FTC Suit Alleges FleetCor Fueled Profits With Deceptive Marketing
The Federal Trade Commission (FTC) has filed suit against a publicly traded company marketing prepaid fuel card solutions to businesses, alleging that it made bogus marketing representations that generated millions of dollars in hidden fees.
According to the complaint, FleetCor and its CEO Ronald Clarke engaged in a systematic pattern of misrepresentations in order to increase earnings, reported at $2.4 billion in 2018, while marketing the fuel cards as a cost-effective solution for businesses. The complaint alleges that the company’s multiple misrepresentations violate the FTC Act’s prohibition on unfair and deceptive acts and practices.
Doing business as “Fuelman,” FleetCor markets its fuel cards as a way for companies to save money on employee fuel and transportation costs while enjoying benefits such as protection from unauthorized charges. In its advertisements for the fuel card, FleetCor touted savings of five to 10 cents per gallon, as well as no transaction or membership fees.
The reality was far different, says the FTC. For one, the per gallon savings actually were less than a fraction of a cent per gallon, resulting in customers spending millions of dollars on a product they believed would reap greater savings, especially when taking the service’s fees into consideration.
The FTC also claims FleetCor charged multiple hidden fees, including transaction fees and other membership fees like “program administration fees,” “high credit risk account fees,” and more. When it did disclose these fees, the company hid them in the fine print of its terms and conditions. To avoid customers detecting these fees, FleetCor set up billing processes specifically calculated to make detection more difficult, such as assessing the fees a few billing cycles after the charge.
Furthermore, the FTC claims the company made it difficult for customers to access fee information online, with many reportedly unable to view invoices or get accurate information on their bills. FleetCor also allegedly failed at times to post payments when received, enabling it to assess late fees.
There were other unkept promises as well, according to the FTC. These included representations that corporate employees would only be able to use the cards to purchase fuel. Apparently, however, corporate employees were able to purchase other items such as snacks and beer at gas stations, adding to the companies’ overall costs.
The complaint seeks injunctive relief to prevent future violations of the FTC Act and a monetary restitution award. The Commission voted 4-1 to file the complaint with Commissioner Wilson casting the sole “no” vote and Commissioner Phillips dissenting on the inclusion of FleetCor’s CEO.
This matter continues a trend by the FTC in investigating and taking enforcement action against companies that allegedly scam corporate customers. Importantly, this case is a reminder to all businesses that they are not immune from scammers, and as such, are advised to conduct careful due diligence before taking on new supply vendors. And speaking of immune, individual officers will not likely find shelter behind the corporate veil if found to control or direct the bad acts and practices of a company.
Joint FTC, Maine Contempt Action Targets Repeat Offender Over Deceptive Supplements
Fool me once, shame on you. Fool me twice, you’re back before the regulators. That’s the lesson learned in a contempt order filed jointly by the Federal Trade Commission (FTC) and the Maine Attorney General’s office against dietary supplement marketers accused of violating the terms of a 2018 settlement order.
Filed in Maine District Court, the contempt motion accuses health supplement manufacturers Health Research Laboratories and Whole Body Supplements, which ship their products from Maine, of violating the terms of the settlement order by making unsupported health claims about their products.
The 2018 settlement stemmed from a 2017 FTC complaint that alleged the companies and their CEO Kramer Duhon made false health claims about one of its weight loss product. In addition, the defendants were accused of engaging in a number of other deceptive marketing tactics, including promoting fake “risk free” product trials.
Among the terms of the 2018 order resolving the matter was a commitment by the companies to refrain from making any scientific claims about their products without proper supporting evidence. Specifically, the 2018 order required “at least one randomized, double-blind, placebo-controlled trial to support any claim that their products effectively cure, mitigate, or treat diseases.”
Now, the FTC and Maine Attorney General Aaron Frey say the companies are at it again, making the types of unsubstantiated health claims that landed them in hot water in the first place. This time, the defendants are accused of marketing supplements called Ultimate Heart Formula, BG18, and Black Garlic Botanicals with claims that they heal, treat, and cure heart disease and hypertension without having “a single…test” of the products, in violation of the terms of the 2018 order.
The motion also alleges the defendants sent mailers to market a product called Neupathic as a “miraculous natural solution” they claimed treats nerve damage related to diabetes, again with no scientific evidence to back up those claims.
In the FTC press release announcing this action, Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said the defendants and their CEOs “have a troubling history of making unproven claims that their products can treat serious disease.” The FTC and Attorney General Frey now seek to “hold these defendants accountable and enforce our 2018 order.”
“The contumacious conduct in this case is especially egregious because [defendants] violated one of the core injunctive provisions of the [2018 order] by disseminating grossly unsubstantiated advertising claims for multiple products beginning shortly after the [c]ourt entered the [o]rder,” note the regulators in their motion.
The contempt motion seeks an order imposing compensatory sanctions equal to the value of sales of the products, totaling more than two million dollars in damages.
