The Federal Trade Commission has issued an Order settling a major case with Amazon.com, Inc., that includes some of the largest fines and refunds the agency has ever collected.

The order resolves allegations that Amazon enrolled millions of consumers in Prime subscriptions without their consent, and knowingly made it difficult for consumers to cancel.

As part of the agreement, Amazon will be required to pay a $1 billion civil penalty, provide $1.5 billion in refunds to consumers harmed by the deceptive Prime enrollment practices, and cease unlawful enrollment and cancellation practices for Prime, the FTC reported in a Sept. 25 announcement and Order.

“Today, the Trump-Vance FTC made history and secured a record-breaking, monumental win for the millions of Americans who are tired of deceptive subscriptions that feel impossible to cancel,” said FTC Chairman Andrew N. Ferguson. “The evidence showed that Amazon used sophisticated subscription traps designed to manipulate consumers into enrolling in Prime, and then made it exceedingly hard for consumers to end their subscription. Today, we are putting billions of dollars back into Americans’ pockets, and making sure Amazon never does this again. The Trump-Vance FTC is committed to fighting back when companies try to cheat ordinary Americans out of their hard-earned pay.”

In a case filed during the Biden-administration by FTC Chair Lina Khan in 2023, the agency charged Amazon and several Amazon executives with knowingly misleading millions of consumers into enrolling in Prime, violating the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA).

The FTC alleged Amazon created confusing and deceptive user interfaces to lead consumers to enroll in Prime without their knowledge. Compounding these deceptive enrollment practices, the FTC claimed that Amazon also created a complex and difficult process for consumers seeking to cancel their Prime subscription, with the goal of preventing consumers from cancelling Prime. Amazon documents discovered in the lead up to trial showed that Amazon executives and employees knowingly discussed these unlawful enrollment and cancellation issues, with comments like “subscription driving is a bit of a shady world” and leading consumers to unwanted subscriptions is “an unspoken cancer," the FTC reported.

In announcing the settlement, the FTC noted that the settlement is only the third ROSCA case in which the FTC has obtained a civil penalty. In addition, the $1 billion civil penalty was the largest ever in a case involving an FTC rule violation and $1.5 billion in consumer redress, providing full relief for the estimated 35 million consumers impacted by unwanted Prime enrollment or deferred cancellation, was the second-highest restitution award ever obtained by FTC action.

The settlement also requires Amazon to stop their unlawful practices and make meaningful changes to the Prime enrollment and cancellation flows in a number of ways. Those include providing a clear and conspicuous button for customers to decline Prime and forcing Amazon to remove a button that says, “No, I don’t want Free Shipping.”

The Commission vote approving the stipulated final order was 3-0. The FTC filed the proposed order in the U.S. District Court for the Western District of Washington.

WASHINGTON—President-elect Donald Trump said Andrew Ferguson will be the new chair of the Federal Trade Commission, signaling a potentially major shift in the attitude of the independent regulatory agency towards large mergers and acquisitions, which had been under fire from current Democratic chair Lina Khan.

Ferguson, who was sworn in April 2 as an FTC commissioner, will not have to be confirmed by the Senate. He brings extensive conservative credentials to the post, having served as chief counsel to Republican Senate leader Mitch McConnell and clerked for Supreme Court Justice Clarence Thomas.

Most analysts believe Ferguson will bring a more sympathetic approach to big corporate deals than Khan. But he is also a critic of the big tech companies that faced lawsuits in recent years from the FTC under Khan.

“Andrew has a proven record of standing up to Big Tech censorship, and protecting Freedom of Speech in our Great Country,” Trump wrote on Truth Social.

Prior to joining the FTC, Ferguson most recently was Virginia’s solicitor general. Before that, he was chief counsel to McConnell (R-Ky.) and a Republican counsel on the U.S. Senate Judiciary Committee. He also practiced law at several Washington firms. He earned his undergraduate degree and law degree from the University of Virginia. After law school, Ferguson clerked for Judge Karen L. Henderson on the U.S. Court of Appeals for the D.C. Circuit and for Thomas.

Trump also announced that he is picking Mark Meador to be an FTC commissioner.

“Mark has also worked as an antitrust enforcer at both the Federal Trade Commission and the Department of Justice Antitrust Division, and in private practice at Paul, Weiss, Rifkind, Wharton & Garrison LLP,” Trump said in a post.

WASHINGTON, D.C.—The Federal Communications Commission and Federal Trade Commission have signed a Memorandum of Understanding to coordinate consumer protection efforts. The new MOU follows the FCC’s restoration of Net Neutrality and the FCC’s recent decision to reclassify broadband service as a Title II telecommunications service.  

