ICLG - Consumer Protection Laws and Regulations - USA Chapter covers common issues in consumer protection laws and regulations, including substantive provisions, enforcement action, remedies and anticipated reforms,.
1.1 What legislation, regulations and guidelines are relevant to consumer protection in your jurisdiction?
United States law protects consumers at the federal and state levels. Select federal consumer protection statutes, which apply nationwide, include the Federal Trade Commission Act (“FTC Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the Gramm-Leach-Bliley Act (“GLB Act”), the Truth in Lending Act (“TILA”), the Fair Credit Reporting Act (“FCRA”), the Fair Debt Collection Practices Act (“FDCPA”), the Equal Credit Opportunity Act (“ECOA”), the Identity Theft and Assumption Deterrence Act, the Children’s Online Privacy Protection Act (“COPPA”), the Telephone Consumer Protection Act (“TCPA”), the Video Privacy Protection Act (“VPPA”), the Federal Tort Claims Act (“FTCA”), the Consumer Product Safety Act (“CPSA”), the Federal Food, Drug and Cosmetic Act (“FDCA”), the Magnuson Moss Warranty Act, the Lanham Act, and the Securities Exchange Act of 1934 (“SEC Act”).
Under President Biden, the Federal Trade Commission (“FTC”) and the Consumer Financial Protection Bureau (“CFPB”) have been increasingly active in consumer protection efforts, with a renewed focus on rulemaking to complement enforcement actions. Newer rule initiatives focus on addressing unfair and deceptive business practices related to multi-level marketing schemes, for-profit colleges, “gig” employment opportunities, telemarketing, automotive “junk fees”, government impersonation, and commercial surveillance. The rulemaking process can take years, but it typically results in better protections for consumers and more meaningful guidance for businesses than enforcement action alone.
Federal regulations are also evolving with the consumer purchase experience, which is increasingly online. For example, the FTC is working to develop new regulations surrounding deceptive and unfair product review and endorsement practices, such as using fake reviews, suppressing negative reviews, and paying for positive reviews. The FTC is also evaluating how best to combat and prevent the harmful effects of Artificial Intelligence (“AI”). For example, the FTC recently announced its “Voice Cloning Challenge” to develop ideas that will protect consumers from fraudulent actors using AI voice cloning to perpetrate harm in the marketplace.
In addition to the evolving federal regulatory scheme, most states have one or more consumer protection statutes that prohibit unfair and deceptive business practices within their borders. States with the broadest, most flexible prohibitions thus affording the greatest consumer protections include Hawaii, California, Illinois, Massachusetts, New York, Connecticut and Vermont.
Perhaps the best-known examples of state consumer protection statutes are California’s Consumers Legal Remedies Act (“CLRA”) and New York’s General Business Law (“GBL”). Powerful examples of state privacy legislation are the Illinois Biometric Information Privacy Act (“BIPA”), and the California Consumer Privacy Act (“CCPA”.)
1.2 What is the definition of “consumer” (i.e., who does consumer protection law protect)?
Consumer protection laws safeguard purchasers of goods and services against defective products and deceptive, fraudulent business practices. The definition of “consumer” is statute-specific and varies depending on the nature of the goods or services being regulated. For example, under the Uniform Commercial Code (“UCC”), a collection of laws adopted by most states to regulate interstate commercial transactions, “‘consumer’ means an individual who enters into a transaction primarily for personal, family, or household purposes”. UCC § 1-201. Under the Dodd-Frank Act, which overhauled financial regulation after the Great Recession of 2007–2009, “‘consumer’ means an individual or an agent, trustee, or representative acting on behalf of an individual”. 12 U.S.C. § 5481(4). Under the FCRA, which restricts the use of information held by consumer reporting agencies, the term simply “means an individual”. 15 U.S.C. § 1681(a)–(c). The TCPA protects businesses as well as natural persons against telephone solicitation. 47 U.S.C. § 227.
Under state law, the definition of “consumer” may be limited to an “individual who seeks or acquires, by purchase or lease, any goods or services for personal, family, or household purposes” – see, e.g., Cal. Civ. Code § 1761(d) – but some statutes sweep more broadly. For example, under the Texas Deceptive Trade Practices and Consumer Protection Act (“DTPA”), the definition of consumer includes “an individual, partnership, corporation, this state, or a subdivision or agency of this state who seeks or acquires by purchase or lease, any goods or services”. Tex. Bus. & Com. Code § 17.45(4)
1.3 Who is/which entities are required to comply with consumer protection law?
The entities governed vary by statute. For example, the FTC Act applies to “persons, partnerships, or corporations, except banks, savings and loan institutions […], Federal credit unions […], common carriers […], and persons, partnerships, or corporations insofar as they are subject to the Packers and Stockyards Act”. 15 U.S.C. § 45(a)(2). The Dodd-Frank Act applies to “any person that engages in offering or providing a consumer financial product or service”, as well as affiliates of such persons. 12 U.S.C. § 5481(6). State consumer protection laws typically provide broad prohibitions that apply to anyone engaged in commercial conduct. For example, the Connecticut Unfair Trade Practices Act provides that “[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce”. Conn. Gen. Stat. § 42-110b(a). Many statutes, however, carve out specific exceptions. For example, the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) imposes a standard of strict liability on businesses but contains an exemption for media entities that publish deceptive advertisements in good faith and without knowledge of the deception. 73 P.S. § 201-3.
1.4 Which agency/agencies is/are responsible for enforcing consumer protection law (i.e., who is the investigator and who is the adjudicator)?
Various federal agencies enforce consumer protection laws, including the FTC, the Consumer Financial Protection Bureau (“CFPB”), the Federal Communications Commission (“FCC”), the Consumer Product Safety Commission (“CPSC”), the Food and Drug Administration (“FDA”), and the United States Department of Agriculture (“USDA”). At the state level, each Attorney General investigates and enforces consumer protection laws; in some states, District Attorneys also have the authority to prosecute consumer protection claims. In California, the Department of Consumer Affairs (“DCA”) has an internal division that is empowered to investigate consumer complaints and enforce state consumer protection laws.
Many state consumer protection laws also include a private right of action, empowering consumers to vindicate rights in court parallel to, or independent of, government action. This serves as a critical “gap” filling measure to ensure greater legal compliance and accountability than regulatory action alone could achieve. In some states, individuals are required to give advance notice of the alleged deceptive practices to the business, prior to filing in court. This creates a safe harbour period during which the business may address the individual’s claims and avoid legal liability or other penalties.
