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FTC Policy Statements,

Advisory Opinions, and

Final Rules

Federal Trade Commission

January 17, 2025

UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

WASHINGTON, D.C. 20580

Office of Policy Planning

January 17, 2025

In the last four years, the FTC has published policy statements and rulemakings on a wide

variety of topics pertaining to competition and consumer protection. The FTC staff has compiled these

policy statements and final rules into the attached compendium. They reflect our work on a wide array

of important and popular priorities, ranging from restoring robust enforcement of corporate

accountability laws to protecting Americans from discrete unlawful practices like junk fees,

subscription traps, noncompetes, and much more.

We share these materials in case they are useful to states and advocates as they work in the

years ahead to promote fair, honest, and competitive markets. For example, they may be useful as

models for policy initiatives like state legislation or rulemakings. Additionally, many states have “mini

FTC Act” statutes that provide state attorneys general and private plaintiffs with legal tools similar to

the FTC Act’s prohibitions on unfair methods of competition and unfair or deceptive acts or practices.

Accordingly, these materials may also be useful for efforts to enforce existing state laws.

We believe these policy statements and the explication of our legal authorities in the statements

of basis and purpose accompanying these rulemakings reflect the best interpretation of the FTC Act

and other statutes the FTC administers, and they may also be the best interpretation of parallel “mini

FTC Acts.” We note that under Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), what

matters is the “best reading” of a statute, id. at 373, regardless of whether an agency adopts it. We

believe that the interpretations set forth in these documents reflect the best reading of the laws and that

the reasoning provided therein will therefore prove to be durable.

We further note that the statements of basis and purpose in the enclosed final rulemakings

describe in detail the extensive evidence supporting the FTC’s rules, as well as our fulsome analysis of

the significant benefits the rules would provide for consumers, businesses, workers, and the economy.

States and advocates may find this evidentiary record and analysis useful as they contemplate future

policy initiatives.

Finally, we thank states and advocates for your partnership over the years. States and advocates

have always played a vital role in protecting consumers and competition, and they have been an

invaluable partner to our work at the FTC. We hope these materials can be helpful as they continue to

carry out our shared mission of promoting fair, honest, and competitive markets.

Hannah Garden-Monheit

Director, Office of Policy Planning

Federal Trade Commission

TABLE OF CONTENTS

Policy Statements

Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles

Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (Jul. 9, 2021) ...5

Policy Statement on Repair Restrictions Imposed by Manufacturers and Sellers (Jul. 21, 2021)

......................................................................................................................................................12

Statement of the Commission on Breaches by Health Apps and Other Connected Devices (Sept.

15, 2021) ......................................................................................................................................14

Enforcement Policy Statement Regarding Negative Option Marketing (Oct. 28, 2021) ............16

Policy Statement on Education Technology and the Children’s Online Privacy Protection Act

(May 19, 2022).............................................................................................................................31

Policy Statement on Rebates and Fees in Exchange for Excluding Lower Cost Drug Products

(Jun. 16, 2022) .............................................................................................................................35

Policy Statement on Enforcement Related to Gig Work (Sept. 15, 2022) ...................................41

Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the

Federal Trade Commission Act (Nov. 10, 2022) .........................................................................58

Policy Statement on Biometric Information and Section 5 of the Federal Trade Commission Act

(May 18, 2023).............................................................................................................................74

Merger Guidelines (Dec. 18, 2023) .............................................................................................86

Statement Concerning Brand Drug Manufacturers’ Improper Listing of Patents in the Orange

Book (Sept. 14, 2023) ..................................................................................................................137

Policy Statement on Franchisors’ Use of Contract Provisions, Including Non-Disparagement,

Goodwill, and Confidentiality Clauses (Jul. 12, 2024)................................................................143

Staff Guidance on the Unlawfulness of Undisclosed Fees Imposed on Franchisees (Jul. 12, 2024)

......................................................................................................................................................150

Joint Statement on Competition in Generative AI Foundation Models and AI Products (Jul. 23,

2024) ............................................................................................................................................152

Policy Statement on Exemption of Protected Labor Activity by Workers from Antitrust Liability

(Jan. 14, 2025)..............................................................................................................................155

Antitrust Guidelines for Business Activities Affecting Workers (Jan. 16, 2025) ........................167

Advisory Opinions

Commission Statement on the Holder Rule and Attorneys’ Fees and Costs (Jan. 18, 2022) ......180

Final Rules

Made in USA Labeling Rule (Jul. 14, 2021) ...............................................................................184

Standards for Safeguarding Customer Information – 2021 Amendments (Dec. 9, 2021) ...........198

Standards for Safeguarding Customer Information – 2023 Amendments (Nov. 13, 2023) .........241

Combating Auto Retail Scams Trade Regulation Rule (Jan. 4, 2024) .........................................252

Trade Regulation Rule on Impersonation of Government and Businesses (Mar. 1, 2024) .........358

Telemarketing Sales Rule Amendments (Apr. 16, 2024) .............................................................373

Non-Compete Clause Rule (May 7, 2024) ..................................................................................400

Health Breach Notification Rule (May 30, 2024) ........................................................................565

Ophthalmic Practice Rules (Eyeglass Rule) Amendments (Jul. 26, 2024) ..................................602

Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (Aug. 22, 2024) ....650

Negative Option Rule (Nov. 15, 2024) ........................................................................................696

Trade Regulation Rule on Unfair or Deceptive Fees (Dec. 17, 2024) .........................................766

UNITED STATES OF AMERICA

Federal Trade Commission

WASHINGTON, D.C. 20580

STATEMENT OF THE COMMISSION

On the Withdrawal of the Statement of Enforcement Principles

Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act

July 9, 2021

Section 5 of the Federal Trade Commission Act prohibits “unfair methods of competition

in or affecting commerce.” 1 In 2015, the Federal Trade Commission under Chairwoman Edith

Ramirez published the Statement of Enforcement Principles Regarding “Unfair Methods of

Competition” Under Section 5 of the FTC Act (hereinafter “2015 Statement”), which established

principles to guide the agency’s exercise of its “standalone” Section 5 authority. 2 Although

presented as a way to reaffirm the Commission’s preexisting approach to Section 5 and preserve

doctrinal flexibility, 3 the 2015 Statement contravenes the text, structure, and history of Section 5

and largely writes the FTC’s standalone authority out of existence. In our view, the 2015

Statement abrogates the Commission’s congressionally mandated duty to use its expertise to

identify and combat unfair methods of competition even if they do not violate a separate antitrust

statute. Accordingly, because the Commission intends to restore the agency to this critical

mission, the agency withdraws the 2015 Statement.