“Consumers do not want their broadband provider cutting sweetheart deals, with fast lanes for some services and slow lanes for others. They do not want their providers engaging in blocking, throttling, and paid prioritization,” said FCC chairwoman Jessica Rosenworcel.  “If consumers have problems, they expect the nation’s expert authority on communications to be able to respond. Now we can. In partnership with our colleagues at the FTC, we will protect consumers and ensure internet openness, defend national security, and monitor network resiliency and reliability. I thank Chair Khan and her team for their leadership and cooperation in protecting consumers.”

“The FTC is squarely focused on protecting Americans from illegal business tactics, from tackling AI-enabled voice cloning fraud to fighting the scourge of robocalls. We look forward to continuing to work in close partnership with the FCC,” said FTC Chair Lina M. Khan. “Effective law enforcement requires targeting the upstream actors enabling unlawful conduct, and having the FCC as a partner here will be critical.”

Under the agreement the FCC said that it will return to its traditional position as the enforcer of essential rules as they apply to broadband service providers, a critical part of telecommunications infrastructure. This includes prohibitions against blocking, throttling, and paid prioritization practices; transparency requirements; consumer protections related to internet service outages; and basic consumer privacy protections which have long applied to phone networks.  

The two regulatory agencies said that the new MOU terminates the 2017 Restoring Internet Freedom FCC-FTC Memorandum of Understanding.

It also clarifies that commitments under prior MOUs, including the 2003 Memorandum of Understanding regarding Telemarketing Enforcement, as well as the 2015 FCC-FTC Consumer Protection Memorandum of Understanding that remain in effect and are not altered or invalidated by the new MOU, the agencies said. 

The FCC and the FTC also reported that they will continue to share legal, technical, and investigative expertise and experience. 

WASHINGTON—The National Association of Broadcasters has hired Nandu Machiraju as its senior vice president and deputy general counsel. Machiraju will report to Rick Kaplan, chief legal officer and executive vice president, Legal and Regulatory Affairs.

NAB says that Machiraju will develop and advance the association’s policy goals across a broad range of issues that concern radio and television broadcasters, leading industry advocacy on NextGen TV and addressing a variety of spectrum matters and other regulatory issues.

"Leveraging his deep expertise in regulatory matters and competition law, Nandu will play a crucial role in NAB’s advocacy before the FCC, the Administration and federal courts,” said Kaplan. "Broadcasters will be well served by Nandu’s keen intellect, ability to build consensus and analytical approach, and we are thrilled to welcome him to NAB’s legal team.”

Before joining NAB, Machiraju served as a partner at Baker & McKenzie LLP, advising clients on antitrust issues and regulatory matters under the U.S. Federal Trade Commission (FTC) and U.S. Department of Justice jurisdictions. 

Additionally, Machiraju spent several years in senior leadership roles at the FTC, including serving as attorney adviser to Chairman Joseph Simons, where he played a key role in overseeing the agency’s appellate litigation, antitrust conduct, merger investigations and congressional relations. He began his legal career as an associate at Cadwalader, Wickersham & Taft LLP, focusing on antitrust issues.

Machiraju holds a Bachelor of Arts degree in Business Administration from George Washington University, a Master of Public Policy degree from the University of Chicago and a Juris Doctor degree from Georgetown University Law Center.

WASHINGTON, D.C.—The Federal Trade Commission has launched an inquiry into how generative AI might impact the competitive landscape and has issued orders to five major tech companies requiring them to provide information regarding recent investments and partnerships involving generative AI companies and major cloud service providers.

The compulsory orders were sent to Alphabet, Inc., Amazon.com, Inc., Anthropic PBC, Microsoft Corp., and OpenAI, Inc.

Generative AI has prompted government officials, regulators and media organizations to worry that Gen AI solutions might be used to unfairly influence elections with AI-generated propaganda, encourage copyright violations of content created by news organizations and artists and be used by criminals in a variety of fraudulent schemes. 

Deals between generative AI companies like OpenAI and big tech companies have also prompted antitrust concerns that one big company might use the technology to dominate search and other lucrative digital markets. 

“History shows that new technologies can create new markets and healthy competition. As companies race to develop and monetize AI, we must guard against tactics that foreclose this opportunity, “said FTC chair Lina M. Khan. “Our study will shed light on whether investments and partnerships pursued by dominant companies risk distorting innovation and undermining fair competition."

The FTC issued its orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies that allow enforcers to gain a deeper understanding of market trends and business practices. Findings stemming from such orders can help inform future Commission actions.

The Commission voted 3-0 to issue the Section 6(b) orders, which operate like subpoenas, and conduct the study of AI investments and partnerships.

The FTC said that the agency’s 6(b) inquiry will scrutinize corporate partnerships and investments with AI providers to build a better internal understanding of these relationships and their impact on the competitive landscape. 

The FTC noted that companies are deploying a range of strategies in developing and using AI, including pursuing partnerships and direct investments with AI developers to get access to key technologies and inputs needed for AI development. 

