Federal Register / Vol. 87, No. 48 / Friday, March 11, 2022 / Proposed Rules
John Beck Amazing Profits, 865 F. Supp. 2d at
1072 (ads featuring testimonials created impression
that ‘‘a typical consumer can easily and quickly
earn thousands of dollars per week’’); see also, e.g.,
World Patent, No. 17–cv–20848, 2017 WL 3508639,
*12; Macmillan, Inc., 96 FTC 208, 301 (1980);
National Dynamics, 82 FTC at 511–13, 564 and as
modified at 85 FTC at 1057; Universal Credit
Acceptance Corp., 82 FTC 570, 669, 682–83 (1973);
Von Schrader Mfg., 33 FTC 58, 65 (1941).
Grant Connect, 827 F. Supp. 2d at 1214, 1226
(‘‘Examples of deceptive conduct violative of the
Act include unsubstantiated claims that consumers
can make a lot of money using the defendant’s
product . . . .’’); see also, e.g., FTC v. Digital
Altitude, LLC, No. 2:18–cv–0729, 2018 WL 1942392,
*7–10 (C.D. Cal. Mar. 9, 2018); John Beck Amazing
Profits, 865 F. Supp. 2d at 1067, 1071–72; Holiday
Enterprises, No. 1:06–cv–2939, 2008 WL 953358,
*6–7; Von Schrader, 33 FTC at 64.
Vemma, No. 2:15–cv–01578, 2015 WL
11118111, *6 (in determining whether marketing
made deceptive income claims, ‘‘[t]he ‘common-
sense net impression’ of representations controls’’);
see also, e.g., World Patent, No. 17–cv–20848, 2017
WL 3508639, *11–12; John Beck Amazing Profits,
865 F. Supp. 2d at 1073; Med. Billers Network, 543
F. Supp. 2d at 306–07; Tashman, 318 F.3d at 1276;
Febre, No. 94–cv–3625, 1996 WL 396117, *4.
World Patent, No. 17–cv–20848, 2017 WL
3508639, *13–14 (rejecting disclaimer defense as
they ‘‘failed to change the net impression created
by Defendants’ salespeople who verbally promised
financial gain’’); see also, e.g., Vemma, No. 2:15–
cv–01578, 2015 WL 11118111, *6; John Beck
Amazing Profits, 865 F. Supp. 2d at 1072;
Stefanchik, No. 04–cv–1852, 2007 WL 1058579, *6;
Minuteman Press, 53 F. Supp. 2d at 262–63.
Five-Star Auto Club, 97 F. Supp. 2d at 526
(liability for misleading earnings claims under
Section 5 did not turn on ‘‘intent to defraud or
deceive,’’ or ‘‘bad faith’’); see also, e.g., Holiday
Enterprises, No. 1:06–cv–2939, 2008 WL 953358,
*6–7; Med. Billers Network, 543 F. Supp. 2d at 304;
Nat’l Bus. Consultants, No. 89–cv–1740, 1990 WL
32967, *9; Wolf, No. 94–cv–8119, 1996 WL 812940,
FTC Policy Statement on Deception (October
23, 1984) (appended to Cliffdale Assocs. Inc., 103
FTC 110, 180 & n.37 (1984); see also, e.g.,
Exposition Press, Inc. v. FTC, 295 F.2d 869, 873 (2d
Cir. 1961); Med. Billers Network, 543 F. Supp. 2d
Med. Billers Network, 543 F. Supp. 2d at 319–
20 (holding seller liable for telemarketer agent’s
earnings misrepresentations regardless of
telemarketer’s purported independent contractor
status); see also, e.g., Stefanchik, No. 04–cv–1852,
2007 WL 1058579, *6; FTC v. Skybiz.com, Inc., No.
01–cv–396, 2001 WL 1673645, *9 (N.D. Okla. Aug.
31, 2001), aff’d, 57 F. App’x 374 (10th Cir. 2003);
Five-Star Auto Club, 97 F. Supp. 2d at 527; U.S. Oil
and Gas, No. 83–cv–1702, 1987 U.S. Dist. LEXIS
16137, *48–49; Goodman v. FTC, 244 F.2d 584,
592–593 (9th Cir. 1957).
Five-Star Auto Club, 97 F. Supp. 2d at 530
(‘‘[Defendants] violated [the] FTC Act by providing
participants with deceptive means and
instrumentalities,’’ specifically, marketing materials
that included deceptive earnings claims, explaining
that ‘‘[a]s a matter of law, ‘those who put into the
hands of others the means by which they may
mislead the public, are themselves guilty of a
violation of Section 5 of the Federal Trade
Commission Act.’’’); see also, e.g., Vemma, No.
2:15–cv–01578, 2015 WL 11118111, *7.
See, e.g., FTC v. BINT Operations LLC, No.
4:21–cv–518 (filed E.D. Ark. 2021); FTC v. Moda
Latina BZ Inc., No. 2:20–cv–10832 (filed C.D. Cal.
2020); FTC v. Digital Income System, Inc., No. 1:20–
cv–24721 (filed S.D. Fla. 2020); FTC v. OTA
Franchise Corp., No. 8:20–cv–287 (filed C.D. Cal.
2020); FTC v. Ragingbull.com, LLC, No. 1:20–cv–
3538 (filed D. Md. 2020); FTC v. National Web
Design, LLC, No. 2:20–cv–846 (filed D. Utah 2020);
FTC v. Noland, No. 2:20–cv–0047 (filed D. Ariz.