This case is yet another example of regulatory agencies actively watching the marketing practices of companies – and their principals – subject to settlement orders.
NARB Recommends Native Deodorant Discontinue Ad Claims
Something doesn’t smell right with Zenlen’s deodorant ads, according to the National Advertising Review Board (NARB), which upheld a recommendation by the National Advertising Division (NAD) that the company, doing business as Native Cosmetics, discontinue unsupported advertising claims.
The matter initially came before the self-regulatory arm of the BBB after Tom’s of Maine, a competitor of Native, challenged advertising claims the company makes about its deodorants. NAD had ruled in favor of Tom’s and recommended the challenged claims be discontinued. Native then appealed the decision to the NARB, which affirmed NAD’s findings.
Native’s ads depict a deodorant providing wetness protection by means of both a water absorption mechanism and a special film that acts as a barrier against odor on the skin’s surface. Tom’s challenged both of these claims.
Regarding Native’s claims that its deodorants provide superior moisture absorption, the NARB agreed with NAD’s finding Native’s evidence failed to show that its products absorbed an amount of water relevant to consumers. Neither NAD nor the NARB were convinced that particular ingredients in the deodorant had moisture-absorbing characteristics reflective of the advertised results.
The NARB also recommended Native discontinue its claim that the deodorant provides “effective protection against wetness.” After analyzing Native’s proffered evidence in support of this wetness protection skin barrier claim, NAD found that skin testing provided by Native was not supported because the submitted evidence was flawed.
For starters, the wetness protection skin test apparently measured a level of wetness protection that a reasonable consumer would not consider effective, according to the NARB. As the NARB put it, “reasonable consumers could expect product protection well beyond the 4 hours measured by the skin … test.” Further, Native’s evidence failed to show that the types of wetness protection measurements provided were “acceptable claim support for a deodorant.”
Native released a statement following the recommendation saying that although it “is disappointed and respectfully disagrees with the NARB Panel’s decision, as a strong supporter of the self-regulatory process, it will agree to discontinue the challenged claims.”
Advertisers take note: in order for marketing claims to pass muster in the event of a challenge before NAD, evidentiary support must be relevant to the proffered claim. Additionally, product testing results relied on to support a claim should reflect a reasonable consumer’s expectation and perception. Indeed, Native could hardly claim that four hours of wetness protection would be interpreted by the reasonable consumer as “effective” wetness protection.
French Antitrust Authority Fines Google 150 Million Euros Over Unfair Ad Rules
The French Competition Authority (Authority) has fined Google 150 million euros over what it said are the tech giant’s anti-competitive advertising practices and its “opaque and difficult to understand” ad rules. It held that rules for Google Ads lacked objectivity and predictability, and that the company abused its overwhelming market power in the ad search industry by applying its rules on advertisers “unfairly and randomly.”
The Authority issued its decision in the four-year-old case triggered by French news and weather publisher Gibmedia, which accused Google of suspending its account without notice. Google had argued that its decision to block Gibmedia’s ads was not arbitrary but based on the belief that the company was carrying ads for companies with questionable billing practices, a contention Gibmedia strongly denied and couched as an “attack” on the “victim.”
The decision, which Google has indicated it intends to appeal, requires the company to clarify the wording of its advertising rules for Google Ads, review procedures for notifying advertisers of any modifications, and clarify its procedures for suspending accounts. The decision also obligates Google to establish procedures for treating account violations that are strictly necessary and proportionate to its stated objective of protecting the consumer.
The decision also places reporting burdens on Google, including submitting an annual report to the Authority showing the number of complaints and accounts it has suspended in France, as well as the nature and reasons for the suspension. Within two months of the decision, Google must also submit a report outlining its intended compliance implementation process, and within six months submit a report outlining how it has executed those processes. Finally, Google must publish a summary of the decision on its France home page.
The company’s almost total market share of the online search business in France gives it the responsibility to grant fair access to the service, noted the Authority. “The way the rules are applied gives Google a power of life or death over some small businesses that live only on this kind of service,” noted Isabelle de Silva, head of the Authority. “One of the great principles of competition law is that with great power comes great responsibility,” she added.
The decision follows a lengthy investigation by the French Authority into Google’s ad practices that also found that over time Google arbitrarily changed its interpretation of its rules pertaining to the search ads that appear alongside Google search results. This is the first penalty imposed by this French Authority on Google.
For advertisers like Gibmedia concerned about how Google applies its search business rules, the decision signals a welcome step (and trend) towards clarity and uniformity. To wit, the U.K.’s ad regulator recently raised the question of separating Google’s ad sector from the rest of its business in order to ameliorate some of the problems identified in this action.
For Google, however, the decision adds yet another setback to the long list of regulatory and litigation woes facing the company around the world. In France alone, Google’s parent Alphabet agreed to pay 1 billion euros in September to settle a fiscal fraud matter and in January was fined 50 million euros for violating European Union privacy rules.