How the FTC Investigates Consumer Protection Violations

How the FTC Investigates Consumer Protection Violations

The Federal Trade Commission, or FTC for short, is the main agency responsible for protecting consumers from shady or illegal business practices. But how exactly does the FTC go about looking into potential violations of consumer protection laws? Here’s an inside look at the FTC’s process for investigating consumer complaints and enforcing consumer rights.

Receiving and Reviewing Consumer Complaints

The FTC relies heavily on input from consumers to identify issues and potential lawbreakers. Every day, people submit complaints through the FTC’s online complaint form or by calling the FTC’s Consumer Response Center hotline. The FTC reviews each complaint carefully to spot trends and patterns that may indicate broader, systemic problems that warrant a closer look.

For example, if the FTC receives a surge of complaints about a certain company’s billing practices or advertising claims, that’s a red flag that something fishy might be going on. The FTC’s data analysts pore over complaint information to detect these kinds of patterns that point to violations of consumer protection statutes like the FTC Act or the Telemarketing Sales Rule.

Opening Investigations into Companies and Industries

If the incoming complaint data suggests there’s a widespread issue happening, the FTC may decide to open a formal investigation into a particular company or even an entire industry. The FTC has broad investigative powers to gather more information through subpoenas, interviews, and reviewing corporate records.

The purpose of these in-depth investigations is to determine if consumer protection laws have been broken. For instance, FTC investigators may look for evidence that a company has engaged in deceptive marketing, made false claims in advertising, violated customers’ privacy rights, or used other unfair business practices.

Seeking Settlements with Law Violators

Many FTC probes wrap up with the agency reaching a settlement agreement with the company accused of violating consumer protection statutes. These settlements help the FTC take quick enforcement action without having to go through lengthy federal litigation.

Typical settlement terms require the company to provide refunds to harmed consumers, agree to change its business practices going forward, and pay civil penalties for breaking the law. While settlements allow companies to avoid admitting guilt outright, they do require admitting that the FTC has enough evidence to win in court.

Filing Lawsuits Against Consumer Law Violators

If the FTC’s settlement negotiations with a company hit a dead end, the agency may decide the next best step is to file a lawsuit against the company. These lawsuits seek tough remedies like court orders banning companies from engaging in illegal practices or even refunding money to compensate consumers.

But lawsuits also mean a long, uncertain litigation process versus quick settlements. And if the FTC loses in court, then the company faces no penalties at all. So lawsuits are more of a high-stakes gamble for the FTC versus settling.

Examples of FTC Consumer Protection Investigations

To make this process more concrete, here are a few real-world examples of how the FTC has investigated and taken action against companies for consumer protection violations:

Snapchat

In 2014, Snapchat settled FTC charges that the company deceived consumers about the disappearing nature of messages sent through the app. As part of the settlement, Snapchat was prohibited from misrepresenting how ephemeral messages actually are and required to establish a privacy program.

Google

In 2011, Google settled FTC charges that it used deceptive tactics and violated its own privacy promises when launching its failed Google Buzz social network. Google agreed to stronger privacy protections and regular outside audits for 20 years.

DirecTV

In 2015, the FTC sued DirecTV for deceptive advertising related to discounted promotional packages. After a court order, DirecTV provided more than $3.5 million in refunds to customers and clarified its offers.

Ashley Madison

In 2016, the FTC sued the parent company of the Ashley Madison adultery website for lax data security and privacy practices. The company paid $11.2 million in settlements with the FTC and states.

How Consumers Are Protected

Thanks to the FTC’s work investigating consumer complaints and taking action against corporate wrongdoers, consumers benefit in a few key ways:

• Consumers get money back through refunds and restitution when companies settle FTC charges.
• Consumers are safer from scams and deception when the FTC bans deceptive advertising and business practices.
• Consumer privacy is better protected when companies agree to stronger data security measures under FTC settlements.
• Consumers can submit complaints knowing the FTC is reviewing the data for patterns of wrongdoing.

So while the consumer protection process has many steps, it’s designed to root out violations and provide critical remedies for consumers.

References

FTC. “Consumer Protection.” https://www.ftc.gov/news-events/media-resources/consumer-protection

FTC. “Enforcement.” https://www.ftc.gov/enforcement

Loeb, Walter. “How the FTC Works (and How It Doesn’t).” Forbes, November 2014. https://www.forbes.com/sites/walterloeb/2014/11/19/how-the-ftc-works-and-how-it-doesnt/?sh=77e7280a7f4b