FTC

On July 9, 2024, the FTC and California Attorney General settled a case against NGL Labs (“NGL”) and two of its co-founders. NGL Labs’ app, “NGL: ask me anything,” allows users to receive anonymous messages from their friends and social media followers. The complaint alleged violations of the FTC Act, the Restore Online Shoppers’ Confidence

On May 22 the Federal Trade Commission (“FTC”) announced a $6 million settlement with Edmodo, an ed tech provider, for violations of the COPPA Rule and Section 5 of the FTC Act.  The FTC described this settlement as the first FTC order that will prohibit an ed tech provider from requiring students to provide more

2022 and 2023 may be remembered as pivotal years for efforts against so-called “greenwashing.”  In this article, we look at some recent developments in the regulation of “green claims” in the UK, the US, and the EU that corporates should be aware of.  We provide a broad summary and comparison snapshot of the UK, US and EU regimes to help companies navigate these rules.  Now is a critical time for companies to get up to speed: authorities in all three jurisdictions are focusing more and more intently on this issue; company reputations will increasingly rise and fall with the strength of their green claims, and national regulators are set to get new powers (including the power to levy significant fines) to tackle companies found in breach.

I.  Summary of recent developments: What’s new in greenwashing?

In January 2022, the UK’s Competition & Markets Authority (“CMA”) launched a sector‑by‑sector review of misleading environmental claims.  The CMA started with the fashion sector, and called out a number of high‑profile, fast‑fashion companies for their practices.  Twelve months later, the CMA announced that it was expanding the investigation to greenwashing around “household essentials”, including food, drink, toiletries and cleaning products.  The CMA’s review is the first concerted application of the CMA’s new Green Claims Code, published in September 2021, which gives guidance for any business (wherever based) making environmental claims in the UK.

Meanwhile, in December 2022, the US Federal Trade Commission’s (“FTC”) launched a review of the “Guides for the Use of Environmental Claims” (“Green Guides”), which was last updated in 2012.  The initial comment period closed on April 24, 2023.  The FTC plans to update the Green Guides to reflect developments in consumers’ perception of environmental marketing claims.  As a part of its ongoing review, the FTC also announced a workshop to examine recyclable claims.  The workshop is scheduled for May 23, 2023 and the public can submit comments on the subject of recyclable claims through June 13, 2023.  For more detail on the review, please see our dedicated blog post, here.

Finally, the EU has proposed two Directives to modernize and harmonize the rules on green claims across the bloc (together, the “EU Green Claims Proposals”).  Currently, EU law does not specifically regulate environmental claims.  Instead, environmental claims are subject only to general consumer protection and advertising rules (set out in Directive 2005/29 on Unfair Business-to-Consumer Practices and Directive 2006/114 on Comparative Advertising).  Admittedly, the EU has published guidance on interpreting and applying the general rules in the context of green claims (see the guidance here, and see our previous blog post discussing the guidance here).  However, in practice, EU Member States approach interpretation and enforcement in a variety of different ways.  On March 3, 2022, the European Commission published a Proposal for a Directive Empowering Consumers for the Green Transition, also known as the “Greenwashing Directive.”  The Greenwashing Directive amends the EU’s existing consumer protection rules, and bans a number of general green claims, such as “climate neutral” or “eco-friendly.”  It also imposes some rules on the use of non-environmental sustainability claims or “social impact” claims, such as “locally produced” or “fair labour.”  One year later, on March 22, 2023, the European Commission presented a Proposal for a Directive on Green Claims (“Green Claims Directive”), which we discussed here.  The Green Claims Directive proposes a new and strict framework, applicable to all companies operating in the EU/EEA, to harmonize the rules on the substantiation of voluntary green claims. 

Below, we outline the key aspects of the different legislative frameworks.Continue Reading The Green Claims Global Drive: Developments in the UK, US and EU

On February 1, the Federal Trade Commission (“FTC”) announced its first-ever enforcement action under its Health Breach Notification Rule (“HBNR”) against digital health platform GoodRx Holdings Inc. (“GoodRx”) for failing to notify consumers and others of its unauthorized disclosures of consumers’ personal health information to third-party advertisers.  According to the proposed order, GoodRx will pay a $1.5 million civil penalty and be prohibited from sharing users’ sensitive health data with third-party advertisers in order to resolve the FTC’s complaint. 

This announcement marks the first instance in which the FTC has sought enforcement under the HBNR, which was promulgated in 2009 under the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, and comes just sixteen months after the FTC published a policy statement expanding its interpretation of who is subject to the HBNR and what triggers the HBNR’s notification requirement.  Below is a discussion of the complaint and proposed order, as well as key takeaways from the case.

The Complaint

As described in the complaint, GoodRx is a digital healthcare platform that advertises, distributes, and sells health-related products and services directly to consumers.  As part of these services, GoodRx collects both personal and health information from its consumers.  According to the complaint, GoodRx “promised its users that it would share their personal information, including their personal health information, with limited third parties and only for limited purposes; that it would restrict third parties’ use of such information; and that it would never share personal health information with advertisers or other third parties.”  The complaint further alleged that GoodRx disclosed its consumers’ personal health information to various third parties, including advertisers, in violation of its own policies.  This personal health information included users’ prescription medications and personal health conditions, personal contact information, and unique advertising and persistent identifiers.Continue Reading FTC Announces First Enforcement Action Under Health Breach Notification Rule

On December 20, 2022, the Federal Trade Commission (“FTC”) announced its issuance of Health Products Compliance Guidance, which updates and replaces its previous 1998 guidance, Dietary Supplements: An Advertising Guide for Industry.  While the FTC notes that the basic content of the guide is largely left unchanged, this guidance expands the scope of the previous guidance beyond dietary supplements to broadly include claims made about all health-related products, such as foods, over-the-counter drugs, devices, health apps, and diagnostic tests.  This updated guidance emphasizes “key compliance points” drawn from the numerous enforcement actions brought by the FTC since 1998, and discusses associated examples related to topics such as claim interpretation, substantiation, and other advertising issues.

Identifying Claims and Interpreting Advertisement Meaning

The updated guidance first discusses how claims are identified and interpreted, including the difference between express and implied claims.  The updated guidance emphasizes that the phrasing and context of an advertisement may imply that the product is beneficial to the treatment of a disease, which in turn would require that the advertiser be able to substantiate the implied claim with competent and reliable scientific evidence, even if the advertisement contains no express reference to the disease.

In addition, the updated guidance provides examples of when advertisers are expected to disclose qualifying information, such as when a product is targeted to a small percentage of the population or contains potentially serious risks.  When the qualifying information is necessary to avoid deception, the updated guidance contains a discussion of what constitutes a clear and conspicuous disclosure of that qualifying information.  Specifically, the guidance states that a disclosure is required to be provided in the same manner as the claim (i.e., if the claim is made visually, the disclosure is required to be made visually).  A visual claim should stand out, and based on its size, contract, location, and length of time is appears, must be easily noticed, read, and understood.  An audible disclosure should be at a volume, speed, and cadence so as to be easily heard and understood.  On social media, the guidance states a disclosure should be “unavoidable,” which the FTC clarifies does not include hyperlinks.  The qualifying information should not include vague qualifying terms, such as that a product “may” have benefits or “helps” achieve a benefit.Continue Reading FTC Issues New Guidance Regarding Health Products