Last month, love was not all lost for the owner of Tinder and OKCupid when a Texas federal district court in FTC v. Match Group, Inc. granted in part the online dating service provider’s motion to dismiss. Specifically, the court agreed with Match that the FTC could not seek equitable monetary relief under Section 13(b) of the FTC Act and barred two claims based on Match’s immunity under the Communications Decency Act (CDA).
To set the scene, here is a recap of the legal landscape. In recent history, the FTC under Section 13(b) brought “proper cases” directly in federal courts without needing to conduct administrative proceedings. The agency also pursued permanent injunctions and equitable monetary relief.
In the past few years, courts have become increasingly less enamored with the FTC’s interpretation of its authority under Section 13(b). The first blow was FTC v. Shire Viropharma, Inc., in which the Third Circuit concluded that under Section 13(b), the FTC cannot base claims on “long-past conduct” alone, but must affirmatively plead facts that a defendant “is violating” or “is about to violate” the law, i.e., that there is “existing or impending conduct.”
Looking at Section 13(b)’s “plain language,” the Third Circuit determined that “‘is about to violate’ means something more than a past violation and a likelihood of recurrence.” Surprisingly, the FTC did not petition for a writ of certiorari from the Supreme Court on this case and instead has argued that the case is limited by its facts.
The FTC has also frequently bolstered allegations in its complaints to satisfy the reason to believe standard. Last April the Supreme Court unanimously held in AMG Capital Management v. FTC that the FTC could no longer use Section 13(b) to seek equitable monetary relief (e.g., disgorgement or restitution) based on Congress’s express words that grant only injunctive relief (e.g., permanent injunction). The AMG court also acknowledged that Section 13(b) is for “prospective, not retrospective” relief based on Congress’s clear choice to use both “is violating” and “is about to violate” but not “has violated.”
In 2019, the FTC filed suit seeking relief under Section 13(b) against Match for alleged unfair and deceptive practices when, among other things, it advertised paid subscriptions to nonsubscribers by communicating messages from fake users potentially engaged in “romance scams.” Match moved to dismiss several of the FTC’s claims, asserting that the FTC failed to allege that Match “is violating” or “is about to violate” the FTC Act and instead expressly recognized that Match had stopped the complained-of advertising practices before the FTC filed suit.
Match argued that the Third Circuit’s pleading standard of “is violating” or “is about to violate” that it set forth in Shire should apply, but the district court extinguished that flame and instead, without referencing or distinguishing the Shire decision, applied a “likelihood to recur” standard favored by the Fifth Circuit. In the Fifth Circuit, the FTC must allege only that practices, absent restraint, would give rise to a fair inference that continued violations are reasonably expected. Moreover, alleged past violations are assessed as one of several non-exhaustive factors. This is a less stringent standard than the Shire standard, which requires existing or impending conduct.
Match Group, Inc. also sheds light on Section 230 immunity for advertisers using third-party content. Section 230 of the Communications Decency Act protects “interactive computer services”—websites that allow third parties to post content—from legal action based on a third-party user’s illegal posting, with certain exceptions for content that violates copyright law and federal criminal law.
In its motion to dismiss, Match argued that it should not be held responsible under Section 230 because the communications serving as the predicate for the alleged deception were created by third-party app users, rather than by Match. The district court agreed, dismissing certain of the FTC’s claims and finding that Match is shielded from liability for supposed misrepresentations by dating app users because the FTC did not plausibly allege Match “itself authored or created the content.” Importantly, the district court explained further that the FTC could not bypass Section 230 immunity by insisting that website features were content, finding that “automatically generated advertisements are not themselves content.”
Some of you might be thinking of popping the big question—what does the future hold? We expect that advertisers of third-party content will continue to rely on the broad immunity found under Section 230 in online advertising cases. Advertisers should continue to monitor congressional efforts to curtail Section 230 protections, of which there are many, including the SAFE TECH Act, which would remove platform immunity for paid third-party speech if “the provider or user has accepted payment to make the speech available or, in whole or in part, created or funded the creation of the speech.”
The fate of Section 13(b) as it applies to past conduct is unclear. Bills to restore the FTC’s ability to obtain monetary relief under Section 13(b) have included language making it clear that the provision can be used to challenge past conduct. In addition, courts are now taking sides and setting the stage for a potential circuit split on the standard to apply when the FTC files suit under Section 13(b) to police a defendant’s past conduct.
Should either the FTC or Match receive a less than favorable result in Match Group, Inc. as the case progresses, it may set up an appeal that would allow the Fifth Circuit to weigh in on whether to continue to stay the course with its past beliefs or have a change of heart. And should the Fifth Circuit stand its ground on the “likelihood to recur” standard, a circuit split solidifies and would be primed for the Supreme Court’s review. Stay tuned.