State Attorney General, Federal Agency and Other Consumer Protection News
Multistate Actions
Led by Wisconsin Attorney General Joshua Kaul, a bipartisan coalition of forty-two attorneys general announced a $102.5 million settlement with Indivior, Inc. for alleged illegal monopoly tactics in connection with the drug Suboxone, a drug used to treat opioid use disorder. The states’ complaint, filed in 2016, alleges Indivior used illegal means to switch the Suboxone market from tablets to film while attempting to destroy the market for tablets in order to preserve its drug monopoly. In addition to the payment, the settlement requires Indivior to disclose to the states all citizen petitions to the FDA, introduction of new products, and any change in corporate control.
A bipartisan group of 22 attorneys general announced multi-billion dollar settlements with two drug makers and two pharmacies for their alleged role in the opioid epidemic. The final agreements with the attorneys general will require manufacturers Teva to stop all opioid marketing and ensure systems are in place to prevent drug misuse, and Allergan to stop selling opioids for the next 10 years. Pharmacies CVS and Walgreens are required to monitor, report and share data about suspicious opioid prescriptions. The combined value of the settlements is $17.3 billion.
Led by the Attorneys General of the District of Columbia, Pennsylvania, and Texas, a bipartisan coalition of thirty attorneys general announced a $2.35 million multistate settlement with online underwear retailer Adore Me over alleged deceptive advertising and billing. The settlement alleges that Adore Me failed to disclose to consumers the terms of its VIP Membership program and the actual amount of the monthly charge made consumers believe that the discounted prices were time-limited, made it difficult for consumers to cancel their memberships, and wrongly removed membership store credits when consumers were finally able to cancel. Under the Assurance of Voluntary Compliance, Adore Me is required to notify all consumers with outstanding balances about their ability to obtain a refund of any unused store credits.
Led by Florida Attorney General Ashley Moody, sixteen attorneys general sent a letter to the Electric Drive Transportation Association and the Zero Emission Transportation Association demanding that new car manufacturers continue to include AM radios in their cars. AM radios protect drivers in emergency situations. In addition to emergency management, AM radio stations provide Americans free non-emergency information, especially in rural areas. According to the National Association of Broadcasters, approximately forty-seven million Americans listen to AM radio on a weekly basis as a source for entertainment, weather reports, and political commentary. This information is particularly necessary in rural America where other sources of this information are often sparse and unreliable. According to the letter, attorneys general fear the impact of this removal on AM stations and also are concerned with the impact losing these emergency resources will have on consumers.
Led by New York Attorney General Letitia James and Pennsylvania Attorney General Michelle Henry, a bipartisan group of twenty-six attorneys general filed comments in support of the Federal Trade Commission’s efforts to facilitate the cancellation of unwanted consumer subscriptions and memberships. In the comments, the attorneys general also offered suggestions to further enhance consumer protection, including amendments to the existing Negative Option Rule. Those amendments would provide more protection to consumers, defining terms at enrollment, allowing easy and immediate cancellation options, and reminding consumers of upcoming charges.
Six attorneys general and the Federal Trade Commission (FTC) challenged the $28 billion Horizon Therapeutics/Amgen Inc. merger. The attorneys general filed an amended complaint joining the FTC in requesting a temporary restraining order and preliminary injunction blocking Amgen from completing the purchase of Horizon. The states and the FTC alleged the merger violates the Clayton Act. According to the attorneys general, the merger would allow Amgen to monopolize the market for certain crucial medications and reduce affordability, access, and choice of drugs for consumers.
Led by California Attorney General Rob Bonta, a coalition of twenty-one attorneys general submitted a comment letter to the United States Department of Education supporting the department’s new “gainful employment” rule. In the letter, the attorneys general urge the department to support additional protections for students of colleges that operate in multiple states by expanding and clarifying that schools offering online programs must comply with state consumer protection laws in all states their programs are offered, not just those where the institutions reside.
Led by the Attorneys General of Colorado, Connecticut, Tennessee, and Virginia, a bipartisan collation of twenty-two attorneys general submitted comments to the National Telecommunications and Information Administration (NTIA). In the comments, the attorneys general urged the National Telecommunications and Information Administration to advance artificial intelligence governance polices that prioritize robust transparency, reliable testing and assessment requirements, and allow for government oversight and enforcement for high-risk uses. The attorneys general also recommended that the NTIA consider a risk-based approach that recognizes that some AI uses may require greater oversight, like when AI is used to make decisions that result in legal implications.