Background

On August 13, 2015, the Federal Trade Commission issued the 2015 Statement, which

announced that the Commission would apply Section 5 using “a framework similar to the rule of

reason,” by only challenging actions that “cause, or [are] likely to cause, harm to competition or

the competitive process, taking into account any associated cognizable efficiencies and business

justifications[.]” 4 The 2015 Statement advised that the Commission is “less likely” to raise a

15 U.S.C. § 45(a)(1).

FTC, Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section

5 of the FTC Act (Aug. 13, 2015) [hereinafter “2015 Statement”],

https://www.ftc.gov/system/files/documents/public_statements/735201/150813section5enforcement.pdf.

Address by Chairwoman Edith Ramirez, Competition Law Center, George Washington University Law

School, 3 (Aug. 13, 2015),

https://www.ftc.gov/system/files/documents/public_statements/735411/150813section5speech.pdf (“Our

aim in adopting this policy statement is to reaffirm the principles that guide our enforcement decisions,

leaving for future generations the flexibility to do the same.”).

2015 Statement, supra note 2. Chairwoman Ramirez and Commissioners Julie Brill, Terrell McSweeny,

and Joshua Wright voted in favor of the statement. Commissioner Maureen Ohlhausen dissented. FTC

Press Release, FTC Issues Statement of Principles Regarding Enforcement of FTC Act as a Competition

Statute (Aug. 13, 2015), https://www.ftc.gov/news-events/press-releases/2015/08/ftc-issues-statementprinciples-regarding-enforcement-ftc-act.

standalone Section 5 claim “if enforcement of the Sherman or Clayton Act is sufficient to

address the competitive harm.” 5

In a statement accompanying the issuance of these principles, the Commission explained

that its enforcement of Section 5 would be “aligned with” the Sherman and Clayton Acts and

thus subject to “the ‘rule of reason’ framework developed under the antitrust laws[.]”6 In a

speech announcing the statement, Chairwoman Ramirez noted that she favored a “common-law

approach” to Section 5 rather than “a prescriptive codification of precisely what conduct is

prohibited.” 7 She also acknowledged that the Commission’s policy statement was codifying an

interpretation of Section 5 that is more restrictive than the Commission’s historic approach and

more constraining than the prevailing case law. 8 She added, “[W]e now exercise our standalone

Section 5 authority in a far narrower class of cases than we did throughout most of the twentieth

century.” 9

With the exception of certain administrative complaints involving invitations to collude,

the agency has pled a standalone Section 5 violation just once in the more than five years since it

published the statement. 10

II.

The Text, Structure, and History of Section 5 Reflect a Clear Legislative

Mandate Broader than the Sherman and Clayton Acts

By tethering Section 5 to the Sherman and Clayton Acts, the 2015 Statement negates the

Commission’s core legislative mandate, as reflected in the statutory text, the structure of the law,

and the legislative history, and undermines the Commission’s institutional strengths.

In 1914, Congress enacted the Federal Trade Commission Act to reach beyond the

Sherman Act and to provide an alternative institutional framework for enforcing the antitrust

2015 Statement, supra note 2.

FTC, Statement on the Issuance of Enforcement Principles Regarding “Unfair Methods of Competition”

Under Section 5 of the FTC Act, at 2 (Aug. 13, 2015),

https://www.ftc.gov/system/files/documents/public_statements/735381/150813commissionstatementsecti

on5.pdf; see also Chairwoman Ramirez, supra note 3, at 10 (“Today’s policy statement reaffirms that this

same framework governs standalone Section 5 claims no less than claims arising under the Sherman and

Clayton Acts.”).

Address by Chairwoman Ramirez, supra note 3, at 2.

Id. at 4-5.

Id. at 2.

See Federal Trade Commission’s Complaint for Equitable Relief, FTC v. Qualcomm Inc., No. 5:17-cv00220 (N.D. Cal. Jan. 17, 2017), [hereinafter “Qualcomm Complaint”],

https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf. Even in

Qualcomm, the Commission primarily relied on arguments under the Sherman Act; the standalone theory

was not a core focus of the litigation.

laws. 11 After the Supreme Court announced in Standard Oil that it would subject restraints of

trade to an open-ended “standard of reason” under the Sherman Act, lawmakers were concerned

that this approach to antitrust delayed resolution of cases, delivered inconsistent and

unpredictable results, and yielded outsized and unchecked interpretive authority to the courts. 12

For instance, Senator Newlands complained that Standard Oil left antitrust regulation “to the

varying judgments of different courts upon the facts and the law”; he thus sought to create an

“administrative tribunal … with powers of recommendation, with powers of condemnation,

[and] with powers of correction.” 13 Likewise, a 1913 Senate committee report lamented that the

rule of reason had made it “impossible to predict” whether courts would condemn many

“practices that seriously interfere with competition, and are plainly opposed to the public

welfare,” and thus called for legislation “establishing a commission for the better administration

of the law and to aid in its enforcement.” 14 These concerns spurred the passage of the FTC Act,

which created an administrative body that could police unlawful business practices with greater

expertise and democratic accountability than courts provided. 15

At the heart of the statute was Section 5, which declares “unfair methods of competition”

unlawful. 16 By proscribing conduct using this new term, rather than codifying either the text or

judicial interpretations of the Sherman Act, the plain language of the statute makes clear that

Congress intended for Section 5 to reach beyond existing antitrust law.

The structure of Section 5 also supports a reading that is not limited to an extension of the

Sherman Act. Notably, the FTC Act’s remedial scheme differs significantly from the remedial

structure of the other antitrust statutes. The Commission cannot pursue criminal penalties for

violations of “unfair methods of competition,” and Section 5 provides no private right of action,

shielding violators from private lawsuits and treble damages. In this way, the institutional design

laid out in the FTC Act reflects a basic tradeoff: Section 5 grants the Commission extensive

authority to shape doctrine and reach conduct not otherwise prohibited by the Sherman Act, but

provides a more limited set of remedies. 17

The legislative debate around the FTC Act makes clear that the text and structure of the

statute were intentional. Lawmakers chose to leave it to the Commission to determine which

practices fell into the category of “unfair methods of competition” rather than attempt to define

through statute the various unlawful practices, given that “there were too many unfair practices

See Neil Averitt, The Meaning of ‘Unfair Methods of Competition’ in Section 5 of the FTC Act, 21 B.C.

