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FTC Restores Criminal Offenses Authority to Issue Opinions Regarding Approvals and Money-Making Opportunities | Faegre Drinker Biddle & Reath LLP


In October 2021, the FTC sent out three different notices of criminal offenses1 to nearly 2,000 companies, warning them against deceptive and unfair practices in the education market; customer endorsements, testimonials and reviews; and lucrative businesses. In each case, potential civil monetary penalties of up to $ 43,792 are at stake. In doing so, the FTC has swept away a seldom-used tool to combat what it sees as an “explosion” of deceptive approvals online. and on social media and a proliferation of lucrative opportunities capitalizing on the COVID-19 pandemic. While the FTC has enforced these same consumer protection laws for decades, these recent notices expand on the FTC’s efforts during the Biden administration to bolster its powers and likely portend even more active enforcement in the space. consumer protection.


Until recently, the FTC has long relied on Section 13 (b) of the FTC Act, 15 USC § 53 (b), to seek a variety of remedies in consumer protection cases, including a monetary relief, restitution and restitution. In particular, Section 13 (b) authorizes the FTC to seek a “permanent injunction” in federal court when it has reason to believe that an individual or business is “violating or is about to violate” the. FTC law. For decades, the FTC has used this provision to seek or threaten to seek monetary redress, restitution, and restitution as part of consumer protection enforcement actions, including those related to false or misleading advertising.

In April, however, the Supreme Court unanimously ruled that Section 13 (b) does not empower the FTC to seek monetary relief. Like us Previously reported, in AMG Capital Management, LLC v. Federal Trade Commission, the Supreme Court overturned a $ 1.27 billion restitution and remission order against a payday loan company and ruled that the wording of the “permanent injunction” in section 13 (b) “does not directly authorize the Commission to obtain a monetary remedy ordered by the court”.

Since then, the FTC has turned to its other sources of enforcement authority to fill the void left by the Supreme Court. Section 5 of the FTC Act, 15 USC § 45, declares “unfair or deceptive acts or practices in or affecting commerce” illegal, but does not provide for civil penalties for a first violation, unless there is a violation. ‘a rule, consent order, administrative order or other standard. As announced by an article from 20202 co-authored by then-Commissioner Rohit Chopra and current Director of the Office of Consumer Protection Samuel Levine, the FTC now uses a rarely used provision of Section 5, known as the Penalty Offense Authority, as method of obtaining authorization to seek sanctions.

The Penalty Offense Authority allows the FTC to seek civil penalties if (1) the FTC can prove that the company or individual knew that the conduct was unfair or deceptive under FTC law, and (2) the FTC has already made a written decision that such conduct is unfair or deceptive.3 To trigger this authority, the FTC can send out a Criminal Offenses Notice – which then establishes the required knowledge element, which is that the recipient knew the conduct was illegal. The Notice does not extend to conduct that has been resolved by Order in Council on consent or other regulation.

Recent FTC Notices Regarding Criminal Offenses

The FTC first issued a criminal offense notice to more than 70 colleges and for-profit institutions regarding unfair and deceptive conduct in the education market in early October 2021.4 The Notice warns companies not to engage in a variety of conduct that has been found to be unfair or deceptive, such as: distorting the demand for graduates from a specific institution; distorting job prospects or the types of jobs available to graduates of an institute; distort the amount of money graduates can earn; distort the qualifications needed to get a job in a certain field; or distort an institution’s facilities or abilities to help graduates find employment.

On October 13, 2021, the FTC issued another notice of criminal offenses to more than 700 businesses to deter misleading advertising, endorsements and testimonials. The notice was sent to a wide range of businesses5, including advertisers, retailers, consumer products companies and many domestic businesses. The notice describes a variety of practices that the FTC has previously determined to be unfair or deceptive and illegal in contentious administrative proceedings. This includes: falsely claiming third party endorsements; misrepresent whether an approval comes from a real, current, or recent user of a product; continue to use an endorsement without reason to believe that the endorser still holds the same views; claim that an approval represents the user experience; use an endorsement to make misleading performance claims; failing to disclose an unexpected material connection with an endorser; or distort the experience of an endorser as typical or ordinary. Ironically, the administrative rulings on which the opinion is based date from 1941 to 1984, representing a body of law that existed and was enforced long before online and social media advertising was as “explosive” as it claims. FTC.