1.5 Are there any specific bodies that regulate/enforce consumer protection law in specific sectors?
Yes, the FTC has eight divisions: (1) Privacy and Identity Protection; (2) Advertising Practices; (3) Consumer and Business Education; (4) Enforcement; (5) Marketing Practices; (6) Consumer Response and Operations; (7) Financial Practices; and (8) Litigation Technology and Analysis. The CFPB regulates entities that provide consumer financial products or services. The FCC implements and enforces federal communications laws. The CPSC enforces federal laws intended to protect the public from hazardous consumer products. The FDA regulates specific consumer products, including food, drugs, biologics, medical devices, cosmetics, and tobacco. The SEC detects and investigates violations of federal securities laws and regulations through civil enforcement and administrative actions. In addition, the USDA regulates certain agricultural products.
2.1 Please describe any protections regarding the quality and function of goods and services acquired by consumers.
At the federal level, agencies such as the FDA and USDA promulgate regulations regarding the quality and function of goods and services such as foods, drugs, and agriculture. At the state level, the UCC, which has been almost universally adopted, contains provisions relating to express and implied warranties. See UCC §§ 2-313–2-315. Some state statutes have requirements pertaining to the quality of goods. For example, California’s CLRA prohibits “[r]epresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have”. Civ. Code § 1770(a)(5). Many states also recognise common law claims for fraud or breach of express and implied warranties.
2.2 Please outline the substantive tests for these protections.
The substantive tests vary depending on the goods or services, as well as the regulations or guidelines at issue. Under the UCC, if the seller makes any promise or provides a description or model relating to the goods, the goods must conform. See UCC § 2-313. The goods must also: “pass without objection in the trade”; “in the case of fungible goods, [be] of fair average quality”; be “fit for the ordinary purposes”; “run, within the variations permitted by the agreement”; be “adequately contained, packaged, and labelled”; and “conform to the promise or affirmations of fact made on the container or label if any”. Id. § 2-314(2). Furthermore, if the seller had reason to know the buyer was acquiring the goods for a particular purpose, the goods must be fit for that purpose. See id. § 2-315. Other state law substantive tests vary by jurisdiction.
2.3 What types of goods and services are covered by the protections relating to the quality of goods and services?
All goods and services sold to the American public for individual use are subject to state and federal laws which regulate their transparency, fitness for sale, and potential for fraud. The types of goods and services covered depend on the source of protection. For example, the UCC applies to commercial goods. See UCC § 2-102. The FDA promulgates Current Good Manufacturing Practice (“CGMP”) regulations for the quality of drug products. See 21 C.F.R. Part 210; 21 C.F.R. Part 211. The USDA sets quality standards for various agricultural products including meat, eggs, fruits, and vegetables. See, e.g., 21 U.S.C. § 606 (relating to the inspection of meat products).
2.4 Are there any exceptions to these protections?
Exceptions are sometimes available and vary by law or regulation. For example, the UCC generally applies to all commercial sales of goods, but parties may contractually modify the protections available to businesses. See, e.g., UCC § 2-316 (relating to the exclusion or modification of warranties).
2.5 What remedies are available for a breach of the protections in relation to the quality and function of goods and services?
If a breach of these protections involves a product defect or risk of a safety hazard to consumers, the remedies can involve enforcement by a federal or state regulatory agency. For example, when a defective product regulated by the FDA has entered the marketplace, the agency can issue a recall. See, e.g., 21 U.S.C. § 3501. Similarly, the USDA has authority to detain and seize defective products for which it has regulatory authority. See id. §§ 672–73. Violations of FDA or USDA regulations may also result in criminal or civil penalties. See, e.g., id. §§ 333 & 335b. Under the UCC, “[t]he measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted”. UCC § 2-714(2). At common law, remedies may include replacement of the defective product, damages, or contractually agreed-to liquidated damages, in circumstances where damages are difficult to calculate.
Individuals may also pursue monetary and injunctive relief in states that provide a private right of action. For example, California’s CLRA authorizes private civil actions against companies that use “unfair methods of competition and unfair or deceptive acts or practices”, including “[r]epresenting that goods or services are of a particular standard, quality, or grade […] if they are of another”. Cal. Civil Code. § 1770(a)(7). Remedies available under the CLRA are wide-ranging, and include monetary damages, punitive damages, restitution, and injunction, as well as attorneys’ fees. Id. at § 1780(a). Consumer-plaintiffs often bring parallel claims under California’s Unfair Competition Law (“UCL”), which offers similar protections against deceptive business practices. Under the UCL “the primary form of relief available […] to protect consumers from unfair business practices is an injunction”. (In re: Tobacco II Cases, 46 Cal. 4 th 298, 319, 93 Cal. Rptr. 3d 559, 575 (2009). Under the UCL and CLRA, as well as California’s False Advertising Law (“FAL”), consumers may also pursue public injunctive relief, which has the primary purpose and effect of stopping unlawful acts that threaten the general public. McGill v. Citibank, N.A., 2 Cal. 5 th 945, 955, 216 Cal. Rptr. 3d 627, 633 (2017).
2.6 Who has or which agencies have standing to initiate proceedings for a breach?
If a breach of the protections in relation to the quality or function of goods involves a product defect or risk of a safety hazard to consumers, then various federal and state agencies may have the authority to initiate proceedings for the breach. For example, under certain circumstances, the CPSC, FDA and USDA have authority to request (and in some cases, mandate) the removal of defective products from the marketplace. In addition, these agencies may coordinate with the DOJ to bring enforcement actions which may result in civil or criminal penalties. The USDA’s Food Safety Inspection Service (“FSIS”) may also bring an enforcement action that results in a food establishment’s loss of ability to produce, sell, or distribute its products in commerce. See 9 CFR § 500.6. For breaches of warranty under the UCC or common law, the injured party may bring a civil action to seek damages or injunctive relief. Individual consumers may also initiate individual or class action proceedings for a breach of state statutory or common law duties.
2.7 Describe at least two examples of public or private enforcement of these protections in the last five years, including the conduct/alleged conduct, result and penalties imposed.
In late 2023, after the FDA’s continued admonitions on retailers for selling vapes that “shamelessly target” minors, federal tobacco regulators sent warning letters to three online retailers giving them fifteen (15) days to stop selling the Luckee Vape Daniels branded products. The vapes were designed to resemble a Jack Daniel’s whiskey bottle and came in the following flavors: icy pina colada; frozen strawberry daiquiri; frozen “mangorita”; and watermelon martini. The design of the vape, as well as the proffered flavors appealed to minors. In December 2023 alone, the FDA sent more than 400 warning letters to retailers across the United States regarding the sale of unauthorized e-cigarettes. After issuing a warning letter, the Center for Tobacco Products may file a civil complaint against manufacturers as a next step, which they have done 38 times between February and December 2023. See [Hyperlink]
In late 2023, an Arizona federal court approved a settlement between the U.S. Dept. of Justice and a drug company to resolve claims that the company sold vaginal cream as a 99.8% effective contraceptive without approval from the FDA. The settlement holds the company liable and ensures that in the future they comply with the FDCA and prohibit the company (and others) from selling contraceptives, which is considered a drug, without FDA approval. See USA v. Smart Women’s Choice, Inc. (No. CV-23-02112) (D. Ariz.).