The Jan. 25 orders were sent to companies involved in three separate multi-billion-dollar investments: Microsoft and OpenAI, Amazon and Anthropic, and Google and Anthropic. The FTC’s inquiry will help the agency deepen its understanding of the investments and partnerships formed between generative AI developers and cloud service providers.

More specifically, the FTC said it was seeking information related to:

• Information regarding a specific investment or partnership, including agreements and the strategic rationale of an investment/partnership.
• The practical implications of a specific partnership or investment, including decisions around new product releases, governance or oversight rights, and the topic of regular meetings.
• Analysis of the transactions’ competitive impact, including information related to market share, competition, competitors, markets, potential for sales growth, or expansion into product or geographic markets.
• Competition for AI inputs and resources, including the competitive dynamics regarding key products and services needed for generative AI.  
• Information provided to any other government entity, including foreign government entities, in connection with any investigation, request for information, or other inquiry related to these topics.

WASHINGTON, D.C. —The Federal Trade Commission and 17 state attorneys general have sued Amazon.com, Inc. alleging that the online retail and technology company is a monopolist that uses a set of interlocking anticompetitive and unfair strategies to illegally maintain its monopoly power. 

The FTC and its state partners say Amazon’s actions allow it to stop rivals and sellers from lowering prices, degrade quality for shoppers, overcharge sellers, stifle innovation, and prevent rivals from fairly competing against Amazon.  

It is part of a larger crackdown on big tech by the Biden administration that has seen lawsuits against Google and Meta as well as Amazon. 

This lawsuit focuses on Amazon’s online retail operations and follows a June FTC lawsuit against Amazon that alleged it knowingly "duped millions of consumers" into unknowingly enrolling in Amazon Prime.” 

The newest complaint alleges that Amazon engages in exclusionary conduct that stifled competition on price, product selection and quality. That conduct prevented current competitors from growing and new competitors from emerging, the FTC said in a press release. 

The FTC also alleged that “Amazon’s far-reaching schemes impact hundreds of billions of dollars in retail sales every year, touch hundreds of thousands of products sold by businesses big and small and affect over a hundred million shoppers.” 

“Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” said FTC chair Lina M. Khan. “The complaint sets forth detailed allegations noting how Amazon is now exploiting its monopoly power to enrich itself while raising prices and degrading service for the tens of millions of American families who shop on its platform and the hundreds of thousands of businesses that rely on Amazon to reach them. Today’s lawsuit seeks to hold Amazon to account for these monopolistic practices and restore the lost promise of free and fair competition.”

“We’re bringing this case because Amazon’s illegal conduct has stifled competition across a huge swath of the online economy. Amazon is a monopolist that uses its power to hike prices on American shoppers and charge sky-high fees on hundreds of thousands of online sellers,” said John Newman, deputy director of the FTC’s Bureau of Competition. “Seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.”

The FTC and the states are seeking a permanent injunction in federal court that would prohibit Amazon from engaging in its unlawful conduct and pry loose Amazon’s monopolistic control to restore competition.

Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New Hampshire, New Mexico, Nevada, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, and Wisconsin joined the Commission’s lawsuit. 

The FTC and states allege Amazon’s anti-competitive conduct occurs in two markets—the online superstore market that serves shoppers and the market for online marketplace services purchased by sellers. That anti-competitive conduct includes:

• Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping prices higher for products across the internet. For example, if Amazon discovers that a seller is offering lower-priced goods elsewhere, Amazon can bury discounting sellers so far down in Amazon’s search results that they become effectively invisible, the lawsuit alleged. 
• Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service, which has made it substantially more expensive for sellers on Amazon to also offer their products on other platforms. This unlawful coercion has in turn limited competitors’ ability to effectively compete against Amazon, the lawsuit alleged..

With its amassed power across both the online superstore market and online marketplace services market, the lawsuit also alleged that Amazon "extracts enormous monopoly rents from everyone within its reach." This includes:

• Degrading the customer experience by replacing relevant, organic search results with paid advertisements—and deliberately increasing junk ads that worsen search quality and frustrate both shoppers seeking products and sellers who are promised a return on their advertising purchase, the lawsuit said. 
• Biasing Amazon’s search results to preference Amazon’s own products over ones that Amazon knows are of better quality, the lawsuit said.
• Charging costly fees on the hundreds of thousands of sellers that currently have no choice but to rely on Amazon to stay in business. These fees range from a monthly fee sellers must pay for each item sold, to advertising fees that have become virtually necessary for sellers to do business. Combined, all of these fees force many sellers to pay close to 50% of their total revenues to Amazon. These fees harm not only sellers but also shoppers, who pay increased prices for thousands of products sold on or off Amazon, the lawsuit said. 

