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FTC Advice: How to Shop Wisely at Outlet Malls

For many consumers in search of a bargain, outlet malls are the place to go. But did you know that merchandise sold at outlet stores can be manufactured exclusively for them, and may differ in quality from merchandise sold at non-outlet stores?

You might get a good deal from an outlet store, but if you want to know if you’re buying “made-for-outlet” merchandise or how to recognize it, ask the staff.

To learn more about how to shop wisely at outlet malls, read the FTC’s consumer blog post, Outlet shopping: Getting your money’s worth.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Releases Fourth Major Study on Alcohol Advertising and Industry Efforts to Reduce Marketing to Underage Audiences

The Federal Trade Commission released its fourth major study on alcohol industry compliance with self-regulatory guidelines, including those designed to address concerns about youth access to alcohol marketing.

For the study, the FTC ordered 14 major alcohol companies to provide information on advertising and marketing expenditures from the 2011 calendar year, and advertising placement data (including audience data) for the first six months of 2011. For the first time, the agency obtained substantial information on Internet and digital marketing and data collection and use practices.

Presented in an aggregate, anonymous fashion, the findings include:

How Companies Allocate Marketing Dollars: 31.9 percent of expenditures were directed to advertising in traditional media such as television, radio, magazine, and newspaper advertising. The study found that 28.6 percent of expenditures were used to help wholesalers and retailers promote alcohol; 17.8 percent were allocated to sponsorships (sports and non-sports) and public entertainment; 7.9 percent were directed to online and other digital marketing – almost a four-fold increase from the 2 percent reported in the 2008 study; and 6.8 percent were directed to outdoor and transit marketing efforts.
Meeting Industry Standards on Ad Placement. In the first half of 2011, 93.1 percent of all measured media combined (including traditional media and online/other digital) met the alcohol industry’s placement standard at the time, which required that 70 percent or more of the audience viewing the ads be 21 years old or older, based on reliable data. Further, because compliance shortfalls were primarily in media with smaller audiences (such as local radio), over 97 percent of individual consumer exposures to alcohol ads were from placements meeting the 70 percent standard. The industry has since adopted a new ad placement standard requiring that 71.6 percent of the audience viewing alcohol ads be 21 years old or older.
Ad Placement on Online and Other Digital Media. In the first half of 2011, 99.5 percent of alcohol ads that advertisers placed on sites owned by others – such as news, entertainment, and sports sites – met the alcohol industry’s 70 percent placement standard. The alcohol companies’ web sites and social media pages are “age gated,” meaning that a consumer must either enter a date of birth that shows him or her to be 21 years old or older, or must certify to being over 21 to enter the site.
Privacy Concerns on Online and Other Digital Media. The report stated that alcohol industry members appear to have considered privacy impacts in the marketing of their products. It appears that, at least in the context of online registration opportunities, alcohol companies generally advise consumers how their information will be used and that they require consumers to opt-in to receive marketing information and consumers can readily opt-out when they want to stop receiving such information. Use of cookies and tracking tools on brand websites appears to be limited to those needed to ensure that only consumers who have stated they are 21 or older can re-enter the site.
Product Placements. Product placement in movies, television shows, and other entertainment media accounted for a very small portion – about one-tenth of one percent – of expenditures. Most product placements involve the provision of props (such as bottles and signs) rather than money.
Outside Review of Complaints. The report found that all three major alcohol industry trade groups – the Beer Institute, the Distilled Spirits Council of the United States, and the Wine Institute – have procedures for external review of complaints regarding alcohol advertising, but only the Distilled Spirits Council received any complaints between January 2009 and December 2012. In the majority of cases (including all cases involving Council members), the advertiser agreed to comply with the decision of the Council’s review board.