Finally, on October 26, 2021, the FTC issued notices of criminal offenses to more than 1,100 companies offering profit-making activities (such as multi-level marketing firms or business and investment coaches), warning them to do not deceive or mislead consumers about potential earnings.6 In particular, the Notice reminds recipients that the following are considered unfair or misleading and therefore illegal: distorting any profit or income that may be anticipated by a participant (for example by claiming that participants are likely to be profitable or that a certain level of profits where the gains are typical or ordinary); and falsely claiming that sales of a lucrative opportunity will only be made to a limited number of potential participants when the sales will actually be made to anyone who is willing and able to pay. Recipients of this notice of profit-making offenses have also received copies of the notice of mentoring and advertising offenses, advising businesses that it is illegal to use testimonials that mislead consumers into error about the potential benefits of participating in a money-making opportunity.

In all three cases, companies can face significant civil penalties – up to $ 43,792 per violation – if they engage in the prohibited conduct. The Notice makes it clear that recipients are not presumed to have committed wrongdoing.

Implications for companies

While the FTC has suggested that these notices are nothing new and only strengthen existing law, the FTC’s new faith in a long-neglected authority and the wide dissemination of notices signal an increased willingness to aggressively enforce. consumer protection laws. The companies that received these notices now have, in the eyes of the FTC, actual knowledge of the types of conduct prohibited by the FTC Act. With the issuance of a notice, an investigation or enforcement action could turn more quickly into a request for monetary relief.

These notices, however, are not the FTC’s first foray into enforcement action against deceptive online advertising and social media. For example, in 2017, the FTC settled a lawsuit against two social media influencers who backed an online gambling company without disclosing their co-ownership of the company.7 Around the same time, the FTC sent warning letters to social media influencers regarding their material connection disclosures in their Instagram posts.8 In 2020, the FTC also settled a lawsuit against a skin care company that posted bogus consumer reviews of company employees without disclosing the reviewers’ employment status.9 Likewise, the FTC recently took action against an allegedly lucrative company that used robocalls, text messages, online ads, social media, and other forms of marketing to make false and unsubstantiated claims about the amount. that consumers could earn.ten

The advisories are now drawing even more attention to these issues, encouraging companies to take proactive steps to avoid engaging in this conduct, and squarely enforcing monetary penalties for violations. As a result, all businesses and advertisers should review their internal policies and procedures to ensure that they comply with applicable law, regulations and FTC policy. This includes the FTC Approval Guides for Using Endorsements and Testimonials in Advertising, as good as FTC Guidelines for Social Media Influencers. Companies should ensure that they avoid misleading claims or endorsements, confirm that any performance claim is or can be justified, and ensure that they disclose any non-obvious and material links to the endorsers. While online advertising and marketing remains the norm, expect additional application activity in the near future.

Antitrust and consumer protection laws are nuanced and complex, and their application to particular business situations is a factual inquiry. Businesses concerned about the impact of recent developments on their risk of violating antitrust and consumer protection laws are strongly advised to consult with legal counsel.


  1. Fed. Commercial, criminal offenses relating to endorsements
  2. R. Chopra & S. Levine, The Case for Resurrection of FTC Criminal Offenses Authority (October 29, 2020)
  3. 15 USC § 45 (m) (1) (B).
  4. Fed. As a trade, Criminal offenses relating to education
  5. Fed. As a trade, List of October 2021 recipients of the FTC Notice of Criminal Offenses Regarding Deceptive or Unfair Conduct Regarding Endorsements and Testimonials (October 21, 2021)
  6. Fed. As a trade, Criminal offenses relating to opportunities to earn money
  7. Fed. As a trade, CSGO Lotto Owners Settle First-Ever FTC Complaint Against Social Media Influencers (September 7, 2017)
  8. Fed. As a trade, FTC staff remind influencers and brands to clearly disclose their relationship (April 19, 2017)
  9. Fed. As a trade, FTC Approves Final Consent Agreement with Sunday Riley Modern Skincare, LLC (November 6, 2020)
  10. See, for example, Fed. As a trade, FTC Returns $ 1.1 Million To Consumers Who Lose Money To Suspected Scammers Selling Fake Income Opportunities (October 4, 2021)

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