Led by Utah Attorney General Sean Reyes, twelve attorneys general filed an amicus brief in support of drug manufacturer Illumina who is challenging the FTC’s efforts to block its merger with Grail Inc. In the brief, the attorneys general allege that the FTC’s structure limiting removal of the Commissioners for cause violates the removal clause which gives the President authority to remove certain executive department heads without cause. The brief further alleges that the statute granting the FTC discretion regarding whether to file lawsuits in court or administratively was an impermissible and unconstitutional delegation of authority by Congress. The attorneys general also expressed their fears that blocking this merger could harm the development of life-saving technology.
Led by Pennsylvania Attorney General Michelle Henry, a bipartisan coalition of twenty-nine states submitted a comment letter to the Federal Communications Commission (FCC) urging them to clarify their rules concerning consent for telemarketing robocalls. The amendment on which the FCC is seeking comment adds language to the existing rule to allow consumers to consent to robocalls and texts from multiple entities, provided the entities are “logically and topically associated” and are all listed on the webpage where the consumer provides consent. In the letter, the attorneys general contend that this amendment could create more ambiguity and that single seller-to-individual consumer language would be more effective.
Individual Attorney General Actions
Alaska Attorney General Treg Taylor announced a $45,000 settlement with Simple Save Protection LLC. Simple Save, a Missouri company that marketed vehicle service contracts on behalf of other companies, allegedly sent hundreds of deceptive mailers to Alaskans that were designed to make the recipients believe that they were being contacted by their vehicle’s manufacturer or dealer. The settlement alleged these vehicle service contracts were purchased only because consumers believed they were buying from a company with whom they already had a relationship.
Arizona Attorney General Kris Mayes announced the conviction of Bradley Tennison, a former financial advisor, and Fredrick Arias, a retired Department of Public Safety officer. Allegedly creating a fake “Christian” organization, The Joseph Project, Arias and Tennison offered risk-free investments with guaranteed rates of return and the promise of contributing to humanitarian projects, however, the funds were allegedly not being used as represented and were actually being transferred to their own personal accounts instead. Both Arias and Tennison were indicted on nineteen felony counts in June of 2019. While Tennison has been convicted and ordered to pay restitution exceeding $9 million, Arias evaded capture and a warrant still remains active for his apprehension.
Connecticut Attorney General William Tong announced a consumer protection investigation into Hyundai and Kia regarding the lack of anti-theft technology in some of their vehicles. The companies allegedly failed to equip their vehicles with industry standard anti-theft technology, which is now causing an uptick in theft of these specific vehicles. These thefts have frequently been accompanied by reckless driving and further criminal activity, causing both injuries and deaths across the country. Earlier this year, a coalition of attorneys general urged the companies to address these safety concerns.
District of Columbia Attorney General Brian Schwalb announced that SmileDirectClub will be required to release more than 17,000 consumers from restrictive nondisclosure agreements (NDAs) and change its refund policy. The attorney general’s office sued SmileDirectClub, an online orthodontics company in 2022, alleging that SmileDirect used NDAs to silence consumer reviews, manipulated reviews, hid information about its products’ safety and effectiveness, as well as other unfair and deceptive practices. Under the settlement agreement, SmileDirectClub is required to notify consumers who previously signed NDAs that they are now allowed to post reviews about their experiences, stop requiring consumers to sign agreements that prevent the sharing of information before providing refunds, and pay $500,000 to the District of Columbia.
Minnesota Attorney General Keith Ellison filed a lawsuit against Reynolds Consumer Products, Inc. and Walmart for allegedly defrauding and deceiving Minnesota consumers through their marketing of Hefty “recycling” bags. According to the complaint, these bags are not recyclable in Minnesota and make all materials placed within them unrecyclable, even items that would otherwise be recyclable. All recyclable items that consumers placed in these bags end up at a landfill, contrary to intentions. The complaint alleges that Reynolds and Walmart actively lied to consumers and profited at the expense of the environment and the recycling industry, specifically selling these bags making it seem that their products would help with recycling efforts.