In an example of successful private enforcement, in 2023, consumers settled class action claims against the manufacturer of Celsius Energy Drinks that were labelled as having “no preservatives”, despite the products containing citric acid (a known preservative). The $7.8 million settlement re-distributed monies to aggrieved consumers and provided for changes to the labeling, including removal of the “No Preservatives” claim. Thus, due to the affirmative action of individual consumers, Celsius energy drinks must now be marketed truthfully. See Prescod v. Celsius Holdings, Inc., et. Al (No. 19STCV09321) (LA Superior Cort).
3.1 Please describe any protections regarding the safety of goods and services acquired by consumers.
At the federal level, the CPSA exists: “(1) to protect the public against unreasonable risks of injury associated with consumer products; (2) to assist consumers in evaluating the comparative safety of consumer products; (3) to develop uniform safety standards for consumer products and to [minimize] conflicting State and local regulations; and (4) to promote research and investigation into the causes and prevention of product-related deaths, illnesses, and injuries.” 15 USC § 2051(b). The Motor Vehicle Safety Act “prescribe[s] motor vehicle safety standards”. 49 USC § 30101(1). The FDCA seeks to ensure the safety of food, drugs, medical devices and cosmetics. See 21 USC §§ 301 et seq. There are also numerous federal laws dealing with the safety of various agricultural products. See, e.g., 21 USC §§ 451 et seq. (relating to poultry inspection and safety); 21 USC §§ 601 et seq. (relating to meat inspection and safety). In addition, there are various state laws to ensure the safety of consumer goods and services. See, e.g., California Sherman Act, Cal. Health & Safety Code § 109875 et seq. (California’s version of the FDCA, establishing parallel state regulation of the safety of food, drugs, medical devices and cosmetics); 16 Tex. Admin. Code §§ 82.1 et seq. (relating to barber shop regulations) and id. §§ 83.1 et seq. (relating to cosmetology regulations).
State and federal laws also affect safety through labelling and disclosure requirements. For example, California Proposition 65 provides that “[n]o person in the course of doing business shall knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual”. Cal. Health & Saf. Code § 25249.6. Many states also recognise relevant common law claims, including, for example, product liability and negligence.
3.2 Please outline the substantive tests for these protections.
The substantive tests vary depending on the governing law or regulation and range from specific to broad. For example, the CPSC broadly prohibits the sale of consumer products that contain a defect which could create a substantial product hazard or products that create an unreasonable risk of serious injury or death. However, there are also very specific requirements for some products. For example, it is deemed a substantial hazard for “[c]hildren’s upper outerwear in sizes 2T to 16” to “hav[e] one or more drawstrings”. 16 CFR § 1120.3(b)(1). The related “standard prohibits drawstrings at the hood and neck area of children’s upper outerwear” and imposes specific limitations on the use of drawstrings in the waist or bottom of children’s upper outerwear. See [Hyperlink];
3.3 What types of goods and services are covered by the protections relating to the safety of goods and services?
The blend of federal, state, and local laws, regulations, guidelines, and ordinances covers a wide range of consumer products and services. Together with the availability of common law claims, few if any consumer products or services escape safety protections.
3.4 Are there any exceptions to these protections?
Individual statutes, regulations, and ordinances may specify exceptions, and in some cases, federal law may preempt state law; however, as set forth in question 3.3, few if any consumer products or services are excluded altogether from safety protections.
3.5 What remedies are available for a breach of the protections in relation to the safety of goods and services?
Remedies include product recalls or seizures and civil or criminal penalties. Individuals may also seek injunctive relief and/or compensatory and punitive damages through a private civil action (individual or class action).
3.6 Are there mandatory reporting requirements with respect to the safety of goods or services?
Yes. For example, under the CPSA, a manufacturer of a consumer product must immediately report to the CPSC if it “obtains information which reasonably supports the conclusion that such product: (1) fails to comply with an applicable consumer product safety rule or with a voluntary consumer product safety standard [. ]; (2) fails to comply with any other rule, regulation, standard, or ban under this Act or any other Act enforced by the Commission; (3) contains a defect which could create a substantial product hazard [. ]; or (4) creates unreasonable risk of serious injury or death”. 15 USC § 2064(b). A manufacturer must also report to the CPSC if it has three civil actions for death or grievous bodily injury within a 24-month period that involve the same product and result in a settlement or judgment for the plaintiff. See id. § 2084.
3.7 Describe any voluntary or mandatory product safety recall regimes.
When a business is on notice that a product it has manufactured, distributed, or sold is hazardous, it may conduct a voluntary recall pursuant to the regulations promulgated by the CPSC. A “voluntary corrective action plan” sets forth specific details regarding the company’s plan to repair or replace the defective item, including the product at issue, a description of the hazard, details regarding the company’s plan to provide notice to the public and affected persons (e.g., a letter, press release, or corrective advertisements) and a statement regarding future action to avoid recurrence. See 16 CFR § 1115.20. When a mandatory product recall is necessary, the CPSC will either issue an adjudicated Commission Order “after parties and interested persons have had an opportunity for a hearing” or “may apply to a U.S. district court [. ] for a preliminary injunction to restrain the distribution in commerce of a product” it believes to be hazardous. 16 CFR § 1115.21(a)–(b). Similarly, consumer products subject to FDA oversight may be recalled through either voluntary or mandatory processes. See 21 CFR §§ 7.40 et seq. and id. §§ 810.10 et seq.
3.8 List at least two examples of public or private enforcement of these protections in the last five years, including the breach/alleged breach, result and penalties imposed.
In late 2023, the CPSC resolved claims against Home Shopping Network, Inc. (“HSN”), resulting in a $16 million dollar fine for failing to report consumers who were burned and injured after using HSN’s defective steamers over a seven-year period even after hundreds of consumer complaints against HSN. Despite the seriousness of the injuries (second and third-degree burns) and countless consumer complaints, HSN failed to immediately report the complaints and injuries to the CPSC, which is required under the Consumer Product Safety Act. Instead, HSN allowed the steamers to remain in the marketplace for seven years before attempting to make changes to the steamers to address potential problems and reporting the consumer complaints to the CPSC. Under the settlement agreement with HSN, CPSC will have already reached $25 million in civil penalties for the fiscal year of 2024, which “is no small feat, and [the enforcement] actions send a loud and clear warning to companies that CPSC will act when companies do not report”, emphasised Alexander Hoehn-Saric, CPSC Chair.
