Costly Fines and Penalties for
Alleged Advertising Law Violations

Summary

Advertising agencies, advertisers and their attorneys have been amazed by the growing size of costly fines and penalties assessed in Federal Trade Commission (FTC) and Court decisions in recent years. Recent Advertising Compliance ServiceÔ issues have analyzed these decisions offering practical, compliance-oriented analysis and commentary. As these decisions illustrate, ignorance of the fast-paced developments in advertising law can be a very costly proposition. Remember: In each one of these cases, someone had to answer why their--or their client's--advertising copy failed to comply with advertising law's countless requirements. Here are just a few examples of such cases examined in recent issues of Advertising Compliance ServiceÔ:

1. 11th Circuit Affirms Ruling: Magazine Seller to Pay Over $7 Million

On October 22, 2007, the Eleventh Circuit Court of Appeals affirmed a lower court judgment ordering a magazine subscription seller to pay a civil penalty of over $5.4 million and give up over $1.6 million of allegedly ill-gotten gains for violating a 1996 FTC consent order and FTC's Telemarketing Sales Rule.

(See Advertising Compliance Service, Issue #631, December 3, 2007.)

2. Law Enforcement Crackdown Results in Six Settlements Imposing Nearly $7.7 Million In Civil Penalties

On November 7, 2007, FTC announced a law enforcement crackdown on companies and individuals accused of violating the requirements of the National Do Not Call (DNC) Registry. This action resulted in six settlements collectively imposing nearly $7.7 million in civil penalties, along with an additional complaint that will be filed in federal district court.

(See Advertising Compliance Service, Issue #631, December 3, 2007.)

3. FTC Settlement in Business Opportunity Case Contains Suspended Judgment of $1,633,953

A company and its owner agreed to settle charges that they misled consumers into paying thousands of dollars for a venture they claimed would generate substantial earnings, without providing legally required substantiation for their claims. The settlement contains a suspended judgment of $1,633,953. Based on Porter's financial condition, the order requires him to pay $5,000. Neverhteless, the full judgment will be imposed if he's found to have misrepresented his financial condition.

(See Advertising Compliance Service, Issue #630, November 19, 2007.)

4. FTC: Program Downloaded Spyware, Adware, Pop-ups To Computers - Consent Order Contains Suspended Judgment of $3.6 Million

According to FTC, operators infected over 15 million computers with destructive, intrusive spyware. These operators agreed to give up $330,000 in allegedly ill-gotten gains from their venture to settle FTC charges that their operation violated federal law. Under the settlement, defendants agreed to give up $330,000 in allegedly ill-gotten gains. However, if the court finds that defendants misrepresented their financial status, $3,595,925--the total revenues from their operation--will be due.

(See Advertising Compliance Service, Issue #628, October 15, 2007.)

5. Company and Owner Banned from Selling Work at Home Opportunities: They Agree to Return $287,500 to Consumers

FTC accused a company and its owner of "tricking" consumers into paying for an envelope-stuffing business opportunity. FTC recently banned them from selling work-at-home business opportunities again. FTC alleged that they falsely promised that they would pay consumers $7 per envelope stuffed and that consumers would earn a substantial income. The operation agreed to pay $287,500 to settle FTC's charges.

(See Advertising Compliance Service, Issue #628, October 15, 2007.)

6. FTC Consent Agreement Involved Software That Spawned Pop-up Messages - Defendants Agree to Pay $501,367.95 and to Suspended Judgment of $1,801,015.16

An operation downloaded onto consumers' computers software that spawned pop-up messages claiming consumers had signed up for a "free trial" that had expired, and demanding payment to make the messages go away. Operators of the movieland.com, moviepass.tv, and popcorn.net websites recently settled FTC charges that its practices violated federal law. Under the consent agreement, defendants agreed to--

• provide a way for consumers to remove the software,
• stop future downloads without consumers' consent, and
• pay over $500,000 for consumer redress.

Under the settlement, the defendants agreed to pay $501,367.95 for consumer redress. If the court later finds that defendants misrepresented financial information, the settlement calls for the court to enter a judgment of $1,801,015.16. Defendants agreed to provide FTC with a database of consumers eligible for redress so eligible consumers do not need to contact FTC to receive redress.

(See Advertising Compliance Service, Issue #627, October 1, 2007.)

[For more eaamples of costly fines and penalties, see More Examples of Costly Penalties and Fines for Alleged Advertising Law Violations.]

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