New Jersey Attorney General Matthew J. Platkin and the state Department of Banking and Insurance Commissioner filed a lawsuit against MV Realty for allegedly misleading consumers. The complaint alleges that MV Realty deceived customers and made misrepresentations regarding its “Homeowner Benefit Program.” MV Realty allegedly marketed this program to consumers as a low-risk opportunity to obtain quick cash, between $300 and $5,000 in payment upfront, whereas in reality, it operated as a high-interest mortgage loan that gives MV Realty the right to list a property for 40 years, and which survives the death of the consumer. MV Realty allegedly used deceptive practices to take advantage of homeowners by misleading them into agreements with the promise of free money, all while really profiting by collecting fees from consumers who accidentally or unknowingly breach the agreement terms.
New York Attorney General Letitia James announced a $1.7 million settlement with COINEX for allegedly failing to register as a securities and commodities broker-dealer and for falsely representing itself as a crypto exchange. The settlement resolves allegations in the lawsuit filed earlier this year, and requires the company to refund thousands of New York investors more than $1.1 million and pay more than $600,000 in penalties to the state. COINEX’s platform is banned from offering, selling, or purchasing securities and commodities in New York. COINEX also officially announced that it would withdraw its platform and services from the United States.
Attorney General James also announced a $6.9 million settlement from Bayer and Monsanto for allegedly falsely advertising and marketing Roundup® weedkillers. According to the settlement, Bayer and Monsanto allegedly claimed in advertising that weedkillers containing the active ingredient glyphosate were safe and non-toxic without sufficient evidence. These claims allegedly violated state false and misleading advertising laws and breached a previous settlement the OAG reached with Monsanto in 1996, where Monsanto committed to stop making unsupported statements regarding the safety of products with glyphosate. The settlement requires Bayer and Monsanto to immediately remove any advertisements that represent glyphosate products as safe, non-toxic, harmless, or free from risk to pollinators and other wildlife. Bayer and Monsanto must also direct distributors and retailers to stop using marketing materials that include these allegedly false representations.
New Hampshire Attorney General John Formella filed a lawsuit against the lead abatement contractor for PHX Remodeling LLC for thirteen violations of the New Hampshire Consumer Protection Act. The complaint alleges that the lead contractor violated the Act on thirteen separate occasions when he, on PHX Remodeling’s behalf, entered into contracts for home improvement, and after taking deposits, performing little or no work, and not refunding. He is alleged to have collectively deprived consumers of $100,328. The state is seeking restitution for all affected consumers and $130,000 in civil penalties, as well as seeking preliminary and permanent relief enjoining him from owning or operating any construction business in New Hampshire.
Pennsylvania Attorney General Michelle Henry announced three settlements with American Automotive Alliance, LLC, AM Protection, Inc., and Mammoth Marketing Group, LLC, three telemarketers that allegedly violated Pennsylvania’s “Do-Not-Call” law and contacted people on the no-call list. The telemarketers allegedly engaged in both auto warranty marketing calls as well as calls marketing Medicare benefits to the elderly. As part of the terms of the settlements, all three companies are required to comply with the Pennsylvania Telemarketer Registration Act, including not calling residents with phone numbers on the “Do-Not-Call” list, and pay a fine totaling more than $90,000.
Rhode Island Attorney General Peter Neronha filed a lawsuit against solar company Smart Green for alleged deceptive practices. The complaint alleges that Smart Green engaged in a pattern of deceptive and unfair trade practices as they went door-to-door, making unsolicited sales pitches for residential solar panel systems. The complaint requests a court order requiring Smart Green to stop misleading customers, provide paper contracts to customers immediately, and pay restitution to injured customers.
Attorney General Neronha also filed a lawsuit against Pioneer Investments, LLC, a residential rental corporation, for allegedly failing to comply with numerous state rental, lead hazard, and consumer protection laws. According to the complaint, tenants affirmed the presence of significant lead poisoning hazards, persistent rodent infestations, deterioration of the building structure, cracking walls and windows, and intermittent loss of water and heat in numerous Pioneer properties. The complaint requests disgorgement, restitution to tenants, and fines and penalties.