L. REV. 227, 229-240 (1980).

Id. at 232-237. See Standard Oil Co. v. United States, 221 U.S. 1, 60 (1911).

See 47 CONG. REC. 1225 (1911) (statement of Sen. Newlands).

S. REP. NO. 1326, 62d Cong., 3d Sess., at xiv (1913).

See Averitt, supra note 11, at 232-37.

15 U.S.C. § 45(a).

William E. Kovacic & Marc Winerman, Competition Policy and the Application of Section 5 of the

Federal Trade Commission Act, 76 ANTITRUST L.J. 929, 932 (2010).

to define, and after writing 20 of them into the law it would be quite possible to invent others.” 18

Lawmakers were clear that Section 5 was designed to extend beyond the reach of the antitrust

laws. 19 For example, Senator Cummins, one of the main sponsors of the FTC Act, stated that the

purpose of Section 5 was “to make some things punishable, to prevent some things, that cannot

be punished or prevented under the antitrust law.” 20

The Supreme Court has repeatedly affirmed this view of the agency’s Section 5 authority,

holding that the statute, by its plain text, does not limit unfair methods of competition to

practices that violate other antitrust laws. 21 The Court, recognizing the Commission’s expertise

in competition matters, has given “deference” 22 and “great weight” 23 to the Commission’s

determination that a practice is unfair and should be condemned.

Although the Commission suffered a few notable defeats under Section 5 in the early

1980s, those decisions in no way support the 2015 Statement’s decision to tether Section 5 to the

Sherman and Clayton Acts. For example, in Boise Cascade, the Ninth Circuit ruled that the

evidence did not support the Commission’s factual finding that the defendants’ conduct had an

adverse effect on prices. 24 In Ethyl, the Second Circuit explicitly held that the FTC’s Section 5

authority is broader than the Sherman or Clayton Acts, but it required the Commission to show

that the challenged conduct is “collusive, coercive, predatory, or exclusionary,” or has an

“anticompetitive purpose,” or “cannot be supported by an independent legitimate reason.” 25 In

short, these decisions confirm that Section 5 empowers the Commission to prohibit conduct that

does not violate other antitrust laws, so long as it clearly explains why the practice is illegitimate

and bases that ruling on substantial evidence.

S. REP. NO. 597, 63d Cong., 2d Sess., 13 (1914) (“The committee gave careful consideration to the

question as to whether it would attempt to define the many and variable unfair practices which prevail in

commerce and to forbid [them] or whether it would, by a general declaration condemning unfair

practices, leave it to the commission to determine what practices were unfair. It concluded that the latter

course would be the better, for the reason . . . that there were too many unfair practices to define, and after

writing 20 of them into the law it would be quite possible to invent others.”).

See Averitt, supra note 11, at 251-252.

51 CONG. REC. 11, 236 (1914) (statement of Sen. Cummins).

See FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 454 (1986); FTC v. Sperry & Hutchinson Co., 405

U.S. 233, 244 (1972); FTC v. Brown Shoe Co., 384 U.S. 316, 321 (1966); FTC v. Motion Picture Advert.

Serv. Co., 344 U.S. 392, 394-95 (1953); FTC v. R.F. Keppel & Bros., Inc., 291 U.S. 304, 309-310 (1934).

Ind. Fed’n of Dentists, 476 U.S. at 454.

Atl. Ref. Co. v. FTC, 381 U.S. 357, 368 (1965) (quoting FTC v. Cement Inst., 333 U.S. 683, 720

(1948)).

Boise Cascade Corp. v. FTC, 637 F.2d 573, 577-82 (9th Cir. 1980).

E.I. du Pont de Nemours & Co. v. FTC, 729 F.2d 128, 136-40 (2d Cir. 1984). See also Official Airline

Guides, Inc. v. FTC, 630 F.2d 920, 927-28 (2d Cir. 1980) (holding that while courts must give “great

weight” to the Commission’s judgment that a practice is unfair, the Commission could not condemn a

monopolist’s refusal to deal where it “has no purpose to restrain competition or expand [its] monopoly,

and does not act coercively”).

III.

The 2015 Statement Overlooks the Unique Features of Section 5, Ratifies an

Unadministrable Approach, and Perpetuates Uncertainty in the Law

In addition to flouting a clear congressional mandate, the 2015 Statement fails to consider

or even recognize the unique features of or limits on Section 5. By instead confining Section 5 to

the framework that presently governs the Sherman and Clayton Acts, the 2015 Statement

willfully surrenders the Commission’s key institutional advantages as an administrative agency

with the power to adjudicate cases, issue rules and industry guidance, and conduct detailed

marketplace studies. 26

The Commission’s efforts to constrain Section 5 in this way have only hindered the

agency’s enforcement efforts. Coupling Section 5 to the Sherman Act has led courts to bind the

FTC to liability standards created by generalist judges in private treble-damages actions under

the Sherman Act, despite the striking differences in institutional contexts and the Commission’s

unique role as an expert public body. 27 Aside from invitations to collude—which the agency has

long treated as a violation of Section 5 28—the Commission has pled a standalone Section 5 claim

just once since the issuance of the 2015 Statement. 29 In practice, the Statement has doubled

down on the Commission’s longstanding failure to investigate and pursue “unfair methods of

competition.”

Moreover, by subjecting Section 5 to a framework similar to the rule of reason, the

Commission hamstrings its enforcement mission with an approach that poses significant

administrability concerns. The current iteration of the rule of reason invites courts to assess

whether particular business conduct is “unreasonable,” including through determining whether

the “procompetitive” effects of the conduct outweigh any “anticompetitive” effects. 30 Famously

unwieldy, the standard leads to soaring enforcement costs, risks inconsistent outcomes, and has

been decried by judges as unadministrable or exceedingly difficult to meet. 31

See, e.g., Professor Daniel A. Crane, Comments at FTC Workshop on Section 5 of the FTC Act as a

Competition Statute, 73-74 (Oct. 17, 2008),

https://www.ftc.gov/sites/default/files/documents/public_events/section-5-ftc-act-competitionstatute/transcript.pdf, (“What I want to suggest is that, in many ways, by marrying the meaning of Section

5 to the Sherman Act, the FTC is losing many, many of its institutional advantages, as both a norm

creator and an enforcer of antitrust law.”).

