FTC International Monthly - August

On behalf of the FTC, the Department of Justice sued video-sharing platform TikTok, its parent company ByteDance, and its affiliated companies for flagrantly violating the Children’s Online Privacy Protection Act (COPPA), and also alleged they infringed an existing FTC 2019 consent order against TikTok for violating COPPA. The complaint alleges defendants failed to comply with the COPPA requirement to notify and obtain parental consent before collecting and using personal information from children under the age of 13. Instead of complying, ByteDance and TikTok spent years knowingly allowing millions of children under 13 on their platform designated for users 13 years and older in violation of COPPA, according to the complaint. TikTok’s practices prompted its own employees to raise concerns. As alleged, after failing to delete numerous underage child accounts, one compliance employee noted, “We can get in trouble … because of COPPA.”

As a result of an FTC lawsuit, the owners and operators of a sprawling credit repair operation known as Financial Education Services (FES) will end the practices that the FTC alleged created a pyramid scheme and also violated the Credit Repair Organizations Act. In addition, the proposed court orders include substantial monetary penalties. The FTC alleged that the company preyed on consumers with low credit scores by luring them in with the false promise of an easy fix and then recruiting them to join a pyramid scheme selling the credit repair services to others, costing them millions of dollars. The FTC also alleged that the pyramid scheme defendants made overinflated income claims that consumers could make tens of thousands of dollars recruiting others into FES. In addition to conduct remedies, the proposed settlements in the case will lead to more than $12 million being turned over to the FTC for refunds to affected consumers.

NRRM, LLC, which does business as CarShield, along with American Auto Shield, LLC (AAS), the administrator of its vehicle service contracts (VSCs), will pay $10 million to settle FTC charges that its advertisements and telemarketing for VSCs are deceptive and misleading, and that many purchasers found that many repairs were not “covered,” despite making payments of up to $120 per month. The FTC also alleges CarShield’s celebrity and consumer endorsers made false statements in its ads. The stipulated order settling the Commission’s complaint also bars CarShield and AAS from making deceptive and misleading statements in the future and requires them to ensure their endorsers’ testimonials are truthful, accurate, and not deceptive.

FTC Acts Against Auto Dealers for Deceptive Pricing and Discriminatory Practices

The FTC has brought two separate actions against auto dealers for deceptive pricing and discriminatory practices. First, the FTC and State of Arizona have acted against Coulter Motor Company and an individual defendant for engaging in a wide array of practices that harm consumers, from deceptive online vehicle pricing to charging Latino car buyers more in interest and add-on products. Defendants will pay $2.6 million to settle the lawsuit, most of which will go to provide refunds to consumers harmed by defendants’ allegedly unlawful actions. The FTC and State of Arizona allege that Coulter, which operates Coulter Cadillac Tempe and Tempe Buick GMC, and the individual defendant regularly charged consumers for unwanted add-ons that consumers never agreed to pay and other bogus fees. A survey of consumers who purchased or leased cars from Coulter found that 92 percent of the consumers surveyed were charged for at least one add-on without their authorization, or that they thought was required.

Separately, the FTC has acted against auto dealer group Asbury Automotive for discriminating against Black and Latino consumers and charging for unwanted add-ons. In an administrative complaint, the FTC alleges that Asbury, which operates three Texas dealerships, and an individual defendant systematically charged consumers for costly add-on items they did not agree to or were falsely told were required as part of their purchase. The FTC also alleges that Asbury discriminates against Black and Latino consumers, targeting them with unwanted and higher-priced add-ons. The defendants’ tactics allegedly included a practice called “payment packing,” where the dealerships convinced consumers to agree to monthly payments that were larger than needed to pay for the agreed-upon price of the car, and then “packed” add-on items to the sales contract to make up that difference.