WASHINGTON, D.C.—The Federal Trade Commission has announced that its staff will be hosting a virtual roundtable discussion on October 4, 2023 to better understand the impact of the use of generative artificial intelligence on music, filmmaking, and other creative fields.

The announcement comes at a time when tech companies such as Adobe are adding generative AI tools to their production and editing software and creators have been voicing concerns about the impact AI tools might have on copyrights and their jobs. 

Artificial intelligence was one of the important sticking points that led to strikes this summer by actors and writers. In July, the FCC held a seminar on how AI might impact the communications industry and how it might be used to more efficiently manage spectrum. 

The FTC said that its staff are seeking to better understand how the development and deployment of AI tools that can generate text, images, and audio—often referred to as generative artificial intelligence—may impact open and fair competition or enable unlawful business practices across markets, including in creative industries. The listening session will focus on different issues posed by generative AI, including concerns raised by musicians, actors, and other content creators about the use of AI to create entertainment and other content.

FTC Chair Lina M. Khan will provide opening remarks to kick off the event and will then hear from representatives from a variety of creative fields, the FTC said. 

Speakers will explore the ways emerging AI tools are reshaping each of the participants’ respective industries and how they are responding to these changes. The listening session, which is being led by the FTC’s Office of Technology, is part of the agency’s efforts to keep up with the latest developments in emerging technologies such as AI.

The event will begin at 3 p.m. ET and be webcast on the FTC’s website at FTC.gov. Additional information, including a list of panelists will be posted in the coming days to the event page.

The lead staffer on this matter is Madeleine Varner from the FTC’s Office of Technology, the FTC said. 

WASHINGTON, D.C.—The Federal Trade Commission (FTC) have filed a lawsuit against Amazon that alleges widespread abuses in the way the online retail giant handles its Amazon Prime membership program. 

Amazon has hotly disputed the charges. 

The FTC lawsuit primarily addresses Amazon’s power in the online shopping arena. But it could have longer term implications for the streaming video business given the fact that streaming video is one of the perks offered to Amazon Prime members, which total more than 200 million. 

The FTC said it is taking action against Amazon.com, Inc. for its years-long effort to enroll consumers into its Prime program without their consent while knowingly making it difficult for consumers to cancel their subscriptions to Prime.

In a complaint filed June 21 in U.S. District Court for the Western District of Washington, the FTC charges that Amazon has knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime. 

More specifically, the FTC contends that Amazon used manipulative, coercive, or deceptive user-interface designs known as “dark patterns” to trick consumers into enrolling in automatically-renewing Prime subscriptions.

Amazon also knowingly complicated the cancellation process for Prime subscribers who sought to end their membership, the FTC alleges. 

The primary purpose of its Prime cancellation process was not to enable subscribers to cancel, but to stop them, the FTC said. Amazon leadership slowed or rejected changes that would’ve made it easier for users to cancel Prime because those changes adversely affected Amazon’s bottom line. 

“Amazon tricked and trapped people into recurring subscriptions without their consent, not only frustrating users but also costing them significant money,” said FTC chair Lina M. Khan. “These manipulative tactics harm consumers and law-abiding businesses alike. The FTC will continue to vigorously protect Americans from “dark patterns” and other unfair or deceptive practices in digital markets.”

The complaint filed by FTC’s is significantly redacted, though the FTC has told the Court it does not find the need for ongoing secrecy compelling.  The complaint charges that Amazon used so-called “dark patterns” to cause consumers to enroll in Prime without their consent, in violation of the FTC Act, and the Restore Online Shoppers’ Confidence Act.

During Amazon’s online checkout process, consumers were faced with numerous opportunities to subscribe to Amazon Prime at $14.99/month. In many cases, the option to purchase items on Amazon without subscribing to Prime was more difficult for consumers to locate. In some cases, the button presented to consumers to complete their transaction did not clearly state that in choosing that option they were also agreeing to join Prime for a recurring subscription, the FTC alleges. 

The FTC also alleges that Amazon put in place a cancellation process designed to deter consumers from successfully unsubscribing from Prime. It contented that consumers who attempted to cancel Prime were faced with multiple steps to actually accomplish the task of cancelling, according to the complaint. 

The complaint also alleges that Amazon was aware of consumers being nonconsensually enrolled and that the company’s executives failed to take any meaningful steps to address the issues until they were aware of the FTC investigation. In the complaint, the FTC also alleges that Amazon attempted to delay and hinder the Commission’s investigation in multiple instances.

In a statement released to the New York Times, Amazon said the “claims are false on the facts and the law” and that “by design we make it clear and simple for customers to both sign up for or cancel their Prime membership.” 

The New York Times also reported that Amazon accused the F.T.C. of filing the lawsuit without advance notice, while the two sides were still in conversation about the case.

The Commission vote authorizing the staff to file the complaint was 3-0. 