The report’s key recommendations include:

When placement compliance levels fall below 90 percent for a brand in a particular media, and lack of compliance is due to wide fluctuations in measured audience composition due to small sample size, the company should consider using a higher audience composition threshold at the time of placement, to increase the likelihood of meeting the standard at the time the ad actually appears.
Because audience demographic data for radio is now available for larger markets showing all audience members age 6 and older , the companies should review this more comprehensive data when making placements.
Companies should take advantage of age-gating technologies offered by social media, including YouTube, and age gates on company websites should require consumers to enter their date of birth, rather than simply asking them to certify that they are of legal drinking age.
Companies should improve posted privacy policies to make them brief, transparent regarding data collection and use, and understandable to ordinary consumers.
Regarding user-generated content, companies should use blocking technologies and engage in frequent monitoring to reduce the potential for violations of the voluntary advertising and marketing codes established by the Beer Institute, the Distilled Spirits Council of the United States, and the Wine Institute.
Alcohol companies and the industry as a whole should continue their efforts to facilitate compliance with the voluntary codes, including staff training and cross-company identification of best practices.
State regulatory authorities, consumer advocacy organizations, and others who are concerned about alcohol marketing should participate in the industry’s external complaint review system when they see advertising that appears to violate the voluntary codes.
Industry and others concerned with reducing underage access to alcohol are encouraged to use the free “We Don’t Serve Teens” alcohol education materials available on DontServeTeens.gov.

The FTC released previous studies in 1999, 2003, and 2008. Recommendations from past reports have resulted in agreements by the Beer Institute, the Distilled Spirits Council of the United States, and the Wine Institute, to adopt improved voluntary advertising placement standards; buying guidelines for placing ads on radio, in print, on television, and on the Internet; a requirement that suppliers conduct periodic internal audits of past placements; and systems for external review of complaints about compliance.

The Commission vote to authorize release of the report was 4 – 0.

FTC to Host Discussions on Immigration Services Fraud in Durham, North Carolina

The Federal Trade Commission and U.S. Citizenship and Immigration Services (USCIS) will host a half-day event today in Durham, North Carolina, to discuss consumer protection in immigrant communities in North Carolina.

Panel discussions will address the impact of immigration services fraud, such as scammers who claim to be affiliated with government immigration agencies, pose as immigration lawyers, or pretend to provide legitimate immigration-related service. They will also address anti-fraud resources and tactics, and how to help consumers avoid deceptive marketing practices targeted at immigrants.

The event will include participants from the FTC, USCIS, U. S. Attorney’s office for the Eastern District of North Carolina, North Carolina Department of Justice, American Immigration Lawyers Association, North Carolina Justice Center, Center for Responsible Lending, and the Better Business Bureau of Eastern North Carolina.

The event will be held from 1 p.m. to 4:30 p.m. in the USCIS Raleigh Durham Field Office, 301 Roycroft Drive, Durham, North Carolina.

Defendants Behind ‘Online Entrepreneur’ Work-at-Home Scheme Settle FTC Charges

The operators of a business opportunity scheme have agreed to settle Federal Trade Commission charges that they defrauded consumers through the sale of a work-at-home program that purportedly provided consumers with their own websites that would enable them to earn a significant income by affiliate marketing with websites of well-known companies such as Prada, Sony, Louis Vuitton, and Verizon.

The settlement is part of a federal-state crackdown on scams that falsely promise jobs and opportunities to “be your own boss” to people who are unemployed or underemployed. Under the settlement, the defendants behind the operation, The Online Entrepreneur, will be banned from selling business and work-at-home opportunities.

According to an FTC complaint filed in November 2012, the defendants sold the “Six Figure Program” to consumers as a purportedly no-risk, money-back guaranteed opportunity to make money via their own website, falsely claiming that, for a $27 fee, they would enable consumers to affiliate with well-known companies’ websites and earn commissions. After purchasing the program, consumers learned that they had to pay $100 or more in additional costs just to set up their websites. The court subsequently halted the allegedly deceptive practices, froze the defendants’ assets, and put the companies into receivership pending a court hearing.

