March 2, 2022
On February 17, 2022, the Federal Trade Commission (FTC) published an Advance Notice of Proposed Rulemaking (ANPR) and a request for public comment regarding a proposed rule to address what the agency calls “deceptive or unfair marketing” that relies upon false claims about potential earnings. The FTC launched the proceeding to challenge “bogus” money-making claims that lure consumers, workers and prospective entrepreneurs into “risky business ventures that often turn into dead-end debt traps.”
Businesses that engage in marketing by using earnings projections or that utilize marketing companies that may make such projections on behalf of a business should follow this FTC rulemaking closely, as it is likely to expand the current understanding of what constitutes deceptive or unfair statements about earnings in the marketplace. In particular, statements about earnings outcomes are already high-risk for educational service entities subject to oversight by the U.S. Department of Education and/or individual states’ unfair and deceptive trade practice laws, but the FTC’s powers of enforcement could lead to additional consequences and liability for such statements and influence other enforcement agencies’ interpretation of what constitutes an actionable statement.
According to the FTC, deceptive earnings claims proliferate in the marketplace. The ANPR represents the FTC’s increased focus on “schemes” that rely upon false, misleading and unsubstantiated earnings claims. The FTC seeks to recover redress for defrauded consumers and assess penalties against multilevel marketers, gig economy platforms, for-profit colleges and other “bad actors” who the FTC believes are preying upon consumers’ hopes for economic advancement.
Significantly, this recent announcement should be viewed in the context of other steps recently taken by the FTC against other industries. Those actions include the Notice of Penalty Offenses Concerning Money-Making Opportunities and the Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct in the Education Marketplace, both published in October 2021. (See our previous Alert.) The ANPR reflects the FTC’s areas of concern, and companies should implement appropriate compliance measures going forward.