WASHINGTON, D.C.—The Federal Trade Commission has alleged that Facebook has failed to fully comply with a 2020 privacy order and proposed new protections that would better protect kids and teens. 

The FTC said the social media giant misled parents about their ability to control with whom their children communicated through its Messenger Kids app, and misrepresented the access it provided some app developers to private user data.

“Facebook has repeatedly violated its privacy promises,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “The company’s recklessness has put young users at risk, and Facebook needs to answer for its failures.”

As part of the proposed changes, Meta, which changed its name from Facebook in October 2021, would be prohibited from profiting from data it collects, including through its virtual reality products, from users under the age of 18. It would also be subject to other expanded limitations, including in its use of facial recognition technology, and required to provide additional protections for users.

The agency noted that this is the third time it has taken action against Facebook for allegedly failing to protect users’ privacy. The Commission first filed a complaint against Facebook in 2011, and secured an order in 2012 barring the company from misrepresenting its privacy practices. 

According to a subsequent complaint filed by the Commission, Facebook violated the first FTC order within months of it being finalized – engaging in misrepresentations that helped fuel the Cambridge Analytica scandal. In 2019, Facebook agreed to a second order—which took effect in 2020—resolving claims that it violated the FTC’s first order. 

The new FTC action alleges that Facebook has violated the 2020 order, as well as the Children’s Online Privacy Protection Act Rule (COPPA Rule).

The 2020 privacy order required Facebook to pay a $5 billion civil penalty. The 2020 order also expanded the required privacy program, as well as the independent third-party assessor’s role in evaluating the effectiveness of Facebook’s program.

The independent assessor, tasked with reviewing whether the company’s privacy program satisfied the 2020 order’s requirements, identified several gaps and weaknesses in Facebook’s privacy program, according to the Order to Show Cause, in which the Commission notes that the breadth and significance of these deficiencies pose substantial risks to the public.

The Order to Show Cause also alleges that Facebook violated both the 2012 and 2020 orders by continuing to give app developers access to users’ private information after promising in 2018 to cut off such access if users had not used those apps in the previous 90 days. In certain circumstances, Facebook continued to allow third-party app developers to access that user data until mid-2020.

The proposed changes to the 2020 order, which would apply to Facebook and Meta’s other services such as Instagram, WhatsApp, and Oculus, include:

• Blanket prohibition against monetizing data of children and teens under 18: Meta and all its related entities would be restricted in how they use the data they collect from children and teens. The company could only collect and use such data to provide the services or for security purposes, and would be prohibited from monetizing this data or otherwise using it for commercial gain even after those users turn 18.
• Pause on the launch of new products, services: The company would be prohibited from releasing new or modified products, services, or features without written confirmation from the assessor that its privacy program is in full compliance with the order’s requirements and presents no material gaps or weaknesses.
• Extension of compliance to merged companies: Meta would be required to ensure compliance with the FTC order for any companies it acquires or merges with, and to honor those companies’ prior privacy commitments.
• Limits on future uses of facial recognition technology: Meta would be required to disclose and obtain users’ affirmative consent for any future uses of facial recognition technology. The change would expand the limits on the use of facial recognition technology included in the 2020 order.
• Strengthening existing requirements: Some privacy program provisions in the 2020 order would be strengthened, such as those related to privacy review, third-party monitoring, data inventory and access controls, and employee training. Meta’s reporting obligations also would be expanded to include its own violations of its commitments.

As part of the action, the FTC has formally asked Meta to respond in 30 days to the proposed findings from the agency’s investigation.

The Commission voted 3-0 to issue the Order to Show Cause.  

The full Order to Show Cause is available here. 

WASHINGTON, D.C.—The Interactive Advertising Bureau has hit back strongly against the Federal Trade Commission’s Advanced Notice of Proposed Rulemaking (ANPR) relating to `commercial surveillance’ by arguing that the move would reduce digital advertising by billions of dollars and that the agency is greatly exceeding its authority. 

In a filing with the FTC, IAB’s executive vice president for public policy Lartease Tiffith complained that the FTC is redefining the ordinary collection, aggregation, and analysis of consumer data as “commercial surveillance”, a move that an IAB press release described as “a definition so broad potential FTC rules could criminalize the internet itself.”

In August, the FTC  said it was exploring rules to crack down on harmful commercial surveillance and lax data security relating to targeted advertising and the handling of consumer data. 

“Firms now collect personal data on individuals at a massive scale and in a stunning array of contexts,” said FTC Chair Lina M. Khan in a statement. “The growing digitization of our economy—coupled with business models that can incentivize endless hoovering up of sensitive user data and a vast expansion of how this data is used—means that potentially unlawful practices may be prevalent. Our goal today is to begin building a robust public record to inform whether the FTC should issue rules to address commercial surveillance and data security practices and what those rules should potentially look like.”