The settlement order announced today permanently prohibits The Online Entrepreneur Inc., Ben and Dave’s Consulting Associates, Inc., and David Clabeaux from selling business and work-at-home opportunities, misrepresenting that consumers are likely to earn money and misrepresenting any material fact about a product or service. They also are barred from failing to clearly disclose the terms of any offer before consumers provide billing information, and making a representation unless it is true and the defendants have competent and reliable evidence to substantiate the claim. In addition, the order prohibits these defendants from selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The order imposes a judgment of more than $2.9 million, which will be suspended when Clabeaux has surrendered real estate, personal property, and bank and investment accounts. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. Litigation continues against the remaining defendant, Benjamin Moskel.

The Commission vote authorizing the staff to file the proposed consent judgment was 4-0. The consent judgment was entered by the U.S. District Court for the Middle District of Florida on March 13, 2014.

NOTE: Consent judgments have the force of law when approved and signed by the District Court judge.

FTC Requests Public Comments on SCI’s Application to Approve Sale of Funeral Assets in Kansas, Missouri, and Texas to Signature Funeral and Cemetery Investments

The Federal Trade Commission is currently accepting public comments on an application by Service Corporation International (SCI) to sell certain funeral and cemetery assets, as required under the FTC’s December 2013 proposed order settling charges that SCI’s acquisition of Stewart would be anticompetitive. In total, the proposed order requires the combined SCI/Stewart to divest 53 funeral homes and 38 cemeteries to ensure competition is maintained in 59 communities throughout the United States.

In its application, SCI has petitioned the FTC to approve the divestiture of the following assets in Kansas, Missouri, and Texas to Signature Funeral and Cemetery Investments LLC and/or its affiliates:

Mount Moriah Terrace Park Funeral Home & Cemetery in Kansas City, Missouri;
Overland Park Chapel in Overland Park, Kansas;
Johnson County Funeral Chapel & Memorial Gardens in Overland Park, Kansas;
Lincoln Funeral Home & Cemetery in Dallas, Texas;
Lincoln Memorial Park Cemetery in Dallas, Texas; and
Emerald City Funeral Home & Cemetery in Kennedale, Texas.

According to SCI’s application, Signature will be a strong and effective competitor in each local market, and has the expertise to successfully operate the businesses it plans to acquire.

The Commission will decide whether to approve the proposed divestiture after expiration of a 30-day public comment period. Public comments may be submitted until April 21, 2014. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Comments can also be submitted electronically. Copies of the application can be found on the FTC’s website and as a link to this press release. (FTC File No. 131-0163, Docket No. C-4423; the staff contact is Elizabeth A. Piotrowski, Bureau of Competition, 202-326-2623)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., N.W., Room 7117, Washington, DC 20001. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Approves Final Order Settling Charges that Down to Earth Designs, Inc. Made Deceptive Environmental Claims for its Diapers and Related Products

Following a public comment period, the Federal Trade Commission has approved a final consent order settling charges that Down to Earth Designs, Inc. made deceptive environmental claims for its gDiapers diaper system, which includes a reusable outer shell (gPants) and disposable pad inner liners (gRefills), as well as baby wipes (gWipes).

According to the FTC’s January 2014 complaint, the company made false or misleading representations in marketing gRefills and gWipes as biodegradable. These representations included claims that: the products are “100% biodegradable” and “certified” biodegradable; gRefills and gWipes will biodegrade when tossed in the trash; gRefills will biodegrade when flushed; and gRefills offer an environmental benefit because they can be flushed.

The final consent order approved by the FTC – among other things — prohibits gDiapers from making biodegradable and compostable claims, unless the claims are true, not misleading, substantiated by competent and reliable scientific evidence, and meet specific requirements outlined in the FTC’s revised Green Guides. Additionally, any claims that a disposable diaper or wipe is compostable must clearly and prominently disclose that the product cannot be composted if soiled with solid human waste.

The Commission vote approving the final consent order was 4-0. (FTC File No. 122-3268; the staff contact is Laura Kim, Bureau of Consumer Protection, 202-326-3734)

U.S. District Judge Finds that FTC Can Sue Deceptive Payday Loan Business Regardless of American Indian Tribal Affiliation

U.S. District Judge Gloria M. Navarro handed the Federal Trade Commission a significant victory in its crackdown on deceptive payday lenders, affirming a magistrate judge’s finding that the defendants in its AMG Services case are within the reach of FTC enforcement actions, even if they are affiliated with American Indian tribes.