The federal court trial began this week in the FTC action to block the largest proposed supermarket merger in U.S. history – Kroger Company’s $24.6 billion acquisition of the Albertsons Companies, Inc. The FTC alleges that the proposed deal would eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of people in the United States. The loss of competition would also lead to lower quality products and services, while narrowing consumers’ choices for where to shop for groceries. Moreover, for thousands of grocery store workers, Kroger’s proposed acquisition of Albertsons would immediately erase aggressive competition for workers, threatening the ability of employees to secure higher wages, better benefits, and improved working conditions. If consummated, the combined company would operate more than 5,000 supermarkets and 4,000 retail pharmacies across 48 states and have over 700,000 employees. The FTC issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition pending the Commission’s administrative proceedings. A bipartisan group of nine attorneys general joined the FTC’s federal court complaint. The trial is expected to last three weeks.

The FTC and DOJ virtually cohosted the first public meeting of the Strike Force on Unfair and Illegal Pricing (Strike Force) to discuss Strike Force enforcement actions to lower prices for people in the United States. President Biden launched the Strike Force to strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on families across the country through anti-competitive, unfair, deceptive, or fraudulent business practices. At the meeting, FTC Chair Khan highlighted the FTC’s recent work to stop corporate lawbreaking that raises prices for consumers, workers, and businesses, including uncovering evidence of corporate conduct that may raise the price of gas, working to lower the cost of many asthma inhalers to just $35 out-of-pocket, and making it easier for people living in the United States. to cancel online subscriptions they do not want. Chair Khan announced that she will ask the Commission to launch an inquiry into grocery prices to probe the tactics that big grocery chains use to hike prices and extract profits from everyday shoppers at the checkout counter.

The FTC filed an amicus brief in a case brought by online video game maker Epic Games Inc. against Google LLC’s app store. The brief outlines how the court should consider potential remedies when determining effective relief to restore competition after Google was found liable for illegal monopolization. In its amicus brief, the FTC encourages the court to use its broad power to order a remedy that stops the illegal conduct, prevents its recurrence, and restores competition. Injunctive relief should also restore lost competition in a forward-looking way and should ensure a monopolist is not continuing to reap the advantages and benefits obtained through the antitrust violation, the FTC’s brief stated.

The FTC submitted a comment supporting the Food and Drug Administration’s (FDA) draft guidance intended to increase the use of interchangeable biosimilar drugs that can be substituted for brand-name biologic products. The FTC comment stated that the FDA’s guidance would increase patient access to lower-cost prescription medications. Biologic drugs treat serious medical conditions and are often some of the most expensive types of prescription medications. A biosimilar drug is like a generic drug in that it treats the same conditions as a reference biologic or brand-name drug with no clinically meaningful differences, including in safety and effectiveness. Under the FDA draft guidance, the FDA is removing its prior recommendation that a biosimilar drug applicant must submit clinical switching studies to demonstrate that a biosimilar is interchangeable with the biologic reference drug. Instead, a biosimilar drug applicant may submit a statement to the FDA explaining why the existing data in a biologic license application would support the FDA’s designation of the drug as interchangeable. Once the FDA designates a biosimilar product as “interchangeable,” pharmacists can substitute that product for a biologic without prescriber intervention.

The FTC highlighted the agency’s work to protect consumers from potential harms related to artificial intelligence in a comment submitted as part of the Federal Communication Commission’s (FCC) notice of inquiry examining the implications of emerging AI technologies. In its comment, the FTC outlined the agency’s efforts to use all the tools at its disposal to address the rapid emergence of new technologies powered by AI and their potential risks to consumers and businesses. As part of the agency’s law enforcement work, the FTC has acted against companies that deceive users about their use of AI or use AI in unfair ways. For example, the FTC alleged that Amazon and Ring used highly private data ‒ voice recordings collected by Amazon’s Alexa voice assistant and videos collected by Ring’s internet-connected home security cameras ‒ to train their algorithms while violating customers’ privacy. The comment also discussed the agency’s rule outlawing government and business impersonation scams ‒ a type of fraud that generative AI can turbocharge. In its comment, FTC staff also discussed the agency’s efforts to combat AI-enabled voice cloning. Scammers are using voice cloning technology to impersonate family or friends, business executives, or others to obtain money from consumers. To help address this growing problem, the FTC last year launched its Voice Cloning Challenge to promote the development of ideas to protect consumers from the misuse of AI-enabled voice cloning for fraud and other harms.