About a year ago, the Federal Trade Commission obtained a temporary restraining order against telecommunications companies Disruption Theory and Emergent Technologies, and their owners, for allegedly marketing "unlimited" calling plans to the friends and family of prison inmates, even though the plans don't, in fact, provide "unlimited" minutes.
After obtaining default judgments against both of the companies and one of the owners, the FTC just entered into a settlement with the other owner of the company, Marc Grisham. As part of the settlement, Grisham is prohibited from making similar false claims in the future.
When the FTC first announced the case last year, Andrew Smith, then the Director of the FTC's Bureau of Consumer Protection, said, "These defendants ripped off families with loved ones in prison, selling them fake calling plans that were supposed to allow unlimited calls with those inmates. Especially with COVID-19 restrictions now in place, the phone is a lifeline for these families, who shouldn’t have to deal with this kind of exploitation.”
Most significantly, as part of the settlement, Grisham is also required to engage in corrective advertising for the next two years. Specifically, in addition to notifying affected consumers directly, he is required to post -- for the next two years -- a clear and conspicuous notice explaining the FTC action on any consumer-facing website he controls. The notice is required to state, in part:
IMPORTANT NOTICE ABOUT FALSE ADVERTISING LAWSUIT AGAINST US: The Federal Trade Commission (FTC), the nation’s consumer protection agency, has sued us for false advertising. We claimed to offer “unlimited minutes” calling plans to inmates and their families. However, our plans do not eliminate the per-minute charges you are required to pay. We cannot and do not replace your jail or prison’s approved call provider. We have settled the FTC lawsuit and have promised not to make claims about unlimited minutes.
The fact that the settlement requires this type of notice is worth paying attention to.
There are strong reasons to notify consumers in cases where they may have been defrauded. The FTC wants to give them their money back. And, if someone is taking a pill that doesn't really work, it's a good idea to let them know that so that they can get the proper treatment instead.
There are also some arguments for requiring companies to engage in corrective advertising, after engaging in false advertising, when the product is still on the market. Even if the company stops making the false claim, there may, at least in theory, be consumers out there who remember the claim and are making purchases based on that. So, corrective advertising can potentially serve the function of educating (confused) consumers about how the product really does work.
But, requiring a notice on any consumer-facing website that the defendant controls for the next two years -- particularly when the website has nothing to do with the services that were the subject of the FTC's investigation -- goes way beyond notifying the consumers who may have been misled. Instead, it seems to serve the function of warning future consumers, of other types of products, that the people you're dealing with have gotten into trouble with the FTC, so you'd better beware of dealing with them. This type of remedy seems, largely, to serve the function of punishing the advertiser by making it more difficult for the advertiser to do business in the future.