In an example of private enforcement of safety regulations, consumer plaintiffs filed suit against Procter & Gamble, alleging that various aerosol personal care products sold by the company were contaminated with benzene. Benzene is a known carcinogen associated with leukemia and other cancers. Plaintiffs alleged that consumers would not have purchased Procter & Gamble’s personal care products if they had known the products were exposing consumers to carcinogens. The parties reached an $8 million settlement to resolve the allegations, under which class members can receive a monetary payment based on the number of products they purchased. Procter & Gamble also agreed to buttress its health and safety practices by implementing material testing, finished product testing, and other measures to monitor for benzene contamination in the future. See In re: Procter & Gamble Aerosol Products Marketing & Sales Practices Litigation, No. 2:22-MD-03025 (S.D. Ohio).
4.1 Please describe any protections/prohibitions relating to the conduct of persons or businesses (e.g., manufacturers/retailers) which sell or supply goods and services to consumers (“Conduct”). For example, misleading and deceptive Conduct, unconscionable Conduct, etc.
The most generally applicable federal consumer protection statute regulating conduct in the United States is the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce”. 15 USC § 45(a)(2). The federal Lanham Act also allows civil lawsuits for false advertising that “misrepresents the nature, characteristics, qualities, or geographic origin” of goods or services. Most states have adopted statutes that prohibit unfair or deceptive business and debt-collection practices. For example, California has three statutes prohibiting unfair or deceptive business practices: the CLRA, which streamlines class certification and provides for both legal and equitable relief, as well as the UCL and FAL, which limit available remedies to injunctive relief and restitution.
4.2 Please outline the substantive tests for the above-mentioned protections/prohibitions.
Under federal law, a deceptive practice is one that “misleads the consumer acting reasonably in the circumstances, to the consumer’s detriment”. See FTC’s Policy Statement on Deception (1983), [Hyperlink]; A practice is unfair if it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition”. 15 USC § 45(n).
The FTC also has the authority to promulgate Rules under the FTC Act that specify particular acts or practices that are unfair or deceptive. In some cases, Congress directs the FTC to promulgate a specific Rule. Selected Rules enforced by the FTC include the following: the Business Opportunity Rule imposes disclosure requirements for business opportunity sellers to prospective buyers, in order to provide buyers with sufficient information to assess the risks of a business opportunity; the CAN-SPAM Rule defines the criteria for ascertaining the “primary purpose” of a commercial e-mail, requiring warning labels on commercial e-mails that have sexually explicit material and prohibiting charging a fee and other opt-out barriers; the COPPA Rule implements COPPA by imposing rules on operators of websites and online services that either have actual knowledge that they collect information on children under 13 on their services or are directed to children under 13; the Franchise Rule requires franchisors to provide specific disclosures to franchisees, so they have sufficient information to properly make an investment in a franchise; the Health Breach Notification Rule requires vendors of personal health records and related entities to notify consumers after a breach involving unsecured information, with specific requirements for timing, method and the content of the notification; and the Made in USA Rule states that marketers making unqualified claims that their products are made in the United States should be able to prove those claims.
Analogous state law claims such as the California statutes described in question 4.1 employ a “reasonable consumer” test that evaluates false and misleading business practices from the vantage of an ordinary consumer. See, e.g., Williams v. Gerber Prods. Co., 523 F.3d 934, 938 (9th Cir. 2008).
4.3 What types of goods and services are covered by these protections/prohibitions? Is the payment of a price for these goods/services always required for their enforceability?
The FTC Act covers all goods and services “in or affecting commerce” 15 USC § 45(a)(2)”; most state protections against unfair or deceptive practices also apply broadly across the spectrum of commercial goods and services. Payment of a price for goods or services is not always required for enforceability under state law. California’s UCL, for example, provides a private right of action for corporate entities to sue their business competitors for unfair or deceptive practices. While the plaintiff corporation must demonstrate economic loss to its business caused by the defendant company’s unfair or deceptive practices, it need not have tendered money directly for goods or services offered by the defendant.
4.4 Are there any exceptions/exemptions to the protections/prohibitions relating to Conduct?
The FTC Act does not apply to banks, savings and loan institutions, federal credit unions, common carriers, or non-profit entities, among others. See 15 USC § 45(a)(2).
4.5 Are there any specific rules which apply in relation to online marketplaces?
The federal Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the “INFORM Consumers Act”) is the most comprehensive example. The Act applies to online marketplaces where third parties sell consumer products. Online marketplaces are broadly defined to include all “consumer-directed” platforms that (a) allow for, facilitate, or enable third-party sellers to engage in the sale, purchase, payment, storage, shipping, or delivery of a consumer product in the United States, (b) are used by one or more third-party sellers for such purposes, and (c) have a contractual or similar relationship with consumers governing their use of the platform to purchase consumer products.
The FTC and state attorneys general are responsible for enforcing the INFORM Consumers Act. The Act requires online marketplaces to adhere to new diligence and disclosure requirements, including: collecting and verifying identification and bank account information for high-volume third party sellers; maintaining data security measures to protect seller information that the marketplace collects; disclosing identification information for sellers with $20,000 or more in annual revenue from marketplace sales; suspending sellers who fail to provide the requested information, certifications, or disclosures; and implementing reporting on product listing pages for high-volume third-party sellers.
4.6 What remedies are available for a breach of the protections/prohibitions relating to Conduct?
At the federal level, unfair or deceptive acts or practices proscribed under section 18(a)(1)(B) of the FTC Act are subject to a statutory civil penalty of $46,517 per violation if the FTC can demonstrate (1) the perpetrator of the unfair or deceptive practices had actual knowledge that their conduct was in violation of the FTC Act, and (2) the FTC had already issued a written decision that such conduct was unfair or deceptive. Additionally, many state consumer protection laws provide remedies for victims of false and deceptive conduct, including statutory damages, restitution, and injunction relief. Typically, these lawsuits proceed as class actions.
4.7 List at least two examples of public or private enforcement of the protections relating to Conduct in the last five years, including the breach/alleged breach, result and penalties imposed.
In January 2024, the FTC and Kubota North Am. Corp. (tractor manufacturer) reached a $2 million settlement related to Kubota’s false labelling of imported replacement parts as “Made in the USA”. The settlement sum is a record for a false origin enforcement claim, and Kubota can no longer label its parts as “Made in the United States”, unless the final assembly or processing was carried out in the United States. See USA v. North America Corp., No. 24- CV-00159 (N.D. Tex.).
Another recent example of public enforcement is FloatMe Corp.’s (a cash advance app company) $3 million settlement with the FTC to resolve claims it misled consumers about how much they could receive in a cash advance (and how quickly), in January 2024. In addition to the financial penalty, FloatMe Corp. agreed to stop charging hidden fees to consumers and to remove deceptive features from the app. See FTC v. FloatMe Corp., No. 24-CV-00001 (W.D. Tex.).