Federal Consumer Protection News
Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) filed an enforcement action against Phoenix Financial Services, a medical debt collector. According to the CFPB’s investigation, Phoenix allegedly sent unlawful collection letters to consumers who had disputed the validity or accuracy of their purported debts, even though Phoenix had not obtained substantiation for the debts. The order requires Phoenix to stop unlawful collection and credit reporting practices, cooperate with additional CFPB supervisory reviews, refund monies consumers paid on an unverified debt, and pay $1.675 million to the CFPB victims relief fund.
The CFPB also issued a notice to consumers advising them that monies stored on payment applications may not actually be federal insured. According to the report, funds stored on apps like PayPal, Venmo, and Cash App, which allow consumers to make peer-to-peer or commercial transactions quickly, may not have federal deposit insurance coverage.
Federal Trade Commission
The Federal Trade Commission (FTC) filed a complaint against Amazon, alleging that Amazon has spent the last several years enrolling consumers into its Prime subscription program without their consent while knowingly making it difficult for consumers to cancel their subscriptions. According to the complaint, Amazon allegedly used manipulative user-interface designs known as “dark patterns” to deceive consumers into re- or auto-enrolling in Prime subscriptions.
The United States Department of Justice on behalf of the FTC, filed a proposed order requiring Microsoft to take additional steps to strengthen privacy protections for child users. According to the complaint, Microsoft allegedly violated the Children’s Online Privacy Protection Act (COPPA) by collecting personal information from children who signed up on an Xbox gaming system without obtaining their parents’ consent, or even notifying their parents. As part of the proposed order, COPPA protections will extend to third-party gaming publishers with whom Microsoft shares children’s data, as well as to avatars generated from a child’s image, and biometric and health information.
The FTC sent payments totaling more than $3.3 million to consumers who were harmed by Arete Financial Group. Arete is a student loan debt relief operation that allegedly tricked consumers into making illegal upfront payments by pretending to be affiliated with the U.S. Department of Education and falsely promising student loan debt relief. In 2019, the FTC alleged Arete Financial and several related companies pretended to be affiliated with the U.S. Department of Education and used radio, television, online ads, and telemarketing calls to promise to enroll consumers in student loan forgiveness, consolidation, and repayment programs.
At the FTC’s request, a Florida court issued an order banning Frank Romero from selling protective goods or services. According to the FTC’s complaint, Romero allegedly preyed upon COVID fears by advertising available PPE that could be quickly delivered when in reality he failed to deliver on time and refused to offer refunds. Romero also would send supplies of inferior quality, violating the Mail Order Rule, the FTC Act, and the COVID-19 Consumer Protection Act. The order also includes two monetary judgments, one for $900,000 and one for $2,000.
Following an enforcement action by the FTC, a federal court has entered a temporary restraining order against Ganadores Online. According to the complaint, Ganadores allegedly targeted Spanish-speaking consumers with false money-making pitches for online businesses and real estate investments. The temporary restraining order prohibits Ganadores from making unfounded marketing claims, violating the Business Opportunity Rule and Cooling Off Rule, and from editing consumers’ reviews.
The FTC sent letters to online marketplaces nationwide notifying them about their obligation to comply with the new Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (INFORM Consumers Act), which took effect on June 27. Under the INFORM Consumers Act, online marketplaces must collect more information about who is selling on their platform. Consumers who buy from covered sellers will have a place to report questionable activity.
In Other Federal News
The Commodity Futures Trading Commission (CFTC) filed a civil enforcement action against Dunwen Zhu and his company, Justby International Auctions (Justby). The complaint alleges that Justby fraudulently misappropriated over $1.3 million intended for digital asset commodity and forex trading from at least twenty-nine customers. Justby allegedly operated a type of romance fraud, referred to as a “Pig Butchering” scheme in which fraudsters cultivate a relationship with a potential customer, fatten them up with compliments and lies, and then solicit them to invest in a fake opportunity.
The Federal Communications Commission (FCC) proposed new rules to strengthen consumers’ ability to revoke consent to receive both robocalls and robotexts. The FCC proposed codifying and strengthening the consumers’ right to revoke consent to receive robocalls and robotexts in any reasonable manner by both text message, voicemail, or email to any telephone number or email address at which the consumer can reasonably expect to reach the caller. This Notice of Proposed Rulemaking also designates an exclusive means to revoke consent that precludes the use of any reasonable method.