See id. at 76 (“[B]y coupling the Sherman Act to the FTC Act, the FTC gets saddled with a rule that

was created in a completely different institutional context with different considerations.”); id. at 77 (“I

think this is a huge mistake in terms of the institutional context. You’re taking baggage you don’t have to

take and you shouldn’t take and it leads to weakened liability norms in the FTC.”).

See, e.g., Oregon Lithoprint, Inc.; Analysis to Aid Public Comment, 83 Fed. Reg. 11529, 11531 (Mar.

15, 2018) (“The Commission has long held that an invitation to collude violates Section 5 of the FTC Act

even where there is no proof that the competitor accepted the invitation.”).

See Qualcomm Complaint, supra note 10.

See, e.g., Ohio v. Am. Express Co., 138 S. Ct. 2274, 2283-84 (2018).

See, e.g., Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 916 (2007) (Breyer, J.,

dissenting) (“How easily can courts identify instances in which the benefits are likely to outweigh

potential harms? My own answer is, not very easily.”); Richard A. Posner, The Rule of Reason and the

In practice, courts have also used the weaknesses of the rule of reason as a basis for

restricting private antitrust plaintiffs. 32 As the Supreme Court recently pointed out, scholars have

found that the defendant prevailed in “nearly all rule of reason cases in the last 45 years on the

ground that the plaintiff failed to show a substantial anticompetitive effect.” 33 Indeed,

lawmakers’ concerns about the infirmities of the rule of reason standard were partly why

Congress enacted Section 5 in the first place. 34 Tying Section 5 back to this framework offends

the plain text, structure, and legislative history of Section 5 and needlessly constrains the

Commission from taking action to safeguard the public from unfair methods of competition.

The 2015 Statement is also rife with internal contradictions that may effectively read the

Commission’s standalone Section 5 authority out of the statute altogether. First, although the

Statement recognizes that Section 5 prohibits conduct that would violate the Sherman or Clayton

Acts “if allowed to mature or complete,” it then requires the Commission to prove “likely”

anticompetitive effects under the rule of reason. 35 Importing the rule of reason’s likelihood

requirement would abrogate the Commission’s statutory mandate to combat incipient

wrongdoing before it becomes likely to harm consumers or competition. As the Supreme Court

has held, Section 5 “was designed to supplement and bolster the Sherman Act and Clayton Act—

to stop in their incipiency acts and practices which, when full blown, would violate those

Acts.” 36

Second, although the 2015 Statement declares that the Commission will apply a

“framework similar to the rule of reason,” it then suggests that the Commission will typically

refrain from bringing a standalone Section 5 case where the Sherman or Clayton Acts already

apply. But it is hard to imagine what, if any, cases could ever meet both of these criteria: With

the exception of invitations to collude, almost every practice that is unlawful under the rule of

reason will already be subject to the Sherman or Clayton Acts and thus (according to the 2015

Statement) be improper targets for standalone Section 5 enforcement. The 2015 Statement may

have hinted at a broader reading of Section 5 by embracing an undefined “framework similar to”

the rule of reason, but if that was the Commission’s intent, the reference was far too vague to

provide any meaningful guidance. By both wedding Section 5 to the Sherman Act’s legal

Economic Approach: Reflections on the Sylvania Decision, 45 U. CHI. L. REV. 1, 14 (1977) (“The content

of the Rule of Reason is largely unknown; in practice, it is little more than a euphemism for

nonliability.”).

Maurice E. Stucke, Does the Rule of Reason Violate the Rule of Law?, 42 U.C. DAVIS L. REV. 1375,

1383, 1423, 1471 (2009).

NCAA v. Alston, No. 20-512, slip op. at 25 (June 21, 2021) (citing Brief for 65 Professors of Law,

Business, Economics, and Sports Management as Amici Curiae 21, n. 9); see also Michael A. Carrier,

The Rule of Reason: An Empirical Update for the 21st Century, 16 GEO. MASON L. REV. 827 (2009).

See supra pp. 2-3.

2015 Statement, supra note 2.

FTC v. Motion Picture Advert. Serv. Co., 344 U.S. 392, 394-95 (1953) (citing FTC v. Beech-Nut

Packing Co., 257 U.S. 441, 453 (1922); Fashion Originators' Guild of Am. v. FTC, 312 U.S. 457, 463,

466 (1941)); see also FTC v. Brown Shoe Co., 384 U.S. 316, 321-22 (1966).

standard and signaling that Section 5 won’t be pursued if the Sherman Act already applies, the

2015 Statement effectively turns standalone Section 5 into a dead letter.

More generally, the 2015 Statement assumes a case-by-case approach to “unfair methods

of competition,” despite widespread recognition that this adjudication-only approach often fails

to deliver clear guidance. 37 Without explanation, the Statement fails to address the possibility of

the Commission adopting rules to clarify the legal limits that apply to market participants.

The Commission’s inability, after a century of commanding this statutory authority, to

deliver clear Section 5 principles suggests that the time is right for the Commission to rethink its

approach and to recommit to its mandate to police unfair methods of competition even if they are

outside the ambit of the Sherman or Clayton Acts. The task will require careful and serious work,

but it is one that our enabling statute expected and required.

IV.

Looking Ahead

Withdrawing the 2015 Statement is only the start of our efforts to clarify the meaning of

Section 5 and apply it to today’s markets. Section 5 is one of the Commission’s core statutory

authorities in competition cases; it is a critical tool that the agency can and must utilize in

fulfilling its congressional mandate to condemn unfair methods of competition. In the coming

months, the Commission will consider whether to issue new guidance or to propose rules that

will further clarify the types of practices that warrant scrutiny under this provision. In the

meantime, the Commission will exercise responsibly its prosecutorial discretion in determining

which cases are appropriate under Section 5, consistent with legal precedent.

See Rohit Chopra & Lina M. Khan, The Case for “Unfair Methods of Competition” Rulemaking, 87 U.

CHI. L. REV. 357, 359-63 (2020); Sandeep Vaheesan, Resurrecting “A Comprehensive Charter of

Economic Liberty”: The Latent Power of the Federal Trade Commission, 19 U. PA. J. BUS. L. 645, 66870 (2017); Jan M. Rybnicek & Joshua D. Wright, Defining Section 5 of the FTC Act: The Failure of the

Common Law Method and the Case for Formal Agency Guidelines, 21 GEO. MASON L. REV. 1287, 1288,

1304-05 (2014); Kovacic & Winerman, supra note 17, at 933-34; C. Scott Hemphill, An Aggregate

Approach to Antitrust: Using New Data and Rulemaking to Preserve Drug Competition, 109 COLUM. L.