In an example of successful private enforcement, in April 2023, a federal court in New York granted the final approval of a $7.8 million settlement, the highest ever settlement for a false advertising claim concerning preservatives. The settlement resolved claims between consumers and Celsius for advertising their popular drink products as having “no preservatives”, despite the presence of citric acid. The settlement provided for class member reimbursements up to $250, and the Company agreed to remove the challenged label claim. Hezi, et al. v. Celsius Holdings Inc., No. 1:21-CV-9892-VM (S.D.N.Y.).
5.1 Does consumer law in your jurisdiction have any other prohibitions/protections not covered by the questions above? If so, please describe these prohibitions/protections.
In addition to the federal consumer protection laws discussed above, state and local governments regulate consumer protection in a variety of ways, ranging from false advertising law, to unfair business practice regulation, to food safety requirements for local restaurants, to product labeling, privacy, biometrics and artificial intelligence. For example, many local health departments conduct restaurant inspections to ensure compliance with food safety requirements. Another prominent example is California Proposition 65, which requires warnings for products with certain chemicals known to cause cancer or reproductive harm.
Due to the growing concern over corporate abuse of consumer data, states are increasingly enacting data privacy regulations. Illinois enacted the Biometric Information Privacy Act (“BIPA”), which institutes collection, use and sharing limits for companies that handle the biometric information of Illinois residents. The California Consumer Privacy Act (“CCPA”) imposes a range of protective measures for consumers. Last year, four new and important state privacy laws came into effect: the Virginia Consumer Data Protection Act (“VCDPA”); the Colorado Privacy Act (“ColoPA”); the California Privacy Rights Act (“CPRA”), which will extend and amend the CCPA; and the Utah Consumer Privacy Act, or “UCPA”. Given their importance to companies carrying out business in the United States, the remainder of this section will focus on these requirements.
5.2 Please outline the substantive tests for the above-mentioned protections/prohibitions.
Three examples follow. In California, as of January 1, 2023, the CPRA applies to businesses that collect personal information from or about Californians and either: (1) have a gross annual revenue over $25 million; (2) buy, sell, or share personal information of 100,000 or more consumers or households; or (3) derive 50% or more of their annual revenue from selling California residents’ personal information. Under the updated law, consumers have new rights, including the right to correct personal information that a business has shared about them and the right to limit the disclosure of sensitive personal information collected about them.
In Virginia, the CDPA applies to persons that conduct business in Virginia or offer products or services targeted to residents in Virginia and: (1) control or process the data of at least 100,000 consumers; or (2) control or process the personal data of at least 25,000 consumers and derive more than 50% of their revenue from the sale of personal data.
The scope of Colorado’s law is substantially the same as Virginia’s except it only applies to data controllers, not data processors (although it defines data controllers more broadly).
In Utah, the UCPA applies to controllers and processors that: (1) conduct business in Utah or produce a product or service targeted to consumers who are Utah residents; (2) have an annual revenue of $25 million or more; and (3) meet at least one of the following thresholds: (i) during a calendar year, control or process the personal data of 100,000 or more consumers; or (ii) derive over 50% of the entity’s gross revenue from the sale of personal data and control or process personal data of 25,000 or more consumers.
5.3 Are there any exceptions/exemptions?
To date, these state data protection regimes typically exempt employee and business-to-business commercial information. The laws also may exempt entities that are subject to certain federal laws described above, such as HIPAA, the GLB Act and the FCRA.
5.4 What remedies are available for a breach of these protections?
In most states, only the Attorney General can issue penalties. However, some states, like California, provide for a private right of action. Across states, civil penalties can range from $2,500 for a one-time unintentional violation of the CCPA to up to $20,000 for a single violation of Colorado’s privacy law.
5.5 List at least two examples of public or private enforcement of these protections in the last five years, including the breach/alleged breach, result and penalties imposed.
In February 2021, the Northern District of California approved a $650 million settlement for Facebook’s alleged violations of Illinois’s BIPA. See “Order re Final Approval, Attorneys’ Fees and Costs, and Incentive Awards”, Facebook Biometric Information Privacy Litigation, 15-cv-03747-JD (N.D. Cal. Feb. 26, 2021). Plaintiffs alleged that Facebook violated BIPA by collecting and storing digital scans of users’ faces without prior notice or their consent. Id. In addition to the $650 million settlement, Facebook was also required to delete the face templates of existing class members and set its “Face Recognition” default user setting to “off”. Id.
In August 2022, the California Attorney General announced the first monetary penalty levied under the CCPA, a $1.2 million fee against retail chain Sephora for allegedly failing to inform consumers it was selling their personal data and failing to honour consumers’ requests to stop the sale of their data. The AG emphasised its “ongoing efforts to enforce California’s comprehensive consumer privacy law that allows consumers to tell businesses to stop selling their personal information to third parties”. See, People v. Sephora USA, Inc, No. CGC-22-601380 (S.F.S.C.).
Last year, the California Attorney General also announced an “investigative sweep” of popular mobile apps in the retail, travel, and food service industries, uncovering many which were out of compliance with the CCPA for allegedly failing to honor consumers’ requests to opt out of the sale of their personal data.
Many state data privacy laws are still emerging, especially in the wake of AI. As such, both public and private enforcement are expected to increase throughout the United States as laws and technology evolve.
6.1 What powers does/do the consumer authority/authorities in your jurisdiction have to investigate potential breaches of consumer law? Describe the key steps in a typical investigation.
The FTC has the power “[t]o gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce”. 15 USC § 46(a). The FTC also has the “power to require by subpoena the attendance and testimony of witnesses and the production of all such documentary evidence relating to any matter under investigation”, also known as a Civil Investigative Demand (“CID”). Id. § 49.
An FTC investigation typically begins when the FTC sends a CID to an investigative target. The CID does not require approval by the Commission as a whole; rather, at least one Commissioner signs off on the issuance of the CID. The target may have a meet-and-confer with the staff designated on the CID to attempt to negotiate the scope of the CID. The target may file a motion to quash within 20 days, which is initially ruled on by a single Commissioner and may be appealed to the FTC. 16 CFR § 2.10. The CID usually requests documents, testimony, and in many cases, particularly more recently, investigational hearings, which are similar to depositions. See 16 CFR § 2.7. At the conclusion of the investigation, staff will either recommend closing the investigation or the filing of a complaint. If staff recommend a complaint, the FTC can grant a period of time for the staff to negotiate a settlement. If a matter is still not resolved, the FTC has the option of filing a complaint in an administrative forum before an administrative law judge (“ALJ”) or directly in federal court.
