On Friday, the FTC announced what would normally be a no-nonsense enforcement action against a company for unsubstantiated profit claims. The FTC alleges that WealthPress, an investment advisory company that purported to offer expert training in trading strategies, made a series of unsubstantiated earnings claims such as “earning $24,840 or more every week”, “tracking the BIG amount of money” , and the opportunity can “literally transform your life.”

The case marks two important firsts for advertisers offering products or services through auto-renewing terms and for businesses making claims to make money or using sponsorships and testimonials. Specifically, the action marks the first time the FTC has obtained Civil Penalties under the Restoring Confidence of Online Shoppers Act (ROSCA). The FTC also made good on its promise to refer cases to its Criminal Violation Authority, marking the first time the FTC has obtained civil penalties from a recipient of its Criminal Violation Notice for lucrative claims.

Civil Penalties for Misrepresentations Related to the Automatic Renewal Terms under ROSCA

The FTC previously laid the groundwork for the ROSCA count against WealthPress in its 2021 action against MoviePass, which we discuss here. In that case, the FTC alleged that MoviePass violated ROSCA by misleadingly advertising that its passes offered “one movie per day” and then preventing subscribers from using the service as advertised. While that settlement did not include civil penalties, then-Commissioner Phillips dissented, arguing that ROSCA could not be fairly construed as addressing some complaint about the characteristics of a product/service subject to an automatic renewal period. Instead, ROSCA authorizes civil penalties for failure to clearly and conspicuously disclose “all material terms or the transaction” before obtaining the express informed consent of a consumer to the offer of negative option.

That tension is present in the WealthPress case, too: Commissioner Wilson issued a concurring statement on the 4-0 vote (Commissioner Phillips' space above remains open) stating that she supports “the inclusion of a ROSCA recount in this complaint under the very specific circumstances presented here”. Commissioner Wilson goes on to explain that the defendant made the misleading claims “part of the terms of sale” by including a profitability disclosure in the Terms and Conditions that consumers agreed to at the time of purchase. She points out that “[i]Information of this type that appears in another format, however, can be seen more appropriately as a claim about the good or service and not as a term of the transaction”, which would leave it outside the scope of ROSCA.

Other commissioners appear to be less aware of that distinction, so any advertiser offering an automatic renewal feature could be at risk of civil penalties for alleged misrepresentations if the misrepresentation is found by the FTC to be part of the “material terms of transaction.” “.

Civil Penalties Under the Authority of Penalty Offenses

While the FTC has filed many actions related to earnings and opportunity claims (including one in November that explicitly references Penalty Violation Notices), the WealthPress case marks the first time the FTC has obtained civil penalties against an advertiser after of receiving your Notice of Penalty Violation. for lucrative claims.

Many of the claims identified in the complaint are quintessential examples of aggressive claims that are likely to garner regulatory scrutiny, while others are more mundane, such as “we give you everything you need, and if you're a beginner, no problem.” The FTC also notes that the disclaimers in the Terms and Conditions (for example, “Past performance of any trading system or methodology is not necessarily indicative of future results”) failed to qualify aggressive earnings claims made elsewhere.

In addition to Criminal Violation Notices related to money-making claims, the FTC has issued notices related to Endorsements and Testimonials and For-Profit Educational Institutions, which may be the next target of civil penalties under the Criminal Violations Authority.