FTC and State AGs Need to Take Their Relationship to the Next Level

While it may not seem like a regular occurrence anymore, Congress does still pass laws – one such law is the FTC Collaboration Act of 2021, which requires the FTC to conduct a study related to the agency’s efforts to promote and enforce consumer protection laws in coordination with state attorneys general. As part of that study, the FTC was required to seek public comment. And although we here at TINA.org are suffering from major comment fatigue having already filed nine comments with three different federal agencies this year, today TINA.org filed a comment detailing, among other things, its experiences concurrently filing complaints with the FTC and state consumer protection regulators.

TINA.org firmly believes that it is imperative that the FTC partner with state consumer protection agencies to amplify and augment its ability to hold wrongdoers accountable and make victims whole. Only through coordinated efforts will the interests in fair, rational, and coherent consumer protection be met. To that end, on more than a dozen occasions, TINA.org has filed complaints concomitantly with the FTC and state agencies. The determination as to which regulatory entity TINA.org files a deceptive marketing complaint is based on a variety of factors, including perceived interest in addressing the unlawful conduct at issue(s), reach of the deceptive and/or false marketing, speed of action, expertise in the subject matter, scope of harm and available remedies, among other criteria.

The 13 cases TINA.org has filed with state consumer protection agencies and the FTC have resulted in mixed actions. These cases include:

• NourishLife: A TINA.org investigation found that NourishLife (which later changed its name to Lifetrients) was deceptively advertising a potentially harmful supplement called Speak by, among other things, claiming it was a treatment for childhood speech delays without having proper substantiation, falsely claiming it was a patented formula, and using deceptive testimonials in marketing materials. As such, in 2013 TINA.org filed a complaint with the FTC, FDA and Illinois attorney general. In 2015, the FTC reached a $3.68 million settlement agreement with NourishLife requiring the company to stop making deceptive marketing claims about Speak, among other things. Neither the FDA nor the Illinois attorney general has taken any public action against the company.
• Vapex: TINA.org investigated Vapex, a Utah-based company that sold e-cigarettes, and found that it falsely claimed consumers could receive a “Free Trial’’ offer, used fake testimonials, falsely claimed it won a taste test contest that didn’t exist, and made price comparisons that showed e-cigarettes were cheaper than tobacco cigarettes without any reliable data to support the claim. Based on these findings, TINA.org filed a complaint with the FTC and the Utah attorney general in July 2014. A little over a month later, the Utah Department of Commerce announced that it was citing Vapex, as well as related companies, $1.1 million for multiple violations of the Utah Consumer Sales Practices Act and the Utah Telephone Fraud Prevention Act, finding, among other things, that the companies engaged in deceptive advertising. In February 2015, the FTC indicated that it would not be recommending enforcement as the company was no longer in business.
• Adore Me: TINA.org investigated the marketing of Adore Me, a web-based lingerie company, and found that it used deceptive marketing tactics, including ads that deceptively promoted product prices that were only available to VIP members; enrolling consumers in a negative-option offer without obtaining consumers’ express consent or disclosing all material terms; falsely telling consumers that monthly charges could be used as store credit when, in reality, the company kept consumers’ store credit if their memberships were canceled; and making it unnecessarily difficult to cancel VIP memberships. In May 2016, TINA.org sent complaint letters to the FTC, the New York attorney general, and the California district attorney for Santa Clara County, urging each of the agencies to take action. In November 2017, the FTC settled with the company for nearly $1.4 million. The next year, in March 2018, the New York attorney general reached a settlement with Adore Me that required, among other things, that the retailer pay $300,000 in penalties, fees and costs, as well as up to $63,000 in consumer restitution. Five months later, in August 2018, the Santa Clara County district attorney and Adore Me entered into a stipulated final judgment requiring Adore Me to pay $600,000 in civil penalties, a minimum of $200,000 in restitution and $250,000 worth of merchandise to homeless and women’s organizations in California. Five years later, in June 2023, the North Carolina attorney general, joined by the attorneys general of Alabama, Arkansas, Connecticut, DC, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Washington and Wisconsin, reached a settlement with Adore Me that required, among other things, that the retailer pay $2.35 million and notify all customers with active VIP memberships that they can obtain a refund of any unused store credits.
• Neora: TINA.org investigated Neora, formerly known as Nerium International, a Texas-based multilevel marketing company that sells a line of skin care products, as well as supplements, and found that the company and its distributors used unsubstantiated disease-treatment claims to market products and atypical income claims to recruit distributors. In July 2016, TINA.org filed complaint letters with the FTC and Texas attorney general urging them to investigate the company and take appropriate enforcement action. The FTC sued Neora and its CEO in June 2019 alleging that the company operates as a pyramid scheme, among other things. That case is still pending. Texas has taken no public action against the company.
• DealDash: TINA.org investigated DealDash, one of the world’s largest penny auction websites, and determined that the company operated a form of illegal gambling and used deceptive marketing tactics to lure consumers to its website, including advertising large savings on auctioned items won without disclosing true out-of-pocket costs; using consumer testimonials touting atypical savings without disclosing that customers typically lost money; promoting a perpetual sale on the purchase of bids; failing to disclose material connections to certain products auctioned on the site; and promoting a 100% money-back refund policy without adequately disclosing the restrictions of the policy. TINA.org sent complaint letters in June 2017 to the FTC and the attorneys general of Minnesota, New York, Connecticut, Pennsylvania, Massachusetts and the District of Columbia urging each agency to take action. To date, there has been no public action taken by any consumer protection regulatory agency. TINA.org continues to receive complaints detailing how consumers are still losing money as a result of the company’s deceptive marketing practices.
• Savage X Fenty: TINA.org investigated the web-based lingerie company Savage X Fenty and found, among other things, that it deceptively enrolled consumers in a negative-option offer without clearly and conspicuously disclosing all the material terms in violation of a 2014 California stipulated judgment, as well as the Restore Online Shoppers’ Confidence Act (ROSCA). In February 2020, TINA.org sent complaint letters to the FTC and the Santa Cruz district attorney’s office in California urging them to take action. In August 2022, the California regulators filed a complaint in state court resulting in a $1.2 million settlement with Savage X Fenty a few months later to resolve the deceptive marketing allegations. To date, the FTC has taken no public action against the company.
• FabKids: TINA.org investigated the children’s clothing brand FabKids and found, among other things, that it deceptively enrolled consumers in a negative-option offer without clearly and conspicuously disclosing all the material terms in violation of a 2014 California stipulated judgment, as well as ROSCA. In August 2021, TINA.org sent complaint letters to a California district attorney’s office, as well as the FTC urging them to stop FabKids’ deceptive marketing and illegal business practices. To date, no public action has been taken by either agency. TINA.org continues to receive consumer complaints about the company.
• HelloFresh: TINA.org investigated the meal kit company HelloFresh and found that it deceptively advertises “free” meals to lure consumers to enter their credit card information on its website through a process that employs dark patterns designed to pressure consumers to speed through their transactions and avoid reading the material terms of its subscription autorenewal program, which are not clearly and conspicuously disclosed, in violation of ROSCA and FTC law. TINA.org sent complaint letters to the FTC and Connecticut state regulators in June 2022 urging them to stop HelloFresh’s deceptive marketing and illegal business practices. Subsequently, TINA.org also sent its complaint to the Massachusetts attorney general’s office in July 2023. To date, no public action has been taken, yet HelloFresh continues to deceptively market its service to consumers nationwide.