6.2 How is an investigation triggered (e.g., ex officio, whistleblower or complaint)?
Investigations may be triggered in various ways – through consumer complaints, information provided by an internal whistleblower, press articles, Congressional referrals, social media posts, or the initiative of a Commission employee. Sometimes, the FTC “sweeps” an entire industry to ensure compliance with the law.
6.3 Describe any complaints procedure for (i) consumers, and (ii) businesses.
The FTC encourages consumers to file a complaint whenever they have been the victim of fraud, identity theft, or other unfair or deceptive business practices. Consumers can file complaints online at [Hyperlink] or by calling 1-877-FTC-HELP. Consumer organisations or other advocacy groups often also file complaints or petitions with the FTC. Consumer groups have filed complaints with the FTC alleging unfair or deceptive practices with respect to, for example, Facebook’s facial recognition practices, Instagram influencers’ failure to disclose that they were being paid for endorsements, and companies’ allegedly unfair practices with respect to scoring individuals for employment and other purposes. These complaints are often sent to the FTC’s Office of Secretary and Commissioners’ offices. Businesses can also file complaints with the FTC through these same channels. Another path for business complaints is through a self-regulatory organisation such as the Better Business Bureau National Programs (“BBBNP”). When a business files a complaint about a competitor’s advertisement with the Better Business Bureau (“BBB”), it has specialised procedures to resolve these issues. If it finds that an advertisement violates its guidelines, and the Company declines to remedy the violation, the BBB can refer the matter to the FTC for enforcement. As one example, the Children’s Advertising Review Unit, a subdivision of the BBBNP, referred the company Musical.ly (predecessor to TikTok) to the FTC for allegedly violating COPPA, and the FTC subsequently brought an enforcement action.
6.4 What is the timeline for a typical investigation?
A typical FTC investigation may take more than a year, and often longer.
6.5 Are there criminal penalties for non-compliance with a consumer law investigation? If so, provide examples where such penalties have been imposed.
Usually, the FTC does not have the authority to seek criminal penalties. However, the FTC’s Criminal Liaison Unit (“CLU”) assists prosecutors with criminal consumer fraud cases, often by sharing evidence of knowledge of fraud that is developed through the FTC’s civil investigations. In 2021, prosecutors who partnered with the FTC obtained 30 convictions or guilty pleas in new or pending cases. See [Hyperlink]; As one example of civil and criminal cooperation, in 2017 the FTC and DOJ jointly brought civil and criminal charges, respectively, against Western Union alleging consumer fraud, aiding and abetting wire fraud, and failing to have an effective anti-money laundering programme. Western Union entered a global settlement that included a $586 million judgment, a permanent injunction and a deferred prosecution agreement.
6.6 Can investigations be resolved by way of commitments or undertakings?
Yes, and this is typical. FTC investigations are usually resolved by a consent order. Violations of administrative consent orders subject defendants to civil penalties. 15 U.S.C. § 45(l). Violation of federal orders can lead to remedies within a judge’s discretion, including contempt of court.
7.1 How does/do the consumer authority/authorities seek to enforce consumer law (e.g., by administrative decision or by commencing proceedings in court)?
Enforcement by the FTC may be achieved through administrative action, judicial action, or both.
7.2 Is/are the consumer protection authority/authorities bound by a time limit to commence proceedings on breaches?
There is no statute of limitations when the FTC seeks an injunction in connection with ongoing conduct. There is a five-year statute of limitations for seeking civil penalties, 28 USC § 2462, and a three-year statute of limitations for redress that the Commission would seek in connection with a rule violation. 15 USC § 57b(d).
7.3 Describe the enforcement powers/tools available to these bodies (civil, administrative, criminal).
The FTC is a civil enforcement agency that cannot seek criminal penalties, though in egregious cases, it partners with criminal authorities to impose remedies, as described in response to question 6.5 above. It can bring an action administratively or in a federal district court.
Administrative actions
If the FTC elects to proceed in an administrative forum, the complaint is adjudicated before an ALJ in a trial-type proceeding conducted under the Commission’s Rules of Practice. The prosecution of a matter is conducted by the FTC “complaint counsel” which comprises staff from the relevant bureau or a regional office. The vote to issue an administrative complaint also triggers an internal firewall between the Commission and the attorneys charged with prosecuting the dispute. The matter is prosecuted from this point forward by agency staff, with no further involvement of the Commissioners. Upon conclusion of the hearing, the ALJ issues an “initial decision”, setting forth his or her findings of fact and conclusions of law, and recommending either entry of an order to cease and desist or dismissal of the complaint. Either the complaint counsel or respondent, or both, may appeal the initial decision to the full Commission.
Upon appeal of an initial decision, the Commission receives briefs, holds oral argument, and thereafter issues its own final decision and order. The Commission’s final decision is appealable by any respondent against which an order is issued. The respondent may then file a petition for review with any U.S. Court of Appeals within whose jurisdiction the respondent resides or carries on business or where the challenged practice was used. 15 USC § 45(c). If the appellate court affirms the Commission’s order, the court enters its own order of enforcement. The party losing in the court of appeals may then seek review by the United States Supreme Court.
A Commission order generally becomes final (i.e., binding on the respondent) 60 days after it is served, unless the order is stayed by the Commission or by a reviewing court. If a respondent violates a final order, it is liable for a civil penalty for each violation. 15 USC § 45(l). The penalty is assessed by a federal district court in a suit brought to enforce the Commission’s order. The court may also issue “mandatory” injunctions and “such other and further equitable relief” as is deemed appropriate.
In addition (after all judicial review of its order is complete), the Commission may seek consumer redress from the respondent in a federal district court for consumer injury caused by the conduct that was at issue in the administrative proceeding, under Section 19 of the FTC Act, 15 USC § 57(b). To prevail, the Commission must demonstrate that “a reasonable man would have known under the circumstances [that the conduct] was dishonest or fraudulent”.
Where the Commission has determined in a litigated administrative adjudicatory proceeding that a practice is unfair or deceptive and has issued a final cease-and-desist order, the Commission may obtain civil penalties from non-respondents who thereafter violate the standards articulated by the Commission. To accomplish this, the Commission must show that the violator had “actual knowledge that such act or practice is unfair or deceptive and is unlawful” under Section 5(a)(1) of the FTC Act. 15 USC § 45(m)(1)(B). In order to prove “actual knowledge”, the Commission typically shows that it provided the violator with a copy of the Commission determination about the act or practice in question, or a “synopsis” of that determination.
