Digest 03.12.2020: AGs and COVID-19 | Face-Mapping | 3D Printed Guns

Breaking News

Attorneys General on the Front Line Against Coronavirus-Related Scams

  • Christopher Allen, a Member of Cozen O’Connor’s State Attorneys General Practice, penned a brief summary about the efforts of AGs to protect the public from scams, abuse, and fraud perpetrated by bad actors attempting to capitalize on the Coronavirus pandemic (“COVID-19”).
  • In the alert, Allen highlights the recent activity of AGs who are using their prominent public profiles to provide the public reliable information and exercising broad their consumer protection powers to go after alleged hucksters peddling false cures and profiteers engaging in price gouging.
  • Examples of AG activity include Missouri AG Eric Schmitt suing former televangelist Jim Bakker for allegedly selling a fake “Coronavirus cure”; New York AG Letitia James issuing a cease and desist letter to Bakker for the same; and Washington AG Bob Ferguson investigating price gouging in the wake of the COVID-19 public health emergency in Washington.
  • In addition to AG actions, the Federal Trade Commission and the Food and Drug Administration sent warning letters to companies allegedly deceptively marketing unapproved products by making unsubstantiated claims about the ability of these products to treat or prevent COVID-19.

Data Privacy & Security

Vermont Attorney General: Data Brokers Can’t Map Your Face Without Your Consent

  • Vermont AG TJ Donovan sued data broker Clearview AI, Inc. for collecting facial recognition data from adults and minors allegedly without their consent in violation of Vermont’s Consumer Protection Act and Fraudulent Acquisition of Data Act.
  • According to the complaint, Clearview AI allegedly collected photos of individuals from the Internet—including from social media—and used artificial intelligence to map the collected faces, then sold access to the resulting facial information data to private businesses, individuals, and law enforcement who used the information to identify people, all without the subjects’ consent. The complaint also alleges that Clearview AI did not adequately safeguard the information it collected, among other things.
  • The complaint seeks injunctive relief, including the deletion of all photos and data of Vermont consumers, restitution, disgorgement, civil penalties, and investigative and litigation fees and costs.

State v. Federal

3D-Printed Gun Files Remain Off the Internet … For Now

  • 21 Democratic AGs led by Washington AG Bob Ferguson obtained a preliminary injunction blocking the Trump Administration from enacting rule changes that would allow the release of 3D-printed gun files on the Internet by shifting oversight for 3D-printed gun exports from the State Department to the Department of Commerce, thereby enabling 3D-printed gun files to be shared person-to-person without requiring an export license.
  • In their suit, the AGs argued that allowing 3D-printed gun files to be shared on the Internet would enable anyone to manufacture unregistered and untraceable firearms and that these arms would be very difficult to detect.
  • In its order, the court noted that without injunctive relief, the proliferation of 3D-printed gun files poses a threat to national security and public interests because it will likely render “ineffective arms embargoes, export controls, and other measures used to restrict the availability of uniquely dangerous weapons sought by those seeking the commit acts of terrorism or other serious crime.”
  • As previously reported, AG Ferguson led a similar effort in 2018 that resulted in a nationwide temporary restraining order preventing a prior administrative rule from taking effect, which similarly would have resulted in publication of 3D-printed gun files on the Internet.

Consumer Financial Protection Bureau

CFPB Sues Bank Over Alleged Unauthorized Account Activity

  • The Consumer Financial Protection Bureau (“CFPB”) sued Fifth Third Bank, National Association (“Fifth Third Bank”) for allegedly taking unauthorized action on consumer accounts in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Truth in Lending Act, and the Truth in Savings Act.
  • In the complaint, the CFPB alleges that Fifth Third Bank opened unauthorized deposit and credit card accounts in consumers’ names, transferred funds from existing accounts to the unauthorized new accounts, activated unauthorized lines of credit, and enrolled consumers in online banking services without their knowledge, among other things.
  • The complaint seeks injunctive relief, damages, restitution, disgorgement, civil penalties and costs. The complaint also asks the court to order Fifth Third Bank to identify and notify all consumers who may have had an unauthorized action taken on their behalf and allow such consumers to close unauthorized accounts and services without fees or penalties, as well as order Fifth Third Bank to correct harmful consumer credit information resulting from its unauthorized activity.

Consumer Protection

FTC: Tea Company, Influencers Cannot Make Unsubstantiated Claims of Product Benefits, Must Disclose Endorsement Agreements

  • The FTC reached a settlement with tea marketing company Teami, LLC and its owners (collectively “Teami”) to resolve allegations that Teami used deceptive health claims and paid social media influencers to promote its products without adequately informing the public that they were paid for their endorsements, in violation of the FTC Act.
  • In its complaint, the FTC alleged that Teami promoted its products with unsubstantiated claims that these products help consumers lose weight, fight cancer, decrease migraines, and treat and prevent flus, among other things, and paid online influencers to promote its products through social media posts that did not prominently display a disclosure about the influencers’ compensation for the endorsement.
  • Under the terms of the proposed stipulated order, Teami is prohibited from making unsupported weight-loss and health claims about its products and must display clear and conspicuous disclosures about material connections with any influencers featured in its advertising. The order also imposes a partially suspended $15.2 million judgment, of which defendants must pay $1 million.
  • The FTC also sent warning letters to ten influencers cautioning them about the inadequacy of the disclosures in their promoted posts.

Pain Relief Not Guaranteed: FTC Goes After TENS Device Marketer for Making Allegedly False Claims

  • The FTC reached a settlement with NeuroMetrix, Inc and its CEO (collectively “NeuroMetrix”), the marketer of a transcutaneous electrical nerve stimulation (“TENS”) device, to resolve allegations that NeuroMetrix made deceptive claims about the device’s ability to treat pain and its clearance by the FDA in violation of the FTC Act.
  • According to the complaint, the FTC alleged that NeuroMetrix sold the Quell line of TENS devices with advertisements falsely claiming that it was “clinically proven” and “FDA cleared” for chronic pain relief.
  • Under the terms of the stipulated order, among other things, NeuroMetrix is enjoined from making unsubstantiated health claims—including deceptive claims about the Quell TENS device ability to provide whole-body pain relief or is FDA-cleared—must pay a $4 million judgment, and must turn over to the FTC all future foreign licensing payments it receives for the Quell TENS devices.