The move could have an important impact on targeted and digital advertising, which would seem to fit into the agency’s definition of “commercial surveillance” as the business of collecting, analyzing, and profiting from information about people.

In response, the IAB filing noted that the "Internet is built on the continuous exchange of data between devices and servers – without these data exchanges, the Internet and its social, cultural, economic, and personal benefits would not exist." 

The filing also highlighted the impact of digital advertising has on supporting free and low-cost online content and services.

“Data-driven advertising greatly benefits consumers by supporting the U.S. economy and creating and maintaining American jobs,” the IAB filing said. “Data-driven advertising, and the Internet economy it supports and drives, contributed $2.45 trillion to the United States’ gross domestic product (GDP) in 2020, accounting for 12 percent of GDP….Additionally, 2.1 million e-commerce companies were operating in the United States in 2020, generating $715 billion in revenue.  Many of those millions of companies are small businesses and sole-proprietorships that are able to achieve success and grow their customer base thanks to data-driven advertising technologies that lower barriers to entry and broaden geographic reach.”

If the FTC restrictions were put in place, the IAB said “Regulations restricting data-driven advertising could likewise have devastating consequences on the over 17 million American jobs that are supported by data-driven advertising.  Most of those jobs were created by small firms and self-employed individuals in all 50 states and across many sectors. In fact, self-employed individuals and people working in small teams of five or fewer people made up 19% of the Internet job total.”

“Further, if the Commission’s regulations resulted in a ban of personalized or targeted advertising, it is likely that between `$32 billion and $39 billion of advertising and ecosystem revenue would move away from the open web by 2025,’” the IAB said.

In the filing the IAB also argued that the FTC has no authority to label “essentially all practices involving the use of ‘consumer data’ to be unfair or deceptive,” a question of “vast economic and political significance” reserved for Congress, according to laws governing the FTC and Supreme Court doctrine. 

In fact, Congress is currently debating a nationwide federal privacy law addressing many of the same issues, and states are deciding their own rules, or declining to, underscoring the FTC’s lack of authority, the IAB argued. 

“IAB represents over 700 leading companies across the digital advertising industry, from brands and publishers to advertising agencies and technology firms. We’re ready to offer our collective expertise and perspective to improve the FTC’s understanding of digital advertising in the modern economy, including small businesses and every American relying on the ad-supported internet for news, information, entertainment, commerce, and community,” said David Cohen, CEO, IAB.

The group also stressed that it was a founding member of Privacy for America, an industry initiative to protect online privacy, jobs and economic growth and IAB supports FTC rulemaking in key areas and stronger enforcement. 

The framework would establish clear rules of the road for individuals, businesses, and law enforcement, and stop harmful and unexpected data practices, while continuing the benefits of digital advertising, the group said. 

MENLO PARK, Calif.—Meta Platforms, a company formerly known as Facebook, received two blows this week as the Federal Trade Commission sued to block its acquisition of Within and the company's disappointing Q2 2022 earnings report pushed its stock down. 

On July 28th, following the Q2 2022 earnings report on July 27, Meta’s stock was trading down 6.62% at 2:53 p.m. ET.  So far this year, the stock is down 53%. 

Meta reported that revenue fell about 1% to $28.8 billion in Q2 2022 from a year earlier. This is the first time that the company reported a revenue decline since it went public. Net income was also down 32% from a year earlier. 

Daily active users were up 3%, however, from a year earlier to 1.97 billion in Q2 2022 and monthly active users saw a small increase of 1% to 2.93 billion.

The company also reported that it is continuing to lose huge amounts of money on its effort to build its metaverse business. Its Reality Labs division, which includes augmented and virtual reality related consumer hardware, software, and content, lost $2.8 billion in Q2 2022, and has lost $5.7 billion so far this year. 

Meta also faces headwinds in its attempts to further expand that business with its proposed acquisition of Within. 

This week the FTC filed a lawsuit suit seeking to block virtual reality giant Meta and its controlling shareholder and CEO Mark Zuckerberg from acquiring Within Unlimited and its popular virtual reality dedicated fitness app, Supernatural. 

“Instead of competing on the merits, Meta is trying to buy its way to the top,” said FTC Bureau of Competition deputy director John Newman. “Meta already owns a best-selling virtual reality fitness app, and it had the capabilities to compete even more closely with Within’s popular Supernatural app. But Meta chose to buy market position instead of earning it on the merits.  This is an illegal acquisition, and we will pursue all appropriate relief.”

The complaint noted that Meta is already a key player at each level of the virtual reality sector. The company’s virtual reality empire includes the top-selling device, a leading app store, seven of the most successful developers, and one of the best-selling apps of all time, the FTC said. 

