At the National Advertising Division’s annual conference this week in Philadelphia, Samuel Levine, Director of the Federal Trade Commission’s Bureau of Consumer Protection, explored the ways in which the agency is currently “firing on all cylinders” and warned advertisers that its recent flurry of enforcement and rulemaking activity “should send a clear message.”
During his second address to the group, Levine discussed how the FTC is focusing its enforcement resources on the practices causing the most harm to consumers, seeking strong relief to halt misconduct, and deploying tools beyond case-by-case enforcement—all in the wake of the “major blow” of the Supreme Court’s AMG decision, which stripped the Commission of its ability to recover redress for consumers through Section 13(b) of the FTC Act.
Levine highlighted three priority areas for the FTC: (i) junk fees and deceptive pricing; (ii) dark patterns; and (iii) emerging forms of fraud.
With respect to the first hot topic, the FTC is concerned about “fees that are buried at the end of the transaction process or are otherwise advertised in such a way that most consumers cannot actually realize the fee or the true total cost.” Levine pointed to the FTC’s recent enforcement actions in this area, including against LasikPlus and Passport Automotive, which challenged bait-and-switch advertising, and Vonage and Publishers Clearing House, which alleged surprise fees relating to cancellation and shipping and handling charges, respectively. Beyond enforcement, the Commission has already proposed a rule that would prohibit both hidden fees and bait-and-switch advertising in the auto sector and is continuing its work on a rulemaking around hidden and bogus fees. As a result, Levine warned advertisers to disclose actual prices upfront and not to charge unauthorized fees.
Next, Levine discussed the ways in which digital (and highly interactive) advertising has resulted in new forms of deception. For example, he posed: “Is a consumer more likely to turn over personal information when a button is green and bolded, if the alternative is faded and gray? Will a consumer be more likely to order a product if there’s a ticking clock in the background, or if there’s a message that 20 other shoppers have this item in their cart?” Following the FTC’s staff report on such dark patterns in the marketplace, the Commission has challenged these practices through enforcement, including against Publishers Clearing House over its manipulative web design and in ongoing litigation against Amazon, where the FTC alleges that the company duped consumers into unknowingly signing up for Amazon Prime while making it difficult for consumers to cancel their memberships. Further, the FTC’s proposed click-to-cancel rule would mandate simple cancellation mechanisms and make clear that consent for charges cannot be obtained via deceptive design interfaces.
The loss of Section 13(b) authority is perhaps felt most strongly in the FTC’s battle against emerging and evolving forms of consumer fraud. However, Levine highlighted the agency’s ability to adapt by discussing its recent approaches to telemarketing, deceptive money-making schemes, and fraud targeting non-English-speaking consumers.
Levine then turned to a topic of particular interest to NAD’s audience: the rise of generative AI and a warning against self-regulation in this area. Comparing today’s inflection point to the rise of Web 2.0 a generation ago, Levine expressed his view that self-regulatory efforts around digital privacy have been a failure and that the Commission is learning from those mistakes in confronting AI, by focusing on three key principles: (i) keeping markets open, fair and competitive, for example, by suing to block mergers that threaten to undermine competition and impede innovation; (ii) using existing tools, especially enforcement, to challenge unfair and deceptive practices; and (iii) expanding its toolkit to confront emerging threats, including through proposed rulemaking to regulate voice-cloning technologies and combat AI-generated fake reviews. To that end, the FTC has made clear that it may violate the FTC Act, the TSR or other laws enforced by the Commission to use AI to defraud the public or help others do the same, to rely on algorithmic decision-making that results in unlawful bias, to make unsubstantiated claims about AI, and to deploy AI-based tools before taking steps to assess and mitigate risks.
Levine concluded his remarks by emphasizing both the rising pace and groundbreaking nature of the FTC’s recent enforcement efforts. Not only did the number of actions coming out of the Bureau of Consumer Protection increase by more than 70% between fiscal years 2021 and 2022 (with another jump expected this year), but, over the last year, the FTC has secured its largest COPPA judgment ever, largest ROSCA judgment ever, and largest administrative judgment ever.
Given the agency’s proactive and aggressive approach, Levine warned that companies should not wait to get a CID from the FTC or for rules to be finalized that could trigger stiff civil penalties, but rather “act now to clean up their advertising.”
“Is a consumer more likely to turn over personal information when a button is green and bolded, if the alternative is faded and gray? Will a consumer be more likely to order a product if there’s a ticking clock in the background, or if there’s a message that 20 other shoppers have this item in their cart?” -- Levine on dark patterns