In June, we blogged about the Federal Trade Commission's lawsuit in federal court against Traffic Jam Events, which alleged that the marketing agency deceived consumers by sending out mailers that appeared to provide information about how to obtain federal COVID-19 stimulus benefits, but which instead lured them to a used car sale.  Now, the FTC has changed course, voluntarily dismissing that case, and bringing a new administrative complaint against the marketer -- alleging a broader set of violations. 

In addition to alleging that Traffic Jam Events misled consumers about the availability of COVID-19 relief, the FTC is now charging the marketer with running a deceptive prize promotion and not complying with the Truth in Lending Act and Reg Z. 

On the prize promotion front, the FTC alleged that Traffic Jam Events sent mailers to consumers falsely claiming that they had won cash prizes.  According to the FTC's complaint, consumers received a mailer falsely claiming that they were a "guaranteed winner" of $2,500.  On the reverse side of the mailer, in fine print, the marketer disclosed that the consumer was not a guaranteed winner -- but only had a 1/52,000 change of winning. 

The FTC also alleged that Traffic Jam Events violated the Truth in Lending Act and Reg Z by promoting a closed end credit transaction without including the required disclosures.  The FTC charged the marketer with failing to properly disclose terms such as, the amount or percentage of the down payment, the terms of repayment, and the annual percentage rate. 

There are a number of useful take-aways from the FTC's action here.  

First, the FTC continues to aggressively go after marketers for making deceptive claims related to COVID-19.  (Just a few days ago, the FTC obtained a TRO against another marketer for making deceptive COVID-19 health claims.) 

Second, the FTC's action highlights the fact that advertising agencies, and others that participate in deceptive promotions, may be held liable for violating the FTC Act and other laws that the FTC enforces.  

Third, although you haven't heard a lot about prize promotions from the FTC in a while, they're clearly still on the FTC's radar.  At a minimum, this case is a good reminder that you can't tell consumers they're a winner, when they're really not.  

Fourth, fine print disclaimers that consumers are unlikely to see are similarly unlikely to convince the FTC that consumers weren't misled.  If you've got information that consumers need to know, the FTC expects that information to be disclosed clearly and conspicuously.  It's also very unlikely, however, that you're going to be able to convince the FTC -- or anyone else, for that matter -- that a disclaimer is effective if it directly contradicts the main message of the advertising.  

Fifth, if you're advertising consumer credit, you'd better make sure you're complying with federal truth-in-lending laws.  If you've got a trigger term, you'd better make sure you've clearly and conspicuously disclosed the required information.  With many consumers having tough times during the pandemic, you can expect that the FTC is looking even more closely at how marketers are promoting credit terms. 

And, finally, this case is a great example of, when you invite the FTC into your home, they may look inside your medicine cabinet as well.  Don't assume that if you push the envelope (no pun intended) on one mailer, that the FTC isn't going to take a hard look at the other things you're doing as well.