Third Bite at the Apple – FTC Administrative Proceeding Signals a Relentless Pursuit Against Supplement Marketers
The FTC routinely pursues dietary supplement makers for making allegedly deceptive or unsubstantiated claims, and most of those investigations are resolved through settlements. The FTC's recent unsuccessful efforts to bring a contempt action regarding one of those settlements and its decision to then challenge the alleged contemptuous conduct in an administrative proceeding provide interesting insights into FTC settlements and the FTC's relentless pursuit of companies that fall into disfavor.
FTC Commissioner Encourages Partnership with CFPB and "Systemic" Change Following FTC Action against Debt Collection Scheme
On November 30, 2020, the Federal Trade Commission (FTC) announced that it had taken action against a debt collection company, Midwest Recovery Systems ("Midwest"), alleging that an alleged "debt parking" scheme caused more than $24 million in harm to consumers. While the complaint and settlement themselves are not that remarkable, the dissent filed by Commissioner Chopra is. Commissioner Chopra challenges the FTC's approach to debt collection, suggesting the FTC refer such cases to the Consumer Financial Protection Bureau (CFPB) and that the FTC focus on other things. We have written previously about Commissioner Chopra's other ideas for reshaping FTC approaches and priorities, and if Commissioner Chopra were to become the next Chair under President-elect Biden, things could get interesting at the agency.
Don't Fake It Till You Make It: Company's False Advertising Costs Them
On November 10, 2020, the District of Utah decided a case involving two sellers of supplements, Vitamins Online, Inc. v. Heartwise Inc. d/b/a NatureWise, which, among other things, examined defendant NatureWise's allegedly manipulated reviews on a major online marketplace. In deciding the case, the court addressed customer reliance on reviews in their purchasing decisions.
FTC Commissioner Seeks to Resurrect Penalty Offense Authority
At the end of last month, FTC Commissioner Rohit Chopra and his attorney advisor, Samuel Levine, penned an article, "The Case for Resurrecting the FTC Act's Penalty Offense Authority." In the article, the authors posit that, because the FTC's "ability to seek monetary relief through Section 13(b) is now in jeopardy," the FTC should "resurrect one of the key authorities it abandoned in the 1980s"—the Penalty Offense Authority under Section 5(m)(1)(b) of the FTC Act. The authors argue that dusting off the FTC's Penalty Offense Authority would "mitigate the ongoing gamesmanship around Section 13(b), showing the marketplace that the FTC has more than one trick up its sleeve." Indeed, Commissioner Chopra's laser focus on mitigating the potential impact of the Supreme Court's forthcoming decision in FTC v. AMG Capital Management was on display twice last month, as we previously discussed. In related news, all five FTC commissioners recently asked Congress to "clarify" the FTC's authority under Section 13(b) in light of the Shire, Credit Bureau Center, and AbbVie decisions.