REV. 629, 674-80 (2009); Crane, supra note 26, at 78-79.

UNITED STATES OF AMERICA

Federal Trade Commission

WASHINGTON, D.C. 20580

Policy Statement of the Federal Trade Commission

on Repair Restrictions Imposed by Manufacturers and Sellers

In 2019, the Federal Trade Commission (“Commission”) called for public comment and

empirical research on repair restrictions, which culminated in the Commission’s “Nixing the

Fix” report to Congress. 1 The Commission is now issuing this policy statement regarding its

enforcement policy with respect to repair restrictions.

Restricting consumers and businesses from choosing how they repair products can substantially

increase the total cost of repairs, generate harmful electronic waste, and unnecessarily increase

wait times for repairs. In contrast, providing more choice in repairs can lead to lower costs,

reduce e-waste by extending the useful lifespan of products, enable more timely repairs, and

provide economic opportunities for entrepreneurs and local businesses.

In 2019, the Commission convened a workshop on “Nixing the Fix” and sought input from

consumers, independent businesses, manufacturers, and others. Through this work, the

Commission uncovered evidence that manufacturers and sellers may, without reasonable

justification, be restricting competition for repair services in numerous ways, including:

imposing physical restrictions (e.g., the use of adhesives); limiting the availability of parts,

manuals, diagnostic software, and tools to manufacturers’ authorized repair networks; using

designs that make independent repairs less safe; limiting the availability of telematics

information (i.e., information on the operation and status of a vehicle that is collected by a

system contained in the vehicle and wirelessly relayed to a central location, often the

manufacturer or dealer of the vehicle); asserting patent rights and enforcement of trademarks in

an unlawful, overbroad manner; disparaging non-OEM parts and independent repair; using

unjustified software locks, digital rights management, and technical protection measures; and

imposing restrictive end user license agreements.

The Commission’s report on repair restrictions explores and discusses a number of these issues

and describes the hardships repair restrictions create for families and businesses. The

Commission is concerned that this burden is borne more heavily by underserved communities,

including communities of color and lower-income Americans. 2 The pandemic exacerbated these

effects as consumers relied more heavily on technology than ever before. 3

Federal Trade Commission. Nixing the Fix: An FTC Report to Congress on Repair Restrictions. (May 2021)

https://www.ftc.gov/system/files/documents/reports/nixing-fix-ftc-report-congress-repairrestrictions/nixing_the_fix_report_final_5521_630pm-508_002.pdf.

See id. at 3-4.

Id. at 4-5.

While unlawful repair restrictions have generally not been an enforcement priority for the

Commission for a number of years, 4 the Commission has determined that it will devote more

enforcement resources to combat these practices. 5 Accordingly, the Commission will now

prioritize investigations into unlawful repair restrictions under relevant statutes such as the

Magnuson-Moss Warranty Act 6 and Section 5 of the Federal Trade Commission Act. 7

First, the Commission urges the public to submit complaints and provide other information to aid

in greater enforcement of the Magnuson-Moss Warranty Act and its implementing regulations.

While current law does not provide for civil penalties or redress, the Commission will consider

filing suit against violators of the Magnuson-Moss Warranty Act to seek appropriate injunctive

relief. The Commission will also closely monitor private litigation to determine whether the

Commission may wish to investigate a pattern of unfair or deceptive acts or practices or file an

amicus brief. Further, the Commission will explore rulemaking, as appropriate.

Second, the Commission will scrutinize repair restrictions for violations of the antitrust laws. For

example, certain repair restrictions may constitute tying arrangements or monopolistic

practices—such as refusals to deal, exclusive dealing, or exclusionary design—that violate the

Sherman Act. 8 Violations of the Sherman Act also violate the prohibition on unfair methods of

competition codified in Section 5 of the Federal Trade Commission Act.

Third, the Commission will assess whether repair restrictions constitute unfair acts or practices,

which are also prohibited by Section 5 of the Federal Trade Commission Act. In addition, the

Commission will analyze any material claims made to purchasers and users to ascertain whether

there are any prohibited deceptive acts or practices, in violation of Section 5 of the Federal Trade

Commission Act.

Finally, the Commission will bring an interdisciplinary approach to this issue, using resources

and expertise from throughout the agency to combat unlawful repair restrictions. The FTC will

also closely coordinate with state law enforcement and policymakers to ensure compliance and

to update existing law and regulation to advance the goal of open repair markets.

The Commission has brought only one case alleging a violation of the Magnuson-Moss Warranty Act in the past

decade. In the Matter of BMW of North America, LLC, No. 132-3150 (October 2015). During this period, the

Commission’s efforts have included issuing several warning letters to companies that appeared to be engaged in

warranty tying in violation of the Magnuson-Moss Warranty Act. See FTC Staff Warns Companies that It Is Illegal

to Condition Warranty Coverage on the Use of Specified Parts or Services, https://www.ftc.gov/news-events/pressreleases/2018/04/ftc-staff-warns-companies-it-illegal-condition-warranty-coverage.

In conjunction with the Nixing the Fix Workshop, the Commission sought public comments and submissions of

empirical research concerning repair restrictions. The full docket of public comments and empirical research

submissions is available at https://www.regulations.gov/docket/FTC-2019-0013/document and

https://www.regulations.gov/document/FTC-2019-0013-0001/comment.

15 U.S.C. § 2301 et. seq. The Magnuson-Moss Warranty Act prohibits, among other things, tying arrangements

that condition a consumer product’s warranty on the use of a third-party service provider or on the use of a particular

product, unless the warrantor provides the services or products for free or obtains a waiver from the FTC. 15 U.S.C.

§ 2302(c).

15 U.S.C. § 45. Section 5 of the Federal Trade Commission Act prohibits unfair or deceptive actors or practices, as

well as unfair methods of competition, in or affecting commerce. Section 5 also encompasses violations of the

Sherman Act, which prohibits certain exclusionary and other anticompetitive conduct.

See, e.g., Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451 (1992); United States v. Microsoft, 253

F.3d 34 (D.C. Cir. 2001).