The complaint alleges that Meta is a potential entrant in the virtual reality dedicated fitness app market with the required resources and a reasonable probability of building its own virtual reality app to compete in the space. But instead of entering, it chose to try buying Supernatural. Meta’s independent entry would increase consumer choice, increase innovation, spur additional competition to attract the best employees, and yield other competitive benefits. Meta’s acquisition of Within, on the other hand, would eliminate the prospect of such entry, dampening future innovation and competitive rivalry, the FTC said. 

The Commission voted to authorize staff to seek a temporary restraining order and preliminary injunction by 3-2. Commissioners Noah Joshua Phillips and Christine S. Wilson voted no. 

A federal court complaint and request for preliminary relief has been filed in the U.S. District Court for the Northern District of California to halt the transaction.

 WASHINGTON, D.C.—The Federal Trade Commission has fined Twitter for deceptively using account security data for targeted advertising and for violating a 2011 FTC order that explicitly prohibited the company from misrepresenting its privacy and security practices. Under the proposed order, Twitter must pay a $150 million penalty and is banned from profiting from its deceptively collected data.

The FTC reported that Twitter asked users to give their phone numbers and email addresses to protect their accounts. Then, Twitter profited by allowing advertisers to use this data to target specific users. 

Under the proposed settlement, which must be approved by a federal court, Twitter did not admit wrongdoing but agreed to pay the fine and address a variety of problems with the way they handled user data. 

“As the complaint notes, Twitter obtained data from users on the pretext of harnessing it for security purposes but then ended up also using the data to target users with ads," said FTC Chair Lina M. Khan. "This practice affected more than 140 million Twitter users, while boosting Twitter’s primary source of revenue.”

According to a complaint filed by the Department of Justice on behalf of the FTC, Twitter in 2013 began asking users to provide either a phone number or email address to improve account security. 

From 2014 to 2019, more than 140 million Twitter users provided their phone numbers or email addresses after the company told them this information would help secure their accounts, according to the complaint. 

Twitter, however, failed to mention that it also would be used for targeted advertising, the FTC alleged. Twitter used the phone numbers and email addresses to allow advertisers to target specific ads to specific consumers by matching the information with data they already had or obtained from data brokers, according to the FTC complaint.

Twitter’s deceptive use of users’ phone numbers and email addresses for targeted advertising also violated the EU-U.S. Privacy Shield and Swiss-U.S. Privacy Shield agreements, which required participating companies to follow certain privacy principles in order to legally transfer data from EU countries and Switzerland, the FTC said. 

The Commission alleged that Twitter’s deceptive use of user email addresses and phone numbers violated the FTC Act and the 2011 Commission order, which stemmed from FTC allegations that the company deceived consumers and put their privacy at risk by failing to safeguard their personal information, resulting in two data breaches. The previous order prohibited Twitter from misrepresenting the extent to which the company maintains and protects the security, privacy, confidentiality, or integrity of any nonpublic consumer information, the FTC said. 

“The Department of Justice is committed to protecting the privacy of consumers’ sensitive data,” said Associate Attorney General Vanita Gupta. “The $150 million penalty reflects the seriousness of the allegations against Twitter, and the substantial new compliance measures to be imposed as a result of today’s proposed settlement will help prevent further misleading tactics that threaten users’ privacy.” 

“Consumers who share their private information have a right to know if that information is being used to help advertisers target customers,” said U.S. Attorney Stephanie M. Hinds for the Northern District of California. “Social media companies that are not honest with consumers about how their personal information is being used will be held accountable.”

In addition to the $150 million penalty, other provisions of the proposed order would:

• Prohibit Twitter from profiting from deceptively collected data;
• Allow users to use other multi-factor authentication methods such as mobile authentication apps or security keys that do not require users to provide their telephone numbers;
• Notify users that it misused phone numbers and email addresses collected for account security to also target ads to them and provide information about Twitter’s privacy and security controls;
• Implement and maintain a comprehensive privacy and information security program that requires the company, among other things, to examine and address the potential privacy and security risks of new products;
• Limit employee access to users’ personal data; and
• Notify the FTC if the company experiences a data breach.

The Commission voted 4 to 0 to refer the complaint and stipulated final order to the Department of Justice for filing. 

DOJ filed the complaint and stipulated final order in the District Court of Northern California, San Francisco Division. 

In a statement Damien Kieran, Twitter’s chief privacy officer said that “on May 25, 2022, Twitter reached a settlement with the Federal Trade Commission (FTC) regarding a privacy incident disclosed in 2019 when some email addresses and phone numbers provided for account security purposes may have been inadvertently used for advertising. This issue was addressed as of September 17, 2019, and today we want to reiterate the work we’ll continue to do to protect the privacy and security of the people who use Twitter.”

