Consumer protection authority has long been a staple of the Federal Trade Commission’s (FTC) enforcement of the FTC Act, beginning with the 1938 Wheeler-Lea amendments to the agency’s establishing statute. And Congress drew an express connection between the FTC’s competition and consumer protection authorities with the introduction of Section 5(n) of the FTC Act, which stipulates that:
[t]he Commission shall have no authority under this section or section 57a of this title to declare unlawful an act or practice on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.
This authority is not so far from my competition expertise, such as it is. Not a little of my research—and competition advocacy—has focused on the competitive impact of certain consumer protection regulations. There were, for example, this FTC staff policy paper (co-authored with Tara Koslov) and, more recently, this paper on the law & economics of privacy (co-authored with Liad Wagman), which grew out of work we began together at the FTC.
These sorts of things dovetail with the agencies’ long history of competition R&D, including advocacy work, and the recently announced initiatives on anticompetitive regulations by the FTC and the U.S. Justice Department (DOJ)—positive initiatives, as I discussed here in April. For more extensive comments, see these, which were submitted to both agencies by Eric Fruits, Ben Sperry, Kristian Stout, Mario Zúñiga, and myself, on behalf of the International Center for Law & Economics (ICLE).
So what’s new in consumer protection? On June 10, the FTC announced a proposed order that, if approved by a federal court (as expected), will resolve the commission’s January 2025 complaint against Evoke Wellness. There, the FTC alleged that Evoke Wellness (and Evoke Healthcare Management, Jonathan Moseley, and James Hull) used deceptive advertising and marketing practices to lure consumers to their substance-abuse treatment clinics, in violation of Sections 5(a) and 12 of the FTC Act and Section 8023 of the Opioid Addiction Recovery Fraud Prevention Act of 2018.
I’ve not studied the underlying evidence, but accepting the allegations as true, the conduct at-issue seems plainly a species of fraud—essentially attempts (often successful) to hijack substance-abuse patients interested in other established treatment clinics—thereby confounding the search efforts of vulnerable consumers and free-riding off the reputational assets of third-party treatment facilities. The proposed order would bring a halt to such fraudulent practices, and its provisions seem to pose little—if any—risk to legitimate, procompetitive conduct.
A few weeks prior, on May 22, the FTC announced that:
operators of an alleged transnational student loan debt relief scam have agreed to be permanently banned from the debt relief industry and to turn over more than $1 million in assets to resolve Federal Trade Commission charges that the operation bilked millions out of struggling student loan borrowers.
There can, of course, be close or contentious questions in Section 5 deception cases, which may turn on fine issues of interpretation; the overall impression of an ad (perhaps for some consumers but not for others); or the proper calibration of substantiation requirements, such that the agency does not unduly chill the dissemination of truthful and non-misleading information that may be useful to consumers and competition, as well as firms marketing legitimate goods and services.
But there’s no sign of close or contentious issues in the debt-relief scam. According to the FTC, the defendants:
- pretended to be affiliated with the U.S. Education Department and its loan servicers to lure student-loan borrowers seeking debt relief;
- made false promises of low, permanently fixed monthly payments and complete loan forgiveness;
- illegally called tens of thousands of consumers on the Do Not Call Registry;
- extracted more than $7.3 million in illegal advance fees and payments for nonexistent debt-relief services; and
- promoted fake consumer reviews and testimonials on social media and their website.
In addition, it was alleged that:
The defendants falsely promised to apply consumers’ monthly payments to their loan balances, but in reality, they pocketed borrowers’ hard-earned money and sent much of the funds to their call center in Colombia.
Such bald-faced scams may seem uninteresting to those who seek creative extensions of the commission’s Section 5 authority. On the other hand, novelty is not a measure of harm; and fraud is no less damaging for being prosaic. Here, it seems that millions of consumers were harmed, and nothing in the initial complaint or the proposed order seems to impinge on legitimate procompetitive marketing practices in the debt-relief industry—or, for that matter, in any other industry.
Again, it seems that fraudulent conduct was efficiently addressed, and the fraudsters sent packing, with a complaint filed in July 2024, and a proposed order submitted to federal court in Florida less than one year later.
So, a couple of tips of the hat to a unanimous commission, Bureau of Consumer Protection Director Chris Mufarrige, and, of course, the staff (who do the actual work).
Likely salutary as well—if a bit fuzzy—is another consumer protection matter that caught my eye: the FTC’s June 3 announcement of warning letters regarding possible violations of the FTC’s Contact Lens Rule. (See what I did there? Do you envision a way for me to stop?)
Yes, prescribers ought to comply with the prescription-release requirement of the Contact Lens Rule. And the warning letters seem a measured response to potential—but not established—violations. What’s fuzzy about that? Bear with me a bit, and I’ll get there.
