Digest 12.2.2019 When “Free” Trials Come With Strings Attached: Attorneys General Ask FTC to Look Into Deceptive Negative Option Marketing

Consumer Protection

When “Free” Trials Come With Strings Attached: Attorneys General Ask FTC to Look Into Deceptive Negative Option Marketing

  • Twenty-three AGs, led by New York AG Letitia James and Pennsylvania AG Josh Shapiro, submitted comments in response to an Advance Notice of Proposed Rulemaking by the Federal Trade Commission (“ FTC”), urging it to adopt regulations to prevent deceptive negative option marketing schemes in which consumers’ silence or failure to take action in response to an offer is deemed to be an acceptance.
  • According to the comments, one of the most problematic negative option marketing strategies is the “free” trial in which consumers are offered a limited-period free trial of a product or service, but are required to provide their payment card information. Unless consumers opt out during the free trial period, they are charged automatically once the free trial period ends.
  • The AGs recommended that the FTC expand its regulations to require negative option marketing plans to include informed consent, periodic notices disclosing the timing, amount, and method by which the seller bills the consumer for renewals, simple cancellation processes by the same method used to initially enroll in a program, and refunds for consumers who were unwittingly enrolled into a negative option plan.

Want to Get on the FTC’s Bad Side? Falsely Claim Participation in the EU-U.S. Privacy Shield Framework

  • The FTC reached settlements with Click Labs, Inc., a website and mobile app services provider (“Click Labs”); Incentive Services, Inc., a developer of award and incentives programs (“Incentive Services”); Global Data Vault, LLC, a data storage and recovery services provider (“Global Data”); and TDARX, Inc., an information technology services provider (“TDARX”). The settlements resolved allegations that, among other things, each company falsely claimed to participate in the EU-U.S. Privacy Shield framework – a stringent international data privacy standard designed to allow companies to transfer data from the European Union to the United States while adhering to the EU’s data privacy laws – in violation of the FTC Act.
  • The complaints against Click Labs and Incentive Services also allege that the companies falsely claimed to participate in the Swiss-U.S. Privacy Shield framework. The complaints against Global Data and TDARX allege that these companies allowed their EU-U.S. Privacy Shield certifications to lapse, which made them ineligible for participation in the program, but that they misleadingly represented themselves as current participants in the program.
  • Under the settlements, Click Labs, Incentive Services, Global Data, and TDARX are each prohibited from misrepresenting their participation in any privacy or data security program sponsored by any government, and must meet certain compliance reporting, recordkeeping, and compliance monitoring requirements, among other things.

Changed Your Mind About A Future Cremation? You Should Be Able to Get Your Money Back

  • California AG Xavier Becerra sued funeral services company Service Corporation International and its subsidiaries (collectively “Service Corp.”) for alleged misleading marketing and mishandling of customer funds relating to its pre-need contracts for cremation services in violation of several California state laws.
  • The complaint alleges, among other things, that Service Corp. used deceptive bundling of cremation services with merchandise to avoid placing $100 million it accepted for pre-need cremation contracts in a statutorily-mandated, fully refundable trust, failed to provide full refunds on pre-need contracts as required by law, and misleadingly claimed to use its own crematoriums while using third-party crematoriums instead.
  • The complaint seeks injunctive relief, restitution, civil penalties, and costs.

Do Not Use Your Charity’s Funds to Pay Your Personal Cable TV Bills

  • Washington AG Bob Ferguson sued the non-profit Veterans Independent Enterprises of Washington (“VIEW”) and its operations manager, Rosemary Hibbler (“Hibbler”) for allegedly misusing funds in violation of Washington’s Charitable Solicitations Act, Nonprofit Corporation Act and Consumer Protection Act.
  • The complaint alleges, among other things, that Hibbler spent hundreds of thousands of dollars of VIEW’s money for personal expenses such as tax bills, rent, cable TV, criminal defense fees, and directly deposited VIEW’s funds into her personal bank account.
  • The suit seeks, among other things, civil penalties and declaratory and injunctive relief, including prohibiting Hibbler and VIEW’s board members from managing funds for or operating any charitable organization.


T-Mobile/Sprint Merger Clears Another Hurdle with Texas Agreement

  • Texas AG Ken Paxton reached an agreement with mobile wireless telecommunications service providers Sprint Corporation and T-Mobile US, Inc. (“T-Mobile”), resolving antitrust concerns relating to the providers’ proposed merger.
  • According to the AG’s office, under the terms of the agreement, T-Mobile committed to offer Texas consumers its current or better wireless plans for the next five years and to expand its 5G network coverage throughout the state, including in rural areas.
  • As previously reported, 18 AGs – including AG Paxton – sued to enjoin the merger over concerns that it would reduce competition in violation of the Clayton Act. While several AGs have reached settlements, including Mississippi AG Jim Hood, the litigation by several other AGs is still ongoing.

 Labor & Employment

Attorneys General Argue for Limiting the Use of Non-Compete Clauses in Letter to FTC

  • Michigan AG Dana Nessel joined 18 other AGs in writing a letter to the FTC, urging it to curb the use of abusive non-compete clauses in employment contracts.
  • The letter states that non-compete clauses, which are estimated to affect 30 million American workers, are especially harmful to low-income workers and impede job mobility and advancement opportunities.
  • The letter urges the FTC to use its rulemaking authority to limit the use of non-compete clauses under its mandate to classify such clauses as “unfair methods of competition” and per-se illegal under the FTC Act, arguing that rulemaking would be the quickest and most comprehensive approach to regulating non-compete clauses.
  • As previously reported, 18 Democratic AGs submitted a comment to the FTC in July, urging it to regulate anticompetitive labor practices, including non-compete clauses.