Hunton Retail Law Resource

This week, the following consumer protection actions made headlines:

Federal Trade Commission:

FTC Obtains Multimillion Dollar Judgment Against Repeat Offender

At the FTC’s request, the U.S. District Court for the Southern District of New York entered a $13.4 million judgment against BlueHippo’s CEO, Joseph Rensin, as well as finding Rensin, BlueHippo Funding LLC and BlueHippo Capital LLC, in contempt for violating a 2008 federal court order concerning BlueHippo’s operation of a deceptive computer financing scheme. The FTC charged BlueHippo with contempt in 2009, alleging that the company contracted with thousands of consumers to finance new computers, but failed to provide those computers, in addition to having a deceptive refund policy. In July 2010, the Court issued an order partially granting the FTC’s motion for contempt. The FTC appealed the compensatory sanctions portion of that order, and in August 2014, the United States Court of Appeals for the Second Circuit vacated the damages portion of the order and remanded the case for a reconsideration of damages. The contempt judgment will go towards consumer redress.

FTC Settles with Phone Billing Company on Contempt Charges

Phone billing aggregator, Billing Services Group (“BSG”), will pay $5.2 million in a proposed settlement agreement to resolve FTC charges that BSG was in contempt of a 1999 court order prohibiting the company from unauthorized phone bill. The contempt agreement requires BSG to admit that they failed to vet charges before processing them and that they did not investigate consumer complaints about unauthorized charges. The proposed stipulated final order was filed in the U.S. District Court for the Western District of Texas, San Antonio Division.

FTC Alleges Company Deceived Customers with Fake Newspaper Subscriptions

The FTC filed suit against numerous corporate and individual defendants, alleging a complicated scheme in which the operators of dozens of companies used fake newspaper subscription notices to deceive consumers. The FTC alleges that these companies sent unauthorized “Notice of Renewal/New Order” mailers to consumers for subscriptions to hundreds of newspapers and magazines, including The New York Times and The Wall Street Journal. According to the FTC’s complaint, consumers paid significantly inflated subscription prices and had trouble receiving the publications they ordered. The FTC states that more than 375 newspapers told the defendants to stop, and many have placed “alerts” to warn consumers. The complaint was filed in the U.S. District Court for the District of Oregon, Medford Division.

Senator Schumer Urges FTC to Investigate Cellphone Tracking Technology

Senator Chuck Schumer (D-NY) asked the FTC to investigate the use of cellphone-tracking billboard technology, including Clear Channel Outdoor America’s RADAR initiative, as a potentially deceptive trade practice. The RADAR initiative will track anonymous aggregated data on consumer travel and behavior through their cellphone location information, which Sen. Schumer says could allow companies to spy on consumers without proper notice. In his letter to FTC Chairwoman Edith Ramirez, Sen. Schumer warned of “spying billboards.” Clear Channel responded by emphasizing that the data is collected and measured by a third party, and providing merely “aggregated and anonymized statistical reports…that do not include any personally identifiable information.”

Self-Regulatory and Consumer Actions:

KLF International Discontinues Weight Loss Claims

In response to an inquiry by the National Advertising Division (“NAD”), KLF International, Inc. has said it will voluntarily discontinue advertising claims for the Venus Factor Weight Loss System. The claims in the inquiry included advertising saying: the system would cause one to “drop up to three dress sizes in a week” and “helps women make some changes to their nutrition, so that their brains will automatically produce leptin in lower quantities and melt the fat away faster.” KLF advised the NAD that the challenged claims had been permanently discontinued, including claims made not by KLF, but by affiliates. KLF promised to diligently monitor affiliate claims going forward.

Consumer Litigation:

Class Action Suits Filed Against Quaker Oats

Consumers have filed putative class action lawsuits in federal courts in both New York and California, alleging that Quaker Oats has deceptively marketed its oatmeal as “100% natural.” The plaintiffs say that testing found traces of the pesticide glyphosate, an active ingredient in the weed killer Roundup, in some oatmeal. The amount of the pesticide found is well below the limit allowed by the Environmental Protection Agency for cereal grains, but the lawsuit focuses on the advertising of the product, claiming that because glyphosate is not natural, the advertising for Quaker Oats Quick 1-Minute, Old Fashioned and Steel Cut Oats is false and misleading.