Federal actions
Section 13(b) of the FTC Act, 15 USC § 53(b), authorises the Commission to seek preliminary and permanent injunctions in federal court to remedy “any provision of law enforced by the Federal Trade Commission”. Whenever the Commission has “reason to believe” that any party “is violating, or is about to violate” a provision of law enforced by the Commission, the Commission may ask the district court to enjoin the allegedly unlawful conduct, pending completion of an FTC administrative proceeding to determine whether the conduct is unlawful. Further, “in proper cases”, the Commission may seek, and the court may grant, a permanent injunction. Additionally, the Commission may obtain civil penalties and consumer redress for violation of the FTC Rules. Civil penalties are available if the Commission can prove that a defendant has violated a Rule “with actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is unfair or deceptive and is prohibited by such rule”.
7.4 Where regulators/enforcement bodies have a choice of enforcement tools/powers, what considerations do they take into account in determining which tools/powers to use?
The FTC’s choice of administrative or federal court largely depends on the types of remedies it is seeking. If the FTC is seeking civil penalties, it must work with the DOJ or another federal agency with direct authority to litigate civil penalties in federal court, such as the CFPB. Civil penalties are not available in an administrative proceeding. If the FTC is seeking disgorgement or restitution and the case involves the violation of an FTC Rule, the FTC is entitled to this relief in federal district court directly. If the FTC is seeking disgorgement or restitution in other matters, it would have to allege that the law violation was “dishonest or fraudulent”, and would first have to file an administrative action before being able to seek disgorgement or restitution. For purely injunctive relief, the FTC often files actions administratively because any violation of the administrative action would subject defendants to civil penalties.
7.5 Describe the relevant rules and procedures that must be followed by such bodies (e.g., administrative, judicial).
In the administrative forum, the ALJ presides over adjudications with broad power to compel testimony from parties and non-parties alike. These powers include issuing subpoenas, taking depositions or causing them to be taken, compelling admissions, holding settlement conferences, making initial decisions, and holding parties in contempt if they fail to comply with the ALJ’s orders. 16 CFR § 3.42. In a federal district court, proceedings are governed by the Federal Rules of Civil Procedure, which allow parties to conduct discovery and gather evidence, from both parties and non-parties. For example, Rule 45 allows for subpoenas that can compel testimony, the production of documents, electronically stored information or other tangible items. Fed. R. Civ. P. 45(a).
7.6 Is there a right to a stand-alone action and follow-on right of action within consumer law? Who has standing to bring these actions?
While there is no private right of action under the FTC Act, some federal consumer laws provide a private right of action. Many state laws also provide for private rights of action. For example, California’s false advertising laws empower aggrieved consumers to vindicate their rights in court, and the CCPA provides that “[a]ny consumer whose nonencrypted and nonredacted personal information […] is subject to an unauthorized access and exfiltration, theft, or disclosure as a result of the business’s violation of the duty to implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information may institute a civil action[.]” Cal. Civil Code § 1798.150(a)(1). Plaintiffs can pursue damages and injunctive or declaratory relief. Id. Illinois’ BIPA also provides a private right of action. Individual consumers may also bring state common law claims, such as for negligence, fraud, or product liability.
Individual consumers must have standing to enforce violations of these laws. There are three elements generally required to establish standing: “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 578 U.S. 330, 338 (2016). Any injury in fact must also be “concrete and particularized”. Id. at 339.
7.7 Is there a statute of limitations for bringing stand-alone or follow-on actions?
Private actions have statutes of limitations, which vary depending on the specific claim. Three or four years is typical under state consumer laws.
7.8 Describe any international or regional cooperative mechanisms (e.g., MOUs) in which your jurisdiction is involved in the enforcement of consumer protection.
The FTC joins with more than 100 foreign competition and consumer protection authorities around the world and regularly cooperates with foreign authorities on enforcement and policy matters. Some examples follow:
ICPEN: the International Consumer Protection and Enforcement Network (“ICPEN”) is a coalition of mostly government organisations that enforce fair consumer practices and share information and best practices with each other. These organisations include the FTC and government offices from other countries, such as Germany, Ireland, Italy, Japan and Mexico. See FTC, “International Consumer Protection and Cooperation” [Hyperlink]
GPEN: the Global Privacy Enforcement Network (“GPEN”) is an informal network of privacy enforcement authorities that work together to facilitate sharing of information and cooperate on cross-border enforcement of laws protecting privacy. See FTC, “Multilateral Memorandum of Understanding For Participation In the Global Privacy Enforcement Network System” (2015), [Hyperlink]
Bilateral agreements: The FTC has entered into at least 22 bilateral cooperation agreements with foreign consumer protection authorities including Australia, Ireland, Mexico, Spain and several Canadian provinces. See FTC, “International Cooperation Agreements” [Hyperlink]
8.1 Describe any appeal processes.
In FTC administrative enforcement actions, appeals from the ALJ’s “initial decision” to the full Commission are available to either FTC’s “complaint counsel” or any respondent. In limited cases, including certain merger cases, an appeal from the ALJ’s initial decision is automatic. See FTC Rules of Practice § 3.52. Upon appeal, the Commission receives briefs, holds oral argument, and thereafter issues its own final decision and order. The FTC Rules of Practice allow for the filing of amicus briefs in support of either side of the appeal, with leave of the Commission. For automatic appeals, the Commission places the appeal on its docket and defines the issues to be briefed by the parties. See FTC Rule of Practice § 3.53. Unlike appeals in state or federal courts, the Commission reviews the ALJ’s entire decision anew, without deference, including the findings of fact. See FTC Rules of Practice § 3.54(b).
The Commission’s final decision is then appealable, but only by any respondent against which an order is issued. The respondent may file a petition for review with any U.S. court of appeals within whose jurisdiction the respondent resides or carries on business or where the challenged practice was used. 15 USC § 45(c). The case then proceeds from that point along the same path as cases originally filed in the district courts. Just as a case coming up for appellate review from a federal district court receives some deference from the appellate court, so too does a final Commission decision. Specifically, the appellate court reviews questions of law de novo but will not disturb factual determinations of the Commission that are supported by substantial evidence. If the federal Court of Appeals affirms the Commission’s order, the court enters its own order of enforcement. The party losing in the court of appeal may seek review by the United States Supreme Court, upon petition for a writ of certiorari. Otherwise, consumers enforcing state law consumer protection claims may appeal through standard civil processes.
8.2 Can consumers or retailers/manufacturers appeal decisions made by the consumer authority/authorities or by a court?
Consumers are not parties to enforcement actions and thus do not have appellate rights from enforcement decisions. As described above in section 1, there is no private right of action under the FTC Act, and such actions can only be brought by the agency. The FTC and defendant retailers/manufacturers, however, can appeal administrative enforcement decisions as described in response to question 8.1 above.