“Keeping data secure and respecting privacy is something we take extremely seriously, and we have cooperated with the FTC every step of the way,” he continued. “In reaching this settlement, we have paid a $150M USD penalty, and we have aligned with the agency on operational updates and program enhancements to ensure that people’s personal data remains secure and their privacy protected.”

Elon Musk, who has proposed acquiring Twitter has not as yet responded to the complaint and the proposed settlement. 

WASHINGTON—A settlement has been reached between the Federal Trade Commission and Wellco Inc. and its owner and CEO George M. Moscone on the charge that Wellco sold indoor TV antennas and signal amplifiers to consumers using deceptive claims that the products would allow them to cut the cord and still receive their favorite channels for free.

Per the FTC, Wellco violated the FTC Act by making deceptive performance claims for their OTA television antennas and related signal amplifiers, using deceptive consumer endorsements and misrepresenting some of their web pages as news reports about antennas.

Wellco began marketing and selling indoor TV antennas and amplifiers to consumers in 2017 under the TV Scout, SkyWire, SkyLink and Tilt TV brand names. The FTC says that they sold more than 800,000 antennas and more than 272,000 amplifiers.

“The defendants used every trick in the book to sell their antennas and amplifiers to people, including older adults, who wanted to save money on cable and satellite TV channels,” said Daniel Kaufman, acting director,  FTC Bureau of Consumer Protection. “People should be able to trust the claims companies make, not discover after buying that they were told lies.”

Among the claims Wellco made with the products, the FTC alleges, were that users could stop paying for cable or satellite TV subscriptions and still receive all of their favorite TV channels; that a substantial portion of users receive more than 100 premium channels in HD; they enable consumers to receive more channels than most other TV antennas on the market; and that they were the top rated indoor HDTV antennas in America. In addition, Wellco also claimed their amplifiers substantially increased the number of stations received with their antennas and that by using both consumers could receive HBO and AMC.

Under the terms of the settlement, Wellco would be prohibited from making claims about any product’s rating, ranking or superiority to other products; the channels users will receive; or any material aspect of a product’s performance, efficacy or central characteristics, unless the claims are true and substantiated. The company is also prohibited from making any misrepresentation through a product endorsement, that a website is an objective news report or that independent tests demonstrate the effectiveness of a product.

The proposed order also called for a $31.82 million judgement against Wellco. However, the judgement will be suspended upon the defendants’ payment of $650,000 to the FTC, based on their inability to pay the full judgement.

The settlement was unanimously approved by the FTC.

WASHINGTON—AT&T is writing a check for $60 million to the FTC to settle litigation over allegations that it misled its smartphone customers with what it called “unlimited” data plans, but that instead would often reduce customers’ data speeds for things like video streaming and web browsing.

The allegations stem from a 2014 complaint that said AT&T did not adequately disclose to customers signed up for its unlimited data plan that AT&T would reduce their data speeds if they reached a certain amount of data use in a given billing cycle; according to the claim, that data point was 2 GB. This “throttling” would impact things like streaming video through the phones or web browsing. As of October 2014, an alleged 3.5 million customers were impacted by this practice.

“AT&T promised unlimited data—without qualification—and failed to deliver on that promise,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “While it seems obvious, it bears repeating that internet providers must tell people about any restrictions on the speed or amount of data promised.”

In addition to the monetary portion, the settlement prohibits AT&T from making any representation about the speed or amount of mobile data without disclosing any material restrictions. The FTC says the disclosures must be prominent and not hidden in fine print or behind hyperlinks.

The $60 million will be used to help provide partial refunds to current and former customers that signed up for unlimited plans but experienced throttling issues. Customers will not need to file claims for a refund.

ARLINGTON, VA.—The Consumer Technology Association has announced that both Federal Trade Commission Chairwoman Edith Ramirez and Federal Communications Commission Chairman Tom Wheeler will serve as speakers at the upcoming CES 2016 conference. In addition, all commissioners from both agencies are scheduled to take part in a roundtable discussion on top policy and regulatory issues in regards to the Internet of Things, spectrum allocation, privacy and disruptive innovation.

Ramirez and Wheeler will join Gary Shapiro, CTA president and CEO, for SuperSession on the challenges their agencies must deal with in this changing technological landscape. The session is scheduled to take place Jan. 6 at 11:30 a.m. in the North Hall, room N257 of the Las Vegas Convention Center.

Part of CES 2016’s Innovation Policy conference track, the “2016 Preview: FCC and FTC Commissioner Roundtable” is also scheduled for Jan. 6 at 12:45 in room N254. FCC commissioners Mignon Clyburn, Jessica Rosenworcel, Ajit Pai and Michael O’Reilly will take part in the discussion, as will FTC commissioners Julie Brill, Maureen Ohlhausen, and Terrell McSweeny.

CES 2016 will take place from Jan. 6-9, 2016 in Las Vegas. For more information, visit www.CESweb.org.