The twin missions of the FTC are often said to be complements, with the FTC’s competition authority working to protect competition itself (alongside antitrust enforcement by DOJ and others) and its consumer protection authority protecting consumers’ access to the fruits of competition. The extent to which they actually function as complements depends on their implementation by the FTC and the courts. But in broad strokes, their potential for mutual reinforcement, in the service of consumer welfare, seems clear enough. See, for example, former Commissioner and Acting Chairman Maureen Ohlhausen, writing with Alexander Okuliar here, and former FTC Chairman Timothy Muris here. As Muris put it:
The FTC’s consumer protection and competition missions naturally complement each other by protecting consumers from fraud or deception without restricting their market choices or their ability to obtain truthful information about products or services.
Not incidentally, the FTC has sought to pursue such complementarity in more than six decades of research, advocacy, rulemaking, and enforcement focused on (sorry) optical goods, with the commission issuing nonbinding guidelines for the industry as early as 1962. A substantial staff investigation begun in 1975 led to a 1977 report on the “Advertising of Ophthalmic Goods and Services and Proposed Trade Regulation Rule.” That led, in turn, to the FTC’s promulgation of the Eyeglass Rule in 1978 (and most recently amended in 2024).
FTC staff had found numerous impediments to competition in retail sales of eyeglasses. Among other things, they observed that many prescribers—especially optometrists—resisted providing their patients with eyeglass prescriptions that could be filled by other lawful providers of optical goods. Widespread practices included the following:
- Outright refusal to release prescriptions or refusal to conduct the examination unless the patient agrees to purchase eyeglasses at the time;
- Charging an additional fee as a condition of releasing the prescription; and
- Conditioning release of the prescription on signing a release or waiver of liability by the patient.
Prices for glasses varied as much as 300%, but without prescriptions, consumers could not effectively comparison shop for the glasses that met their needs. Retailers, in turn, had little incentive to compete on price when so many consumers had no prescription to be filled by anyone other than the prescribing optometrist. To address the logjam, the Eyeglass Rule required—and still requires—optometrists (and other prescribers) to provide their patients—immediately after completion of an eye examination—a free copy of their eyeglass prescription.
Market developments, consumer complaints, and ongoing inquiries were important inputs to Congress, which enacted the Fairness to Contact Lens Consumers Act (FCLCA) in 2003. The FCLCA charged the FTC with, among other things, adopting a prescription-release rule for contact lenses. Hence, we saw the FTC adopt the Contact Lens Rule (CLR), implementing the FCLCA, in 2004.
A standard 10-year review led to amendments in 2020 that addressed a problem with the 2004 rule: it was hard to enforce. It was especially hard to enforce given the resources available for enforcement (it turns out that Congress sometimes assigns duties, but not dollars). There was evidence that many prescribers were not complying with the CLR. Some may have been unaware of the CLR, while others may have been uncowed by the risk of enforcement. As it happens, the FTC had brought zero cases to enforce the prescription-release requirement in the first 15 years of its existence. And so, the commission adopted a record-keeping requirement that was supposed to facilitate enforcement.
Has it done so? I don’t know. I haven’t seen a case, although it’s possible that I missed one, or that one’s in the works.
Part of what the staff wrestled with in designing the 2020 amendments was the question of regulatory efficiency. There seemed to be ongoing consumer harms to be addressed by regulation (and regulatory enforcement), but one wanted (we wanted) to address such harms with an intervention less costly than the harms themselves. And while there’s a direct statutory charge for the FTC to adopt and enforce the CLR, both the CLR and the FCLCA have their roots in the Eyeglass Rule, which is a rule prohibiting unfair practices in the industry.
In that regard, we’re reminded of the very sensible (and competition-relevant) constraints of Section 5(n) of the FTC Act. Heaping large record-keeping costs on the entire industry—including large numbers of law-abiding prescribers—might, in the end, impose more costs on consumers than it mitigates, even if it leads to a few successful enforcement cases. And the competitive benefits of the rule might themselves be diminished, to the extent that developments in e-commerce and big-box retailing may have improved retail competition independently.
Was the light worth the candle? Perhaps, but that’s the fuzzy part. A wholesale lack of enforcement makes it hard to study the costs and benefits of regulation. It’s hard to know the costs and benefits of the original CLR, and hard to know the costs and benefits of the record-keeping amendment that was adopted in 2020. It may be possible, of course, to study the effect of including a certain text string representing the regulatory provision in Code of Federal Regulations. That’s not all bad: without more, enforcement costs are kept to a minimum and error costs associated with false positives ought to be nil. So, not all bad, but maybe not much in the way of law enforcement or consumer protection either.
Warning letters might help, but we’ve been here before. In 2016, the FTC sent some 45 warning letters to contact-lens prescribers; and in 2023 the FTC sent 24 cease-and-desist letters to prescribers about noncompliance with the CLR. So, the new letters are by no means the only letters. But I’m left wondering about the apparently measured warning-letter response. Measured against what?
By the way, it’s not quite true that the FTC’s CLR enforcement has been entirely epistolary. Other provisions of the CLR require, for example, that contact lenses be sold only pursuant to a valid prescription. And there has been some enforcement of that provision. Here and here, for example. But that central prescription-release requirement? Nada?