UNITED STATES OF AMERICA

Federal Trade Commission

WASHINGTON, D.C. 20580

Office of the Chair

STATEMENT OF THE COMMISSION

On Breaches by Health Apps and Other Connected Devices

September 15, 2021

In recognition of the proliferation of apps and connected devices that capture sensitive

health data, the Federal Trade Commission is providing this Policy Statement to offer guidance

on the scope of the FTC’s Health Breach Notification Rule, 16 C.F.R. Part 318 (“the Rule”). 1

The FTC’s Health Breach Notification Rule helps to ensure that entities who are not

covered by the Health Insurance Portability and Accountability Act (“HIPAA”) nevertheless face

accountability when consumers’ sensitive health information is compromised. Under the Rule’s

requirements, vendors of personal health records (“PHR”) and PHR-related entities must notify

U.S. consumers and the FTC, and, in some cases, the media, if there has been a breach of

unsecured identifiable health information, or face civil penalties for violations. The Rule also

covers service providers to these entities. In practical terms, this means that entities covered by

the Rule who have experienced breaches cannot conceal this fact from those who have entrusted

them with sensitive health information.

The Rule was issued more than a decade ago, but the explosion in health apps and

connected devices makes its requirements with respect to them more important than ever. The

FTC has advised mobile health apps to examine their obligations under the Rule, 2 including

through the use of an interactive tool. 3 Yet the FTC has never enforced the Rule, and many

appear to misunderstand its requirements. This Policy Statement serves to clarify the scope of the

Rule, and place entities on notice of their ongoing obligation to come clean about breaches.

The Rule covers vendors of personal health records that contain individually identifiable

health information created or received by health care providers. The Rule is triggered when such

entities experience a “breach of security.” 4 Under the definitions cross-referenced by the Rule,

the developer of a health app or connected device is a “health care provider” because it

“furnish[es] health care services or supplies.” 5 When a health app, for example, discloses

The Rule implements the requirements of the American Recovery & Reinvestment Act of 2009, Pub. L. No. 111-5,

123 Stat. 115, codified at 42 U.S.C. § 17937.

Mobile Health App Developers: FTC Best Practices, FED. TRADE COMM’N, https://www.ftc.gov/tipsadvice/business-center/guidance/mobile-health-app-developers-ftc-best-practices (last visited on Sept. 15, 2021).

Mobile Health Apps Interactive Tool, FED. TRADE COMM’N, https://www.ftc.gov/tips-advice/businesscenter/guidance/mobile-health-apps-interactive-tool (last visited on Sept. 15, 2021).

See 16 C.F.R. § 318.2(a)

See id. § 318.2; 42 U.S.C. § 1320d(6), d(3).

sensitive health information without users’ authorization, this is a “breach of security” under the

Rule. 6

The statute directing the FTC to promulgate the Rule requires that a “personal health

record” be an electronic record that can be drawn from multiple sources. The Commission

considers apps covered by the Rule if they are capable of drawing information from multiple

sources, such as through a combination of consumer inputs and application programming

interfaces (“APIs”). For example, an app is covered if it collects information directly from

consumers and has the technical capacity to draw information through an API that enables

syncing with a consumer’s fitness tracker. Similarly, an app that draws information from

multiple sources is covered, even if the health information comes from only one source. For

example, if a blood sugar monitoring app draws health information only from one source (e.g., a

consumer’s inputted blood sugar levels), but also takes non-health information from another

source (e.g., dates from your phone’s calendar), it is covered under the Rule.

In addition, the Commission reminds entities offering services covered by the Rule that a

“breach” is not limited to cybersecurity intrusions or nefarious behavior. Incidents of

unauthorized access, including sharing of covered information without an individual’s

authorization, triggers notification obligations under the Rule.

As many Americans turn to apps and other technologies to track diseases, diagnoses,

treatment, medications, fitness, fertility, sleep, mental health, diet, and other vital areas, this Rule

is more important than ever. Firms offering these services should take appropriate care to secure

and protect consumer data. The Commission intends to bring actions to enforce the Rule

consistent with this Policy Statement. Violations of the Rule face civil penalties of $43,792 per

violation per day.

Id. § 318.2(a) (defining “breach of security” as “acquisition of [PHR identifiable health information] without the

authorization of the individual.”).

Enforcement Policy Statement Regarding Negative Option Marketing

Introduction and Background

The Federal Trade Commission (“FTC” or “Commission”) issues this Policy Statement

to provide guidance regarding its enforcement of various statutes and FTC regulations addressing

negative option marketing and operating. 1 This Statement is intended to assist the business

community and practitioners by providing specific guidance on the Commission’s interpretation

of existing law as it applies to negative option practices. This Statement may also assist the

courts in developing an appropriate framework for interpreting and applying the various statutes

and regulations addressing negative option marketing discussed herein.

Negative option offers come in a variety of forms, but all share a central feature: each

contains a term or condition under which the seller may interpret a consumer’s silence or failure

to take affirmative action to reject a good or service or to cancel the agreement as acceptance or

continuing acceptance of the offer. 2 Typically, negative option arrangements include, but are not

limited to, automatic renewals, continuity plans, free-to-pay or fee-to-pay conversions, and

prenotification plans. Automatic renewals allow sellers (e.g., a magazine publisher) to

This Policy Statement elaborates on principles annunciated by the Commission in individual

cases and rules issued over the course of many years. This Policy Statement does not confer any

rights on any person and does not operate to bind the FTC or the public. In any enforcement

action, the Commission must prove the challenged act or practice violates one or more existing

statutory or regulatory requirements. In addition, this Policy Statement does not preempt federal,

state, or local laws. Compliance with those laws, however, will not necessarily preclude

Commission law enforcement action under the FTC Act or other statutes. Pursuant to the

Congressional Review Act (5 U.S.C. § 801 et seq.), the Office of Information and Regulatory

Affairs designated this Policy Statement as not a “major rule,” as defined by 5 U.S.C. § 804(2).