Consumers (and retailers/manufacturers) have full appellate rights in private civil litigation to which they are parties that are originated in state or federal courts and brought under state law like California’s CLRA or UCL or under federal statutes like ECOA, TCPA, FCRA, etc. Appeals in private litigation follow the normal court appellate rules, whereby only final judgments or orders that dispose of all claims as to all parties are automatically appealable. Certain interlocutory orders are subject to discretionary appeal, such as class certification orders, orders denying motions to compel arbitration, “collateral” orders (orders on issues unrelated to the merits of the suit), certain kinds of sanctions orders, attorney disqualification orders, etc.
8.3 Does an appeal suspend the effect of any penalty/the requirement to pay any fine (if applicable)?
The effects of an appeal vary based on circumstances. In administrative actions, a party subject to a cease-and-desist order under section 5 of the FTC Act may apply to the Commission for a stay pending judicial review. See FTC Rules of Practice § 3.56(b). If, within 30 days after the application was received by the Commission, the Commission either has denied or has not acted on the application, a stay may be sought in a court of appeals where a petition for review of the order is pending. Id. An application for stay must state the reasons a stay is warranted and the facts relied upon, and must include supporting affidavits or other sworn statements, and a copy of the relevant portions of the record. The application must also address the likelihood of the applicant’s success on appeal, whether the applicant will suffer irreparable harm if a stay is not granted, the degree of injury to other parties if a stay is granted, and why the stay is in the public interest. See FTC Rules of Practice § 3.56(c).
In court actions seeking injunctive relief, monetary damages, and/or penalties, often an appeal will suspend the defendant’s obligation to pay a penalty. The payment of penalties will generally be stayed on appeal automatically. In deciding whether to stay an order awarding injunctive relief pending appeal, federal courts engage in a similar exercise as the Commission in an administrative appeal, balancing four factors: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” LabMD, Inc. v. FTC, 678 F. App’x 819 (11 th Cir. 2016) (citing Nken v. Holder, 556 U.S. 418, 425-26 (2009) (quotation omitted)).
9.1 What are the recent enforcement trends in your jurisdiction?
Increasing fraud enforcement:
Fraud continues to be a top priority for federal and state regulators. The FTC-maintained Consumer Sentinel Network receives fraud reports from individual consumers, federal agencies, and 25 states; All North American Better Business Bureaus, businesses like Microsoft’s CyberCrime Center, Western Union, and MoneyGram; and certain nonprofits.
According to available data from 2022, more than 2.4 million consumers reported being victims of fraud, with the most reported fraud being imposter scams, followed by online shopping scams. Consumers reported losing more money to investment scams than any other category—roughly $3.8 billion – which is more than double the amount lost to investment scams in the year prior. The second most common type of fraud was imposter scams, with up to $2.6 billion of losses reported, also up from the year before.
AI and Tech:
In 2023, AI took the world by storm. The FTC in turn stated its strong commitment to protecting consumers in light of the new technology and has begun to act. For example, in late 2023, it served a civil investigative demand on AI-giant OpenAI, reportedly to explore the Company’s data protection efforts and its widescale use of personal data of internet users to “train” AI without notice, consent, or compensation. In February 2024, the FTC warned companies that quietly changing privacy policies, in an effort to gain consent to use consumer data for AI training, may qualify as fraud and deception under the law (see [Hyperlink] ). The FTC is also looking at specific harm caused outside of data privacy; for example, the fraudulent use of AI-based voice cloning systems (see [Hyperlink] ). Finally, the FTC is exploring the corporate and investment relationships among various AI companies, which could lead to one or more antitrust enforcement actions (see [Hyperlink] ).
Greenwashing:
A growing number of consumers are looking to buy environmentally friendly, “green” products, whether designated as “natural”, “non-toxic”, “sustainable”, “compostable”, or otherwise. Instead of offering environmentally friendly products in response to this increased demand, a number of manufacturers are instead choosing to “greenwash” their products by labelling them with false or deceptive claims. To aid companies in their marketing and advertising decisions in this arena, the FTC developed the Green Guides, which detail general principles that apply to environmental marketing claims, consumer interpretation of “green” advertising claims, and adequate substantiation and qualification of the same. Some states, like California, have specifically incorporated the Green Guides into their consumer protection laws. Additionally, the FTC announced in December 2022 that it is seeking public comment on potential updates to the Green Guides, signalling increasing protections for consumers in this arena moving forward.
Focus on racial equity:
Recently, the FTC announced a renewed focus on combating surveillance, algorithmic bias and other emerging issues that may disproportionately affect communities of color. See “Strategic Plan for Fiscal Years 2022-2026” (2022), [Hyperlink] . Through its Every Community Initiative, the FTC supports consumers in historically underserved communities, which may be disproportionately affected by fraud and other consumer issues. These efforts include developing specific resources, conducting outreach and events, initiating law enforcement actions, and conducting research to better identify and understand the equity issues. Finally, with the advent of AI, and known racial bias baked into AI systems that now making crucial decisions in housing, health care and more, the FTC’s enforcement efforts are expected to expand and adapt to tackle these new technological threats to equity.
Debt forgiveness and discharge:
In this area, the trend is toward non-enforcement. In November 2022, the DOJ issued new guidance in conjunction with Department of Education that will allow bankruptcy debtors to be far more successful in obtaining undue hardship discharges of their student loans. In December 2022, Arizona Proposition 209, which significantly increases exemptions for medical debt, went into effect. The law also increases wage garnishment protection to 90% of disposable wages or 60 times the highest minimum wage in the state, whichever is greater, and lowers interest on medical debt to a treasury yield benchmark or 3%, whichever is lower.
9.2 Are there any proposed reforms to consumer law or policy within the next 12 months?
At the federal level, the FCC Order on Robocalls and Telephone Consumer Protection Act (“TPCA”) comes into effect between 2024 and 2025. The TPCA prohibits providers from sending illegal texts and providing consumers with blocking capabilities. The TPCA also sets guidelines on consumer consent to receive prerecorded telemarketing calls. For example, consumers who give written content to receive prerecorded calls can only give consent to one identified seller at a time; this prohibits sellers from getting consent to multiple sellers (sometimes in the thousands) by hidden hyperlinks.
Furthermore, the FTC has amended its safeguards on 16 CFR § 314, requiring financial institutions to report to the FTC any event where unencrypted consumer information (involving more than 500 consumers) is acquired without authorization, goes into effect this year, on May 13, 2024. The FTC is also adopting revised Guides Concerning the Use of Endorsements and Testimonials in Advertising, codified at 16 CFR § 255 and will go into effect later this year, on July 26, 2024.
This chapter has been written by a member of ICLG's international panel of experts, who has been exclusively appointed for this task as a leading professional in their field by Global Legal Group, ICLG's publisher. ICLG's in-house editorial team carefully reviews and edits each chapter, updated annually, and audits each one for originality, relevance and style, including anti-plagiarism and AI-detection tools. This chapter was copy-edited by Hollie Parker , our in-house editor.