More Costly Fines and Penalties for
Alleged Advertising Law Violations

Summary

Advertising agencies, advertisers and their attorneys have been amazed by the growing size of costly fines and penalties assessed in Federal Trade Commission (FTC) and Court decisions in recent years. For over 30 years, Advertising Compliance Service has analyzed these decisions offering practical, compliance-oriented analysis and commentary. As these decisions illustrate, ignorance of the fast-paced developments in advertising law can be a very costly proposition. Remember: You should carefully review all of your advertising copy to make sure your ads comply with advertising law's countless - and increasingly strict - requirements. Here are just a few examples of such cases that were examined in past issues of Advertising Compliance Service - or will be examined in the next issue:

1. FTC ACTION LEADS TO COURT ORDERS BANNING MARKETERS FROM SELLING VACATION PACKAGES - INCLUDES "SUSPENDED" JUDGMENT OF $14 MILLION

The operators behind an alleged vacation prize scheme are banned from selling vacation packages under settlements with FTC and Florida Attorney General Pam Bondi's Office, which charged the defendants with tricking consumers into believing they had won a vacation package as a prize, and then failing to provide the package as promised. The settlements resolve the case. The orders also impose a judgment of more than $14 million, which will be suspended on the satisfaction of numerous terms and conditions designed to ensure that the defendants will be stripped of all of their assets of value.

NOTE: The consent orders are for settlement purposes only and do not constitute an admission by the defendants that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.

(FTC and State of Florida, Office of the Attorney General v. VGC Corporation of America, et al., United States District Court for the Southern District of Florida, Case No. 11-Civ-21757/Martinez, FTC File No. 102 3210, February 28, 2012.)

(See Advertising Compliance Service, Issue #736, April 16, 2012.)

2. FTC ACTION PUTS ROBOCALLERS OUT OF TELEMARKETING BUSINESS - REQUIRES DEFENDANTS TO GIVE UP SOME $3 MILLION IN ASSETS

FTC put a robocall operation out of the telemarketing business under a settlement resolving FTC charges that it bombarded consumers with more than two billion calls pitching a variety of products and services, including worthless extended auto warranties and credit card interest rate-reduction programs. The final settlement order against SBN Peripherals is part of FTC's ongoing crackdown on allegedly deceptive robocallers. The order bans the defendants from telemarketing and requires them to give up roughly $3 million in assets.

NOTE: This consent order is for settlement purposes only and does not constitute an admission by the defendants that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.

(FTC v. Asia Pacific Telecom, Inc. d/b/a Asia Pacific Networks, Repo B.V., SBN Peripherals, Inc. d/b/a SBN Dials, Johan Hendrik Smit Duyzentkunst, individually and as an officer or owner of Asia Pacific Telecom, Inc., Repo B.V., and SBN Peripherals, Inc., and Janneke Bakker-Smit Duyzentkunst, individually and as an officer of Repo B.V., United States District Court for the Northern District of Illinois, Case No. 10 C 3168, FTC File No. 102 3060, March 28, 2012.)

(See Advertising Compliance Service, Issue #736, April 16, 2012.)

3. SECURITY FLAWS IN GAME SITE EXPOSED 32 MILLION EMAIL ADDRESSES AND PASSWORDS - COMPANY REQUIRED TO PAY $250,000 CIVIL PENALTY: FTC

The operator of a social game site agreed to settle charges that, while touting its security features, it failed to protect the privacy of its users, allowing hackers to access the personal information of 32 million users. FTC also alleged in its complaint against RockYou that RockYou violated the Children's Online Privacy Protection Act Rule (COPPA Rule) in collecting information from approximately 179,000 children. The proposed FTC settlement order with the company would (1) bar future deceptive claims by the company as to privacy and data security, (2) require the company to implement and maintain a data security program, (3) bar future violations of the COPPA Rule, and (4) requires it to pay a $250,000 civil penalty to settle the COPPA charges.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. This consent decree is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent decrees have the force of law when signed by the District Court judge.

(USA (For FTC) v. RockYou, Inc., United States District Court for the Northern District of California, San Francisco Division, Case No. CV 12 1487, FTC File No. 1023120, March 27, 2012.)

(See Advertising Compliance Service, Issue #736, April 16, 2012.)

4. FTC PERMANENTLY STOPS TWO MORE OPERATIONS CHARGED WITH USING ALLEGEDLY FAKE NEWS SITES

Two more online marketers agreed to settlements with FTC that will permanently halt their allegedly deceptive practice of using fake news websites to promote acai berry supplements and so-called “colon cleansers” with deceptive claims that consumers could use them to lose weight.

Under the settlement, the “Copeac defendants” will pay more than $1.3 million, which represents revenues they received from deceptive fake news site ads for acai berries, colon cleansers, and other supposed weight-loss dietary supplements; and revenues they received for other products marketed on fake news sites. In the second case, the “Coulomb” defendants’ $2.7 million judgment will be suspended after they pay $170,000 in cash, proceeds from the sale of Low’s 2010 Chevrolet Tahoe, and a certificate of deposit.

NOTE: These consent decrees are for settlement purposes only and do not constitute an admission by the defendant that the law has been violated. Consent decrees have the force of law when approved and signed by the District Court judge.

(FTC v. IMM Interactive, Inc., et al., United States District Court for the Northern District of Illinois, Eastern Division, Case No. 1:11-cv-02484, FTC File No. 102 3232, March 21, 2012; FTC v. Coulomb Media, Inc., et al., United States District Court for the Eastern District of Michigan, Case No. 2:11-cv-11618-RHC-LJM, FTC File No. 112 3072, March 21, 2012.)

AMOUNT: “Copeac defendants”: $1.3+ million; “Coulomb” defendants’ $2.7 million judgment will be suspended after they pay $170,000 in cash, etc.

[For more examples of costly fines and penalties, see More Examples of Costly Penalties and Fines for Alleged Advertising Law Violations.]

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