The Commission’s Telemarking Sales Rule (16 C.F.R. Part 310) defines a negative option

feature as a provision in an offer or agreement to sell or provide any goods or services “under

which the customer’s silence or failure to take an affirmative action to reject goods or services or

to cancel the agreement is interpreted by the seller as acceptance of the offer.” 16 C.F.R. §

310.2(w).

unilaterally renew consumers’ subscriptions when they expire, unless consumers affirmatively

cancel their subscriptions by a certain date. Continuity plans allow consumers to agree in

advance to receive periodic shipments of goods or provision of services (e.g., bottled water

delivery), which they continue to receive until they cancel the agreement. Free trial marketing

(e.g., free-to-pay conversions) provides consumers the opportunity to receive goods or services

for free (or at a nominal fee) for a trial period. After the trial period, sellers can automatically

begin charging a fee (or higher fee) unless consumers affirmatively cancel or return the goods or

services. Finally, under prenotification plans 3 (e.g., book-of-the-month clubs), sellers provide

periodic notices offering goods to participating consumers and then send—and charge for—those

goods only if the consumers take no action to decline the offer. The periodic announcements and

shipments can continue indefinitely. 4

Negative option programs are widespread in the marketplace and can provide substantial

benefits for sellers and consumers. At the same time, consumers suffer costs when marketers fail

to make adequate disclosures, bill consumers without their consent, or make cancellation

difficult or impossible. Over the years, unfair or deceptive negative option practices have

remained a persistent source of consumer harm, often saddling shoppers with recurring payments

for products and services they did not intend to purchase or did not want to continue to

purchase. 5 To address this problem, the Commission and states regularly bring cases

The Commission’s Rule on the “Use of Prenotification Negative Option Plans” (16 C.F.R. Part

425) only covers this type of negative option marketing.

In addition, some negative option offers include upsell or bundled offers, where sellers use

consumers’ billing data to sell additional products from the same seller or pass consumers’

billing data to a third party for their sales. An upsell occurs when a consumer completes a first

transaction and then receives a second solicitation for an additional product or service. A

bundled offer occurs when a seller packages two or more products or services together so that

they cannot be purchased separately.

See, e.g., n. 6 infra.

challenging a variety of harmful negative option practices. These matters involve a range of

deceptive or unfair practices, including inadequate disclosures of hidden charges in ostensibly

“free” offers and other products or services, enrollment without consumer consent, and

inadequate or overly burdensome cancellation and refund procedures. 6 In addition, the

Commission receives thousands of complaints each year related to negative option marketing.

The number of ongoing cases and high volume of complaints demonstrate there is prevalent,

unabated consumer harm in the marketplace.

The FTC’s enforcement actions primarily rely on Section 5 of the FTC Act (15 U.S.C.

§ 45(a)), the Restore Online Shoppers’ Confidence Act (“ROSCA”) (15 U.S.C. §§ 8401-8405),

and the Telemarketing Sales Rule (16 C.F.R. Part 310). However, the Rule on the Use of

Prenotification Negative Option Plans (16 C.F.R. Part 425), the Electronic Fund Transfer Act

(“EFTA”) (15 U.S.C. §§ 1693-1693r), and the Postal Reorganization Act (i.e., the Unordered

Merchandise Statute) (39 U.S.C. § 3009) also address various aspects of negative option

marketing.

Recent examples of these matters include: FTC v. JDI Dating, Ltd., No. 1:14-cv-08400 (N.D.

Ill. 2014); FTC, State of Illinois, and State of Ohio v. One Technologies, LP, No. 3:14-cv-05066

(N.D. Cal. 2014); FTC v. Health Formulas, LLC, No. 2:14-cv-01649-RFB-GWF (D. Nev. 2016);

FTC v. BunZai Media Group, Inc., No. 2:15-cv- 04527-GW-PLA (C.D. Cal. 2015); FTC v.

NutraClick LLC, No. 2:16-cv-06819-DMG-JPR (C.D. Cal. 2016) (NutraClick I); FTC v.

DOTAuthority.com, Inc., No. 0:16-cv-62186-WJZ (S.D. Fla. 2016); FTC v. XXL Impressions,

No. 1:17-cv-00067-NT (D. Me. 2017); FTC v. AAFE Products Corp., No. 3:17-cv-00575 (S.D.

Cal. 2017); FTC v. RevMountain, LLC, No. 2:17-cv-02000-APG-GWF (D. Nev. 2017); FTC v.

Pact, Inc., No. 2:17-cv-01429 (W.D. Wash. 2017); FTC v. Tarr, No. 3:17-cv-02024-LAB-KSC

(S.D. Cal. 2017); FTC v. Credit Bureau Center, LLC, No. 17-cv-00194 (N.D. Ill. 2017); FTC v.

AdoreMe, Inc., No. 1:17-cv-09083 (S.D.N.Y. 2017); FTC v. Triangle Media Corp., No. 3:18-cv01388-LAB-LL (S.D. Cal. 2018); In re: UrthBox, Inc., No. C-4676 (FTC 2019); FTC v. Elite IT

Partners, Inc., No. 2:19-cv-00125-RJS (D. Utah 2019); FTC v. Apex Capital Group, LLC, No.

2:18-cv-09573-JFW-JPR (C.D. Cal. 2018); FTC v. AH Media, No. 3:19-cv-04022-JD (N.D. Cal.

2019); FTC v. Age of Learning, Inc., No. 2:20-cv-07996 (C.D. Cal. 2020); FTC v. NutraClick,

LLC, No. 2:20-cv-08612 (C.D. Cal. 2020) (NutraClick II).

Section 5 of the FTC Act: Section 5 of the FTC Act, which prohibits unfair or deceptive

acts or practices, is the core consumer protection statute enforced by the Commission, and

therefore, has traditionally served as the primary mechanism for addressing deceptive negative

option claims. 7 In its guidance and cases, the FTC has highlighted four basic Section 5

requirements that negative option marketing must follow to comply with Section 5. 8 First,

marketers must clearly and conspicuously disclose the material terms of a negative option offer

including, at a minimum, key terms such as the existence of the negative option offer, the offer’s

total cost, and how to cancel the offer. 9 Second, sellers must disclose these material terms before

consumers agree to the purchase. 10 Third, marketers must obtain consumers’ express informed

Section 5 specifically states that “unfair or deceptive acts or practices in or affecting commerce

. . . are . . . declared unlawful.” The FTC Act defines “unfair or deceptive acts or practices” to

include such acts or practices involving foreign commerce that cause or are likely to cause

reasonably foreseeable injury within the United States or involve material conduct occurring

within the United States (15 U.S.C. § 45(a)(4)(A)). It also defines “unfair” practices as those

that cause or are 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” (15 U.S.C. § 45(n)).

See Negative Options: A Report By the Staff of the FTC’s Division of Enforcement, 26-29 (Jan.

2009), https://www.ftc.gov/sites/default/files/documents/reports/negative-options-federal-tradecommission-workshop-analyzing-negative-option-marketing-reportstaff/p064202negativeoptionreport.pdf. In discussing the principal Section 5 requirements

related to negative options, the report cites to the following pre-ROSCA cases, FTC v. JAB

Ventures, No. CV08-04648 (C.D. Cal. 2008); FTC v. Complete Weightloss Center, No.