TINA.org also brought five multilevel marketing cases jointly to the attention of the FTC and various state entities between 2013 and 2018: Resorts360, Jeunesse, Kyani, Stream and Team National, with no action taken by any consumer protection agency (though Resorts360 and Team National are no longer in business). Further, in 2015, TINA.org filed a complaint with the FTC regarding the marketing of Prevagen, a supplement aimed at people suffering from memory loss. Subsequently, in 2017, the FTC, together with the New York attorney general, filed a lawsuit against Quincy Bioscience, the maker of Prevagen, which is still pending. This is the only TINA.org complaint that has resulted in a joint FTC/state action.

Obviously TINA.org is not privy to the inner workings of the commission or any state regulatory agency, but as an outsider looking in, it appears there has been very little coordination between the FTC and state consumer protection agencies in cases that TINA.org has brought to the attention of the different regulatory entities. As a result, regulatory options have been lost and numerous disadvantages realized, including:

• Heightened negative impacts of the AMG decision – for example, if Texas state regulators had simultaneously brought a case against Neora, equitable relief and penalties might have remained a possibility.
• Massive inefficiencies – for example, had the FTC participated in the state of California’s action against Savage X Fenty, which was (and is) violating ROSCA in ways the FTC pursues on a regular basis, it is possible consumers nationwide, not just those in California, may have been able to receive compensation.
• Inequitable distributions of monetary relief to consumers – for example, Adore Me has settled four separate and wholly independent lawsuits over a five-year period resulting in different amounts of restitution and other monetary relief that have affect harmed consumers differently depending on the timing of the specific settlement and consumers’ geographic location.
• Lost opportunities – for example, the FTC missed its shot at censoring Vapex after Utah took independent action and the company went out of business.

TINA.org’s experience investigating deceptive marketing campaigns that result in bifurcated federal and state enforcement actions highlights the serious drawbacks of the agencies working independently as opposed to synergistically. As such, TINA.org supports the commission’s efforts to improve collaboration with state regulators to better protect consumers, as well as prevent and penalize fraudulent business practices.

To read TINA.org’s comment, click here.