News from the Federal Trade Commission - May 2012

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Penn Corner May 2012

Skechers Ads to Shape Up

Skechers shoe
Skechers USA, Inc. has agreed to pay $40 million to settle charges that it deceived people with ads claiming its Shape-ups and other “toning shoes” would help them lose weight and strengthen muscles. Ads challenged by the FTC include one that aired during the 2011 Super Bowl showing Kim Kardashian dumping her personal trainer for a pair of Shape-ups. Another ad claimed that people who wore Resistance Runner shoes could substantially increase “muscle activation” for posture-related, calf, and buttocks muscles compared to wearing regular running shoes. But the study that supposedly backed up those claims did not produce those results, the FTC alleges, and Skechers cherry-picked the results. People who bought Shape-ups and other toning shoes can learn about refunds at

Whose Space?
Myspace has settled FTC charges that it misled millions of users about sharing personal information with advertisers. Myspace's privacy policy promised it wouldn’t share personal information that could be used to identify users, and that information used to customize ads wouldn’t identify the user to third parties. The FTC charged that Myspace gave advertisers the Friend ID of users viewing particular pages on the site, which allowed advertisers to go to people’s profiles, identify them, and see any publicly available information. Advertisers also could combine the user's real name and profile with other information to link web-browsing activity to them, the FTC said. The settlement requires privacy audits for the next 20 years.

A Cram Sandwich

The FTC has charged BSG, the nation’s biggest third-party billing company, with contempt. The agency is seeking the return of $52 million in bogus charges — the amount the company crammed on to people’s phone bills and failed to refund, despite complaints. Cramming happens when a company adds a charge to your phone bill for a service you didn’t order, agree to, or use. According to the FTC, BSG (Billing Services Group) violated the terms of a previous FTC order by placing more than $70 million in charges on nearly 1.2 million phone lines on behalf of a serial phone crammer for unwanted voicemail and streaming services.

Grand Scale Deception

tv remote
The FTC has won a judgment against a massive infomercial scam that allegedly deceived almost a million people out of more than $450 million. The marketers behind infomercials for John Beck's Free & Clear Real Estate System, John Alexander's Real Estate Riches in 14 Days, and Jeff Paul's Shortcuts to Internet Millions promised big returns for the price of $39.95, the FTC said. But fewer than one percent of the buyers made any profit, and many people found themselves enrolled in programs that charged them every month, the court found. The defendants also pitched personal coaching services for up to $14,995, claiming people would easily earn back the cost. But almost everyone who paid for coaching lost money. Read Ads for Business Opportunities: How To Detect Deception.

A No-Win Situation

lottery balls
The FTC has put an end to an operation that allegedly posed as government agencies and conned hundreds of thousands of people into paying $20 each for fake sweepstakes prizes. According to the FTC's amended complaint, operators of the scheme sent personalized mailers — some with fictitious government agency names and seals — to convince people that they’d won a multi-million dollar prize. But the people getting the mailers hadn’t won a thing, the FTC said. Legitimate sweepstakes don’t require anyone to pay “insurance,” “taxes,” or “shipping and handling charges” to collect a prize. For more, read Scammers Exploit the FTC's Good Name, Promise Phony Sweepstakes Prizes.

Pipelines and Prices

gas pipelines
Kinder Morgan, Inc., has agreed to sell natural gas pipelines and other assets in the Rocky Mountain region to settle FTC charges that its $38 billion acquisition of El Paso Corporation likely would lead to higher prices for transporting natural gas in the area. Both companies operate pipelines and other natural gas facilities throughout the U.S. According to the FTC, without divestitures, the combined firm would dominate natural gas transportation options for producers in Wyoming, Colorado, Nebraska, and Utah. As proposed, Kinder Morgan will divest its Rockies Express pipeline, Kinder Morgan Interstate Gas Transmission pipeline, Trailblazer pipeline, two gas processing plants in the Rocky Mountain region, and associated storage capacity to a buyer approved by the FTC.

"You don’t have to be Don Draper to know that products that claim health benefits attract customers. So, let me remind marketers once again: either shape up your substantiation or tone down your claims. The standard is clear and direct:  Any health benefit claim requires competent and reliable scientific evidence."

David Vladeck, Director, Bureau of Consumer Protection

Funeral Home Fails Again

A New York City funeral home has settled charges that it didn’t disclose casket prices to customers as required by the FTC’s Funeral Rule, despite having participated in a compliance training program once before. Under the FTC’s Funeral Rule, funeral homes must give customers itemized price information at the start of an in-person discussion of arrangements, and a price list for caskets before they see any in the showroom. For more, read Paying Final Respects.

Identity Theft and Older Consumers

The FTC is looking for information from the public on how identity theft affects older consumers. That includes original research on its scope, challenges to dealing with it, and possible solutions. The agency will use what it learns to inform its law enforcement agenda, policy initiatives, and education efforts.

FTC Workshop Looks at Drip Pricing

The FTC is hosting a public workshop May 21st on “drip pricing,” a practice used by airlines, car dealers, and financial institutions, among others, where companies advertise only part of a product's price up-front, and then reveal more charges — like surcharges, taxes, or optional upgrade fees — as a person goes through the process of buying the product.


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