2020); FTC v. Position Gurus, LLC, No. 2:20–cv–710
(filed W.D. Wash. 2020); FTC v. 8 Figure Dream
Lifestyle LLC, No. 8:19–cv–1165 (filed C.D. Cal.
2019); FTC v. Zurixx LLC, No. 2:19–cv–713 (filed
D. Utah 2019); FTC v. Advocare, Int’l, L.P., No.
4:19–cv–715 (filed E.D. Tex. 2019); FTC v. Neora,
LLC, No. 3:20–cv–1979 (filed D.N.J. 2019,
transferred N.D. Tex.); FTC v. Fat Giraffe Mktg.
Group LLC, No. 2:19–cv–63 (filed D. Utah 2019);
FTC v. AWS, LLC, No. 2:18–cv–442 (filed D. Nev.
2018); FTC v. Sellers Playbook, Inc., No. 18–cv–
2207 (filed D. Minn. 2018); FTC v. Dluca, No. 0:18–
cv–60379 (filed S.D. Fla. 2018); FTC v. Mobe Ltd.,
No. 6:18–cv–862 (filed M.D. Fla. 2018); FTC v.
Vision Solution Marketing LLC, No. 2:18–cv–356
(filed D. Utah 2018); FTC v. Jason Cardiff, No. 5:18–
cv–2104 (filed C.D. Cal. 2018).
AMG Capital Mgmt., LLC v. FTC, 141 S. Ct.
15 U.S.C. 53(b).
Penalty Offenses Concerning Multi-Making
Opportunities (issued October 2021), available at
Disclosure Requirements and Prohibitions
Concerning Franchising, 16 CFR part 436 (2007).
Business Opportunity Rule, 16 CFR part 437
Telemarketing Sales Rule, 16 CFR part 310.
See, e.g., FTC v. OTA Franchise Corp., No.
8:20–cv–287 (filed C.D. Cal. 2020) (alleging
consumer harm of over $370 million); FTC v.
Neora, LLC, No. 3:20–cv–1979 (filed D.N.J. 2019,
transferred N.D. Tex.) (alleging consumer harm of
over $120 million); FTC v. Mobe, No. 6:18–cv–862,
Dkt. No. 257, Renewed Motion for Default
Judgment, at 5 (filed M.D. Fla. 2018) (alleging
consumer harm of over $318 million); FTC v. The
Tax Club, Inc., No. 13–cv–210 (filed S.D.N.Y. 2016)
(alleging consumer harm of over $200 million).
Individual losses can be substantial; for example,
tens of thousands of purchasers in the OTA
Franchise matter each paid over $10,000 for
purported courses on how to make money trading
in the financial markets.
hypothetical or past profits;
earnings claims must be substantiated—
that is, the maker must have a
reasonable basis for the claim before
The well-settled law on
deception under section 5 of the FTC
Act applies fully to deceptive earnings
claims: (a) Liability turns on whether
the net impression conveyed by
representations—not merely their
express terms—is unsubstantiated or
do not bar liability, as they often fail to
dispel a misleading impression created
by other representations;
(c) as a
matter of law, good faith or a lack of
intent to deceive is not a defense;
a company may be liable for bait-and-
switch advertising or the use of
‘‘misleading door openers,’’ ‘‘even if the
truth is subsequently made known;’’
(e) a principal may be liable for
deceptive claims made by its
representatives or other agents;
a company may be liable for providing
deceptive marketing materials for others
to use on its behalf (sometimes called
providing ‘‘means and
Despite the Commission’s aggressive
earning claims continue to proliferate in
the marketplace. The FTC continues to
receive widespread reports from
consumers and informants of
misleading earnings claims. In AMG
Capital Mgmt., LLC v. FTC
Supreme Court ruled that the
Commission may not seek equitable
monetary relief under section 13(b) of
the FTC Act for violations of the FTC
Act or other statutes enforced by the
While the Commission
recently issued a Notice of Penalty
Offenses concerning earnings claims,
which will permit the Commission to
seek civil penalties for misleading
earnings claims in some cases, this
authority does not provide a basis for
the Commission to recover funds to
return to injured consumers.
The Commission anticipates that a
rule prohibiting the use of misleading
earnings claims would enhance
deterrence and help the Commission
move quickly to stop illegal conduct.
Such a rule also may further clarify for
businesses what constitutes a deceptive
earnings claim and what it means to
have substantiation for an earnings
In addition, a rule would enable the
Commission to seek monetary relief for
consumers harmed by deceptive
earnings claims, as well as civil
penalties against those who make the
deceptive claims. Specifically, section
19 of the FTC Act, 15 U.S.C. 57b,
authorizes the Commission to seek
‘‘rescission or reformation of contracts,
the refund of money or return of
property, [and] the payment of
damages,’’ among other things, to
redress harm caused by violations of
FTC rules, such as one prohibiting
deceptive earnings claims. And section
5 of the FTC Act, 15 U.S.C. 45(m),
allows the Commission to ‘‘recover civil
penalties’’ against those who violate
such a rule.
The Commission has previously
promulgated rules regulating the use of
earnings claims in certain industry
settings: The Franchise Rule,
Business Opportunity Rule,
Telemarketing Sales Rule.
the scope of coverage of these rules is
limited. Numerous different types of
enterprises that do not clearly fall under
the scope of these existing rules
continue to use misleading earnings
claims to deceive consumers in
violation of section 5. The financial
consequences of this deception for
consumers are significant.
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