District Judge Navarro ruled that Magistrate Judge V. Cam Ferenbach, of the U.S. District Court for the District of Nevada, correctly found that the FTC Act “grants the FTC authority to regulate arms of Indian tribes, their employees, and their contractors.”

“This ruling makes it crystal clear that the FTC’s consumer protection laws apply to businesses that are affiliated with tribes,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “It’s a strong signal to deceptive payday lenders that their days of hiding behind a tribal affiliation are over.”

The FTC has sued a number of payday lenders for engaging in unfair and deceptive practices against consumers. The FTC alleged that these lenders, like AMG Services, have employed deception and other illegal conduct to take advantage of financially distressed consumers seeking loans.

When the FTC sued the defendants behind AMG Services in 2012, they argued that they were exempt from FTC enforcement because of their affiliation with American Indian tribes. They argued that the FTC lacked authority to enforce the FTC Act, the Truth in Lending Act (TILA), and Electronic Fund Transfer Act (EFTA) against tribes and tribal businesses. The AMG defendants have likewise previously claimed immunity from state legal proceedings, despite their tenuous connections to American Indian tribes.

But in a report and recommendation issued in July 2013, Magistrate Judge Ferenbach disagreed. Magistrate Judge Ferenbach found that payday lenders cannot avoid key federal consumer protection statutes simply by aligning themselves with American Indian tribes. He concluded that the FTC Act has “broad reach” and applies generally, giving the agency “the authority to bring suit against Indian Tribes, arms of Indian Tribes, and employees and contractors of arms of Indian Tribes.” The magistrate judge likewise found that the FTC has authority to bring its TILA and EFTA claims. The March 7, 2014 ruling by Judge Navarro affirms the magistrate judge’s findings.

The FTC alleged that the defendants violated the FTC Act by piling on undisclosed and inflated fees, and by threatening borrowers in debt collection calls with arrest and lawsuits. The FTC also alleged that the defendants violated TILA by giving inaccurate loan information to borrowers, and violated EFTA by requiring consumers to preauthorize electronic withdrawals from their bank accounts as a condition of obtaining credit. According to documents filed by the FTC, the defendants’ deceptive and illegal tactics generated thousands of complaints to law enforcement authorities. In many cases, the defendants’ inflated fees left borrowers with supposed debts of more than triple the amount they had borrowed.

The Federal Trade Commission reached a partial settlement on other issues last year with the principal AMG defendants. The settlement bars the settling defendants from using threats of arrest and lawsuits as a tactic for collecting debts, and from requiring all borrowers to agree in advance to electronic withdrawals from their bank accounts as a condition of obtaining credit. The FTC continues to litigate other charges against the AMG defendants, including allegations that they deceived consumers about the cost of their loans by charging undisclosed charges and inflated fees. In a separate decision issued on January 28, 2014, Magistrate Judge Ferenbach found that AMG’s loan documents were deceptive and violated the FTC Act and TILA. That ruling is now before District Judge Navarro.

FTC Staff Advises Massachusetts Department of Public Utilities On Dynamic Pricing Proposal for Residential Electricity Customers

The Federal Trade Commission staff submitted a comment in response to a request from the Commonwealth of Massachusetts Department of Public Utilities (Mass. DPU) for comments on its investigation of dynamic pricing for residential electricity customers. Dynamic prices are rates that vary over time, based on wholesale electricity prices and transmission congestion conditions.

According to the FTC staff comment, with dynamic pricing, customers who respond to incentives to trim demand for power during peak demand periods can save money, lessen environmental impacts, and reduce the costs and improve the reliability of the electric system. Such actions benefit all customers, even those who do not respond to the incentives.

