Alerts

AD-ttorneys@law - June 18, 2019

Alerts / June 18, 2019

In This Issue

FTC Takes Aim at Two More (Alleged) CRFA Violators

Commission claims real estate contracts tried to mum consumers

And You Thought the Beat Slowed Down?

In a story from about a month ago, we wrote that the Federal Trade Commission (FTC) was ramping up its Consumer Review Fairness Act (CRFA) enforcement.

This week’s CRFA spotlight features two new FTC enforcement actions, this time united by a theme: real estate.

First, a primer for the uninitiated: The CRFA, passed into law in 2016, prohibits businesses from using contract fine print to threaten consumers with legal action for negative reviews online.

Caseload

First up are Staffordshire Property Management and its owner, Aaron Fischer, which together operate a property management service and process consumer rental applications.

The FTC alleges that Staffordshire’s contracts contained anti-disparagement provisions and agreements that bound the consumer “not to communicate, publish, characterize, publicize or disseminate, in any manner, any terms, conditions, opinions and communications related to Staffordshire Property Management, this application, or the application process.”

Here All Week!

The second case is against Robert Aaron Stephens and the company he manages, Shore To Please Vacations (STPV).

STPV rents vacation properties to traveling guests, and the FTC claims STPV’s forms read in part as follows: “you agree not to defame or leave negative reviews (includes any review or comment deemed to be negative by a Shore to Please Vacations LLC officer or member, as well as any review less than a ‘5 star’ or ‘absolute best’ rating) about this property and/or business in any print form or on any website…”

The folks at STPV are also accused of adding this to their contracts: “Due to the difficulty in ascertaining an actual amount of damages in situations like this, breaching this clause…will immediately result in minimum liquidated damages of $25,000 paid by you…”

The Takeaway

So, the FTC’s CRFA actions show no signs of abating. If you have any questions or concerns about what you’re asking your customers to do in your contract language, be sure to review the FTC’s handy reference page, which explains the most important points of the Act. The settlement between the FTC and these two property management companies requires the companies to agree to not use these similar anti-disparagement provisions in the future and requires the companies and their owners to notify the affected consumers that these anti-disparagement clauses are void.

Senator Tweets About Detox Teas and Danger to Public

Is Senator Blumenthal’s FTC invocation weirdly tea-specific?

Tweet From Senator Blumenthal to Invoke FTC Action

Recently, Connecticut Senator Richard Blumenthal made a public statement via Twitter to the Honorable Joseph Simons, chairman of the Federal Trade Commission (FTC), about deceptive tea detox marketing and the danger these marketing schemes pose to the public. The tweet linked to a letter from Senator Blumenthal to Chairman Simons describing how these deceptive detox tea marketing claims threaten the public and how they should be addressed by the FTC.

The opening line was framed as a classic lecture from an authority figure within the Senate: “I write to express our deep concern regarding the growing trend of ‘detox teas’ and their false promotion as shortcuts to healthy weight loss and management.”

The Takeaway

Senator Blumenthal’s petition to the FTC chairman embraces the alleged negative effects of appetite-suppressant products ‒ or at least one specific product: detox teas.

According to the honorable senator, the detox tea industry is guilty of three intertwined crimes: peddling dangerous materials, making false promises about results and using dubious influencer advertising to “rope in” children. He takes specific swings at Kim Kardashian and Flat Tummy Co.’s detox tea product, which she promotes on social media, and throws a thinly veiled jab by referencing the FTC’s own guidelines.

If we went into more detail, we’d just be reproducing the memo itself, so we’ll leave you with one further observation: Senator Blumenthal seems especially preoccupied with detox teas, something the FTC may consider evaluating for deception claims based on detox tea companies’ marketing practices. The FTC has previously remarked on the danger of relying on the promises made in diet supplements’ marketing materials, and perhaps will next remark on the dangers of these popular detox teas claims.