The Food and Drug Administration (FDA) issued warning letters to 189 retailers for selling unauthorized tobacco products, specifically Elf Bar and Esco Bars products. According to the agency’s ongoing surveillance efforts, Elf Bar and Esco Bars are among the most popular brands in the United States, which also have high youth appeal. Both brands are disposable e-cigarettes that come in flavors such as bubblegum and cotton candy. According to a recent study published by the Centers for Disease Control and Prevention (CDC), Elf Bar was the most popular disposable e-cigarette sold in the U.S. in December 2022. In another study published by the CDC, in thousands of e-cigarette exposure cases reported (most of which were among children younger than 5 years), Elf Bar was cited more than all other brands combined. From April 2022 to March 2023, nearly all Elf Bar exposure cases occurred among children younger than 5 years old.
The Securities and Exchange Commission (SEC), joined by securities regulators from 10 states, charged Coinbase, Inc. with operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency. The SEC also charged Coinbase for failing to register the offer and sale of its crypto asset staking-as-a-service program. The complaint alleges that since at least 2019, Coinbase has made billions illegally enabling the buying and selling of crypto asset securities. Coinbase allegedly intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions as is required.
The United States Department of Justice secured a conviction against Patrice Runner, a Canadian man who allegedly preyed upon the elderly in a mass-mailing fraud scheme. Runner operated the scheme from 1994 to 2014, sending letters to millions of U.S. consumers, many of whom were elderly and vulnerable. The letters falsely purported to be from psychics and promised that the recipient would receive wealth and happiness in exchange for a fee. Once a victim made a payment, they were then flooded with additional letters offering additional services and items. Runner was convicted of conspiracy to commit mail and wire fraud, four counts of wire fraud, and conspiracy to commit money laundering.
After an investigation by Customs Border Patrol, Homeland Security, Defense Criminal Investigative Service, Naval Criminal Investigative Service and GSA Office of Inspector General, Onur Aksoy plead guilty to running an extensive operation over many years trafficking in fraudulent and counterfeit Cisco networking equipment. Aksoy ran at least nineteen companies as well as fifteen Amazon storefronts and at least ten eBay storefronts that imported from suppliers in China and Hong Kong tens of thousands of low-quality, modified computer networking devices with counterfeit Cisco labels, stickers, boxes, documentation, and packaging, generating over $100 million in revenue. Hospitals, schools, and government agencies were all customers of these counterfeit devices. Aksoy must forfeit $15 million in illicit gains from his scheme and make full restitution to his victims.
Charities News
Florida Attorney General Ashley Moody announced charges against the owner of Rayfield School of Excellence, a nonprofit organization participating in a state-funded program, for allegedly stealing $2.8 million. The owner is charged with overbilling the State of Florida and allegedly defrauding taxpayers in a scheme that involved lying about feeding children in need. The nonprofit provides meals during the summer months to children on assistance. They allegedly inflated the number of meals, defrauding the state.
Minnesota Attorney General Keith Ellison announced an Assurance of Discontinuance enjoining a physician and his practice from soliciting contributions for a nonprofit charity that did not exist. The assurance alleges that Dr. Sean O’Mara falsely claimed on his website that fees paid to his clinic benefited charity and were tax-deductible since they were going to a nonprofit, however no nonprofit actually existed. He also allegedly promised to donate all fees to charity if a customer was not satisfied, but there was never such a charity.
New Jersey Attorney General Matthew Platkin announced a $76,624 settlement with the National Police Relief Association (NPRA). According to the 2021 complaint, the NPRA allegedly used charitable donations to make undisclosed salary payments to board members and pay board expenses. They also allegedly misused charitable funds and lied to the public about the use of their charitable funds. The consent judgment requires payment of $40,000 to a registered charity that provides resources to help the families of fallen law enforcement officers rebuild their lives after a line of duty death. It also requires dissolution of NPRA.
Ohio Attorney General Dave Yost announced a $131,000 settlement with the Ohio Clean Water Fund (OCWF). The OCWF was a sham charity which claimed to be raising funds to provide bottled water and emergency aid to the residents of East Palestine after the train derailment earlier this year. Under the settlement agreement, the OCWF must pay $131,904.88, including $116,904.88 in restitution and $15,000 in civil penalties. It also requires dissolution of OCWF.
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