The staff comment identifies fundamental difficulties in reconciling the “basic” rate-regulated service in Massachusetts with rapid innovations in services and equipment – such as “smart” appliances and electric cars – which enable customers to respond to incentives to reduce electricity consumption during peak demand. To reach this goal, the comment recommends that the Mass. DPU adopt a peak-time rebate plan similar to that adopted by Baltimore Gas & Electric once appropriate electric meters – and consumer education and consumer protection programs – are in place.

The staff comment urges the Mass. DPU “to guard against authorizing public consumer education programs that focus exclusively on the virtues of any distribution utility’s time-varying rates and may provide consumers with incomplete or misleading information about offers from competing marketers.” It also urges the Mass. DPU to “ensure that proper safeguards are in place with respect to the personal information that smart meters generate about customers and make available to marketers,” and that “distribution utilities inform their basic service customers that they are using their data for purposes of implementing time-varying rates.”

The Commission vote approving the comment was 4-0. (FTC File No. V140003; the staff contact is John H. Seesel, Associate General Counsel for Energy, Office of the General Counsel, 202-326-2702).

How To Submit Your Alternative Scoring Questions During FTC Workshop

The Federal Trade Commission is hosting a seminar on alternative scoring products in Washington, D.C., on March 19, 2014, and invites webcast viewers to submit questions online. Staff will live-tweet the seminar, and take questions via Twitter, Facebook, and email.

The seminar, which is part of the FTC’s spring privacy series, will take a closer look at the growing field of alternative scoring, in which companies use data about consumers to create scores designed to predict consumer behavior. Speakers and panelists will examine the privacy questions and possible benefits to consumers from these alternative scoring products.

The live webcast will begin at 10 a.m. EDT. Viewers can submit questions throughout the day via the following channels:

Twitter: Commission staff will tweet workshop highlights from the @FTC Twitter account and use the hashtag #FTCpriv.

Facebook: Post questions to the FTC’s Facebook page in the seminar status thread.

Email: Submit questions via email to [email protected].

Staff will do their best to answer as many questions from the audience and online during the seminar.

Note: The link for the webcast will be active five minutes before the seminar start time.

FTC Charges Arkansas Car Dealer with Not Displaying ‘Buyers Guides’

The Federal Trade Commission has charged an Arkansas auto dealer, Abernathy Motor Company, and its two principals, with failing to display a “Buyers Guide” on used vehicles offered for sale, as required by the FTC’s Used Car Rule. Each violation could result in a civil penalty of up to $16,000.

“Used car dealers are required to post a Buyers Guide providing warranty and other important information on the cars they offer for sale. That’s the law,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Consumers have a right to receive this information up-front to help them make an informed buying decision.”

The FTC’s Used Car Rule, which took effect in 1985 specifically requires used car dealers to disclose whether the car comes with a dealer’s warranty or is being sold “as is.” If the car is sold with a dealer’s warranty, the Rule requires the Buyers Guide to list its basic terms and conditions, including the duration of coverage, the percentage of total repair costs to be paid by the dealer, and the exact systems covered by the warranty.

In January 2013, the FTC announced that its Southwest Region Office had warned 11 used car dealerships in Jonesboro, Arkansas, that their sales practices violated the Used Car Rule. All but Abernathy Motor Company subsequently came into compliance.

Abernathy Motor Company has four used car sales locations in Arkansas: two in Blytheville, one in West Memphis, and one in Jonesboro. The FTC’s complaint also names the company’s owners, Wesley Abernathy and David Abernathy, and an affiliated dealership, Ab’s Best Buys AMC Inc., as defendants.

According to the complaint, the FTC visited the Abernathy dealership in Jonesboro in November 2012, and found that none of the vehicles offered for sale displayed a Buyers Guide. The agency informed the dealership of that fact, and sent the dealership a copy of the Guide and the FTC publication, A Dealer’s Guide to the Used Car Rule. In May 2013, the FTC re-visited the Abernathy dealership, and visited Ab’s Best Buys AMC Inc., and found both dealerships were offering used vehicles for sale that did not display a Buyers Guide.

The FTC appreciates the assistance of Legal Aid of Arkansas in this matter.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Arkansas, Jonesboro Division.

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