FTC and FDA Combine to Squeeze E-Juice

Four companies get warning letters over alleged failure to label their liquid

Train Kept A-Rollin’

E-Liquid. It’s the oil that’s used in the production of e-cigarettes and other vapor products.

And not too long ago, it came under the watchful eye of the Food and Drug Administration (FDA).

Smoked Out

Back in August of last year, the FDA introduced labeling and warning statement requirements for “covered tobacco products” ‒ products that are “deemed to be subject to the FD&C Act.” E-cigarettes have been covered by the FDA for more than two years. The new requirements introduced last year mandate the following text on the packaging of every covered product, including e-cigarettes:

“WARNING: This product contains nicotine. Nicotine is an addictive chemical.”

This tag, in turn, is defined by its own set of rules governing typeface and prominence on the package. For instance, the warning must “comprise at least 30 percent of each of the principal display panels.”

The Takeaway

In early June of this year, the Federal Trade Commission (FTC) and the FDA teamed up to dole out some criticism to four companies that produce the e-liquids: Solace Technologies, Hype City Vapors, Humble Juice Co. and Artist Liquids Laboratories.

According to the FTC’s statement, the companies had misbranded the e-liquids because posts by influencers who promote the products on Facebook, Instagram and Twitter failed to include the nicotine warning. This is tantamount to a violation of the FTC Act, the statement maintained, because “the FTC Act’s prohibition on unfair or deceptive practices includes the failure to disclose material health or safety risks in advertising.” The letters also reminded the companies to ensure that their influencers disclosed their advertising relationship in their posts.

The letters do seem fairly gentle, however, offering a 15-day period for companies to make corrections and lots of suggestions and guidance in lieu of full-blown enforcement actions.

And perhaps that treatment goes to show that the upstart “vaping” companies are becoming legitimate businesses ‒ they’re slowly but surely joining the rest of their industry under the regulators’ penetrating eye. With this growth of vaping companies and their rising popularity among younger consumers and influencers, disclosure of dangers with these types of required warnings will continue to be extremely important, and products will be watched by the careful eyes of regulators such as the FDA and FTC.

Grubhub Orders Up More TCPA Tsouris

Class action plaintiff says the calls never slowed down, despite direct requests

Unchecked!

Grubhub is an ambitious company. Founded in 2004, it had gobbled up its main competitor, Seamless, by 2013; it went public, and set about a string of acquisitions in the online delivery space that consumed an additional eight competitors by 2018. This is a company that’s very sure of the moves it makes.

Perhaps too sure?

A recent Telephone Consumer Protection Act (TCPA) class action filed by Georgia consumer Donna Marshall says that despite her requests to the contrary, Grubhub continued to pester her with “dozens – or possibly even hundreds” of calls.

The topics of the calls, which were logged on her voice mail, ranged from requests for order confirmation to requests for her holiday hours over Memorial Day.

The Takeaway

Marshall claims that she and her fellow classmates never requested the calls in the first place. She claims she even called Grubhub on two occasions and spoke with company representatives, at least one of whom assured her the calls would stop. She says they never did.

Marshall is suing Grubhub in the United States District Court in the Northern District of Illinois, Eastern Division, for violations of the TCPA. She’s seeking damages and injunctive relief with an interesting twist: a request for “Grubhub to hire a Court-approved, independent auditing company to (a) investigate all allegations of TCPA violations, and (b) audit no less than 10% of its outbound calls to ensure that Grubhub had consent and that the consumer had not previously asked that calls stop, and (c) report the results of the above investigations to the Court and Plaintiff’s counsel on a quarterly basis.”

This is one of several TCPA cases against Grubhub, including one that settled (subscription required) for $8 million in 2017. This case and the predecessor cases against Grubhub showcase the importance of companies to ensure they are TCPA compliant when initiating these phone calls and text messages to consumers, lest they be subject to heavy penalties and fines under the TCPA. Ensuring compliance with the TCPA and obtaining the proper consent prior to initiating these communications will continue to be of paramount importance as companies continue marketing to consumers using innovative and reachable methods, such as automated calls.

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