advance to continue to receive products or services in the future. The workshop will address: </li></ul></ul><ul><ul><ul><li>Pros and cons of such arrangements; </li></ul></ul></ul><ul><ul><ul><li>Consumer behavior; </li></ul></ul></ul><ul><ul><ul><li>Applicable standards for making such offers; and </li></ul></ul></ul><ul><ul><ul><li>Appropriate disclosures. </li></ul></ul></ul>
  15. 15. State Attorneys General Update <ul><li>YP Corp. </li></ul><ul><ul><li>Thirty-Four states reached settlement with YP Corp. resolving allegations that the company deceived consumers by automatically signing them up for its on-line yellow pages through a scam involving &quot;activation checks.&quot; </li></ul></ul><ul><ul><li>YP will cease using the checks and will pay $2 million in restitution and investigatory costs. </li></ul></ul>
  16. 16. State Attorneys General Update <ul><li>Chase Bank & Trilegiant </li></ul><ul><ul><li>Seventeen states reached settlement resolving allegations that Chase & Trilegiant deceived consumers into paying for membership programs that claimed to offer discounts on automotive service, home repair, shopping, and other services. Consumers were automatically enrolled in the programs after cashing small checks that were included with membership offers. </li></ul></ul><ul><ul><li>Trilegiant was required to pay $8.325 million in restitution and Chase was required to pay $6.175 million to cover civil penalties, legal costs and fees. </li></ul></ul>
  17. 17. Private Litigation Update – New Filings <ul><li>Time Warner v. DirecTV </li></ul><ul><ul><li>Suit filed in S.D.N.Y. in December. </li></ul></ul><ul><ul><li>Alleges that DirecTV falsely advertised that viewers could not see certain games unless they subscribed. </li></ul></ul><ul><ul><li>Other ads featured Jessica Simpson and William Shatner saying that DirecTV’s high-definition TV service provides superior picture quality than Time Warner’s cable HD service. </li></ul></ul><ul><ul><li>Money damages sought---illustrative of trend? </li></ul></ul>
  18. 18. Private Litigation Update - Settlements <ul><li>Cingular Wireless v. T-Mobile </li></ul><ul><ul><li>Cingular sued T-Mobile for “lowest dropped calls” claim. </li></ul></ul><ul><li>Jackson Hewitt pays $4M </li></ul><ul><ul><li>Same-day loans called “Money Now!” advertised as a quicker way to get money at tax time. </li></ul></ul>
  19. 19. Private Litigation Update – Reported Decisions <ul><li>Van Buskirk v. Greenlight Financial Services (Cal.App.) </li></ul><ul><ul><li>Plaintiffs alleged home loan program had hidden points. </li></ul></ul><ul><ul><li>California Court of Appeals affirmed summary judgment against plaintiffs for failure to establish injury. </li></ul></ul><ul><li>Physicians Committee for Responsible Medicine v. General Mills, Inc ., (E.D.Va.) </li></ul><ul><ul><li>Plaintiffs sued dairy producers for falsely advertising the weight loss benefits of consuming dairy products. </li></ul></ul><ul><ul><li>Claims dismissed under doctrine of primary jurisdiction – i.e., because of concurrent proceedings addressing essentially the same claims at the FDA and FTC. </li></ul></ul>
  20. 20. National Advertising Division Update <ul><li>Youth Enhancement Systems, Inc. </li></ul><ul><ul><li>A challenger filed a proceeding on the grounds that current advertising for the hair product &quot;ProCede&quot; did not comply with a previous NAD decision. </li></ul></ul><ul><ul><li>NAD found that advertising for ProCede violated the previous decision by using &quot;before and after&quot; photographs, impliedly claiming that ProCede grows hair and failing to disclose effectively that ProCede is not intended to grow hair. </li></ul></ul><ul><ul><li>NAD received written assurance from the advertiser that it will modify its advertising to comply with the NAD decision. </li></ul></ul>
  21. 21. National Advertising Division Update <ul><li>Advanced Body Care Solutions </li></ul><ul><ul><li>A challenger filed a proceeding on the grounds that current advertising for the hair product &quot;Follicare&quot; did not comply with a previous NAD decision. </li></ul></ul><ul><ul><li>NAD found that, despite a few &quot;inadvertent&quot; slip ups, the advertiser substantially complied with the previous decision by withdrawing representations that all consumers will experience hair growth and modified &quot;before and after&quot; pictures to disclose that results may vary. </li></ul></ul>
  22. 22. National Advertising Division Update <ul><li>Proctor & Gamble Company </li></ul><ul><ul><li>Kimberly-Clark Corporation (maker of Huggies diapers) challenged advertising claims of &quot;superior overnight absorbancy&quot; made by P&G (maker of Pampers diapers). </li></ul></ul><ul><ul><li>The NAD found that P&G's claims of superiority were supported by the evidence but nevertheless recommended that a side by side demonstration in the commercial be discontinued because it bore little relevance to actual usage or the underlying tests done to support the claim. </li></ul></ul>
  23. 23. National Advertising Division Update <ul><li>Romfab </li></ul><ul><ul><li>Romfab claimed its Range of Motion Exercise Machine could achieve in 4 minutes, the same results as 20-45 minutes of aerobic exercise, 45 minutes of weight training and 20 minutes of stretching combined. </li></ul></ul><ul><ul><li>Romfab refused to provide substantiation for its claims and NAD referred the matter to the FTC for review. </li></ul></ul>
  24. 24. National Advertising Division Update <ul><li>S.C. Johnson & Sons, Inc. </li></ul><ul><ul><li>Reckitt Benckiser, Inc. (maker of Lysol products) challenged S.C. Johnson's (maker of Oust Air Sanitizer) claim that Lysol is ineffective on odors in the air. </li></ul></ul><ul><ul><li>NAD found that S.C. Johnson's representation regarding Lysol's ineffectiveness was misleading and recommended that the commercial be discontinued or modified. </li></ul></ul><ul><ul><li>S.C. Johnson disagreed with the decision but agreed to take in into account when considering future advertising. </li></ul></ul>
  25. 25. National Advertising Division Update <ul><li>DermaDoctor </li></ul><ul><ul><li>NAD sought substantiation of claims of effectiveness of &quot;Picture Perfect Pore Minimizing Solution.&quot; </li></ul></ul><ul><ul><li>NAD found that DermaDoctor provided a reasonable basis to support a general efficacy claim and found that the product works to remove excess skin oils and smooth out pore edges. </li></ul></ul>
  26. 26. National Advertising Division Update <ul><li>Wright Medical Technology, Inc. </li></ul><ul><ul><li>NAD referred Wright Medical Technology to the FTC and the FDA for failing to comply with a previous NAD decision regarding the advertisement of a wound-care product called &quot;GraftJacket.&quot; </li></ul></ul><ul><ul><li>The advertiser provided a &quot;clinical comparison&quot; on its website that suggested that the various products listed were comparable and subject to the same regulatory standards of proof when the clinical methodology's and testing criteria were significantly different. </li></ul></ul>

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