1:08cv00053 (D.N.D. 2008); FTC v. Berkeley Premium Nutraceuticals, No. 1:06cv00051 (S.D.

Ohio 2006); FTC v. Think All Publ’g, No. 4:07cv11 (E.D. Tex. 2006); FTC v. Hispanexo, No.

1:06cv424 (E.D. Va. 2006); FTC v. Consumerinfo.com, No. SACV05-801 (C.D. Cal. 2005);

FTC v. Conversion Mktg., No. SACV04-1264 (C.D. Cal. 2004); FTC v. Mantra Films, No.

CV03-9184 (C.D. Cal. 2003); FTC v. Preferred Alliance, No. 103-CV0405 (N.D. Ga. 2003);

United States v. Prochnow, No. 1:02-CV-0917 (N.D. Ga. 2002); FTC v. Ultralife Fitness, Inc.,

No. 2:08-cv-07655-DSF-PJW (C.D. Cal. 2008); In the Matter of American Isuzu Motors, No. C3712 (FTC 1997); FTC v. Universal Premium Services, No. CV06-0849 (C.D. Cal. 2006); FTC

v. Remote Response, No. 06-20168 (S.D. Fla. 2006); and FTC’s Dot Com Disclosures guidance.

See, e.g., FTC v. JAB Ventures; FTC v. Complete Weightloss Center; FTC v. NutraClick, LLC I.

See, e.g., FTC v. JAB Ventures; Complete Weightloss Center; FTC v. Berkeley Premium

Nutraceutical; FTC v. Think All Publ’g. Disclosures earlier in the transaction may be necessary

to avoid deception. See e.g., FTC’s Dot Com Disclosures guidance.

consent to such offers. 11 Finally, marketers must not erect unreasonable barriers to cancellation

or impede the effective operation of promised cancellation procedures, and must honor

cancellation requests that comply with such procedures. 12 Although these basic guidelines are

useful, the legality of a particular negative option depends on an individualized assessment of the

advertisement’s net impression and the marketer’s business practices. 13

ROSCA: Enacted by Congress in 2010 to address ongoing problems with online negative

option marketing, ROSCA prohibits charging or attempting to charge consumers for goods or

services sold on the Internet through any negative option feature 14 unless the marketer: (1)

clearly and conspicuously discloses all material terms of the transaction 15 before obtaining the

consumer’s billing information; (2) obtains a consumer’s express informed consent before

E.g., FTC. v. Neovi, Inc., 604 F.3d 1150, 1157-59 (9th Cir. 2010), amended by 2010 WL

2365956 (9th Cir. June 15, 2010); FTC v. Amazon.com, Inc., No. C14-1038-JCC, 2016 WL

10654030, at *8 (W.D. Wash. Apr. 26, 2016); FTC v. Ideal Fin. Sols., Inc., No. 2:13-CV-00143JAD, 2015 WL 4032103, at *8 (D. Nev. June 29, 2015); FTC v. BunZai Media Group, Inc.

See, e.g., FTC v. Universal Premium Services; FTC v. Remote Response; FTC v. Berkeley

Premium Nutraceuticals; FTC v. Hispanexo; FTC v. Age of Learning, Inc.

See, e.g., Negative Options: A Report By the Staff of the FTC’s Division of Enforcement, 28.

15 U.S.C. § 8403. ROSCA incorporates the definition of “negative option feature” from the

Commission’s Telemarketing Sales Rule, 16 C.F.R. § 310.2(w). ROSCA also contains a finding

that “Third party sellers used a free trial period to enroll members, after which they periodically

charged consumers until consumers affirmatively canceled the memberships. This use of “freeto-pay conversion” and “negative option” sales took advantage of consumers’ expectations that

they would have an opportunity to accept or reject the membership club offer at the end of the

trial period.” 15 U.S.C. § 8401(8). Finally, in addition to addressing negative option marketing,

ROSCA contains provisions related to third party “post transaction” offers. See, e.g., 15 U.S.C.

§ 8402.

The Commission has brought several cases alleging a failure to disclose adequately the terms

of the negative option feature. See, e.g., FTC v. NutraClick II; FTC v. Triangle Media

Corporation; FTC v. AAFE Products Corp. The Commission recently alleged that failure to

disclose a material term of the underlying service that was necessary to prevent deception

violated this provision of ROSCA. In re: MoviePass, Inc., No. C-4751 (October 5, 2021).

charging the consumer’s account; 16 and (3) provides simple mechanisms for the consumer to

stop recurring charges. 17

ROSCA also addresses offers made by, or on behalf of, third-party sellers during, or

immediately following, a transaction with an initial merchant. Specifically, ROSCA prohibits

post-transaction, third-party sellers 18 from charging or attempting to charge consumers unless the

seller: (1) before obtaining billing information, clearly and conspicuously discloses the offer’s

material terms; and (2) receives the consumer’s express informed consent by obtaining the

consumer’s name, address, contact information, as well as the full account number to be charged,

and requiring the consumer to perform an additional affirmative action indicating consent. 19

ROSCA also prohibits initial merchants from disclosing billing information to any posttransaction third-party seller for use in any Internet-based sale of goods or services. 20

Furthermore, ROSCA provides that a violation of that Act is a violation of a Commission

trade regulation rule under Section 18 of the FTC Act. 21 Thus, the Commission may seek a

variety of remedies for violations of ROSCA, including civil penalties under Section 5(m)(1)(A)

of the FTC Act; 22 injunctive relief under Section 13(b) of the FTC Act; 23 and consumer redress,

See, e.g., FTC v. BunZai Media Group, Inc.; FTC v. Health Formulas, LLC; and FTC v. JDI

Dating, Ltd.

See, e.g., FTC v. Age of Learning, Inc.; FTC v. AdoreMe, Inc.; and FTC, State of Illinois, and

State of Ohio v. One Technologies.

ROSCA defines “post-transaction third-party seller” as a person other than the initial merchant

who sells any good or service on the Internet and solicits the purchase on the Internet through an

initial merchant after the consumer has initiated a transaction with the initial merchant. 15

U.S.C. § 8402(d)(2).

15 U.S.C. § 8402(a).

15 U.S.C. § 8402(b).

15 U.S.C. § 8404. Section 18 of the FTC Act is 15 U.S.C. § 57a.

15 U.S.C. § 45(m)(1)(A).

15 U.S.C. § 53(b).

such as damages, and other relief under Section 19 of the FTC Act. 24 Although Congress

charged the Commission with enforcing ROSCA, it