One more thing. This one gives me pause, and that’s putting it mildly. On June 9, the FTC announced that it will hold a July 9 workshop titled “The Dangers of ‘Gender-Affirming Care’ for Minors,” as a way to explore “unfair and deceptive practices” in the provision or marketing of such care. The workshop description does not suggest a modest initial inquiry into a highly charged and complex mesh of behavioral, biomedical, and social issues. There’s no hint of tradeoffs or potential benefits—even if just for some people, and in some contexts—as well as risks.
I’ll confess that “gender-affirming care” is not an area of expertise of mine. But that’s part of the point. I spent 16 years in the FTC’s Office of Policy Planning. I had much more to do with some endeavors than others. But I cannot recall a single darn thing to suggest any agency experience, much less expertise, in this area. And the framing of the workshop does not seem to promise an exercise in learning.
There could, indeed, but unfair and deceptive practices at-issue, just as there could be in other areas of health care or any other area of commerce. I’m not suggesting that no minor children or families might be harmed by violations of the FTC Act, not to mention other violations of state and federal law. False or misleading advertising materials might be disseminated. Health-care services might be provided by unlicensed or incompetent providers, just as they may be in other areas of health care.
Protecting consumers against charlatans was a central concern motivating the emergence of licensing requirements for physicians and other health-care professionals in the late 19th and early 20th centuries. Rent seeking, too (see ICLE’s comments), but also legitimate consumer protection concerns, and not just rent seeking (here are Carolyn Cox and Susan Foster from the FTC’s Bureau of Economics, and Julie Fairman and I in Health Matrix).
But this seems rather like the FTC’s “Request for Public Comment Regarding Technology Platform Censorship.” As I wrote on this site at the time, there could be materially false or misleading marketing of platform policies, and nonprice dimensions of competition might come into play in merger or conduct scrutiny—if not without complications, and even if they didn’t obviously apply to any actual content-moderation policies. And that’s leaving aside First Amendment concerns, as in Moody v. Netchoice. For more on the complications, see my ICLE colleague Ben Sperry, as well as formal comments submitted to the agency by Ben, Geoff Manne, and myself on behalf of ICLE.
In addition, I thought:
we might wonder whether an inquiry into “censorship” and how “technology platform” conduct “may have violated the law” appears to tilt the inquiry (and perhaps the legal playing field) . . . [and] Encouraging input from “[t]ech platform users who have been banned, shadow banned, demonetized, or otherwise censored” (but no others) hardly seems a neutral solicitation of public comment on the potential costs and benefits of platform conduct.
Indeed, some of the commission’s commentary seems downright ominous. The FTC’s press release informs us that “Censorship by technology platforms is not just un-American, it is potentially illegal.” And similarly (very similarly), in a post on the technology platform formerly known as Twitter, Ferguson says that: “Big Tech censorship is not just un-American, it is potentially illegal.”
To be sure, an RFI is not a study or a legal complaint, and neither is a workshop. And the FTC has not, to the best of my knowledge, brought any bad cases on either content moderation or gender-affirming care. And perhaps they will not.
Still, the framing and tone of the inquiries seem out of character, given the FTC’s long tradition of serious inquiry and research-based law enforcement—and, indeed, some of the more thoughtful efforts of the current FTC majority. They call to mind, rather, the slanted and charged—if not pre-judged—quests of the Lina Khan FTC, such as the agency’s advance notice of proposed rulemaking on “commercial surveillance,” which seemed to presume diverse and tremendous harms across much of the information economy, with barely a nod to the idea that there might be consumer benefits at issue, as well (for those especially interested or indefatigable, I really do recommend ICLE’s formal comments on the ANPR.) Or perhaps the “cross-government inquiry on impact of corporate greed in health care” is the model.
That’s a whole post, at least, and I haven’t even gotten to competition issues at either of the U.S. antitrust agencies. And there’s a whole lot to say there.
In the meantime, I’ll simply note that the FTC continues to tilt at windmills in its attempt to block (or unwind) Microsoft’s acquisition of Activision/Blizzard. The FTC challenged the deal in 2022 and went to federal court in the Northern District of California seeking a preliminary injunction to block the deal, pending the FTC’s proceeding against the merger in the agency’s internal administrative process. The FTC lost. The court denied the FTC’s motion, finding that the agency had failed to show that it was likely to succeed on the merits of the underlying antitrust case.
The commission was undeterred, perhaps convinced its arguments would meet with greater success before itself in the agency’s Part 3 process. That process continues, and the FTC appealed its loss in the Northern District to the 9th U.S. Circuit Court of Appeals. On May 7, the circuit court sustained the district court’s decision against the FTC.
It’s not over. Not necessarily. The FTC could continue through the administrative process, perhaps winning before itself, before going back to fight a steeper uphill battle should Microsoft appeal a decision on the merits in federal court.
The FTC could, but it shouldn’t. The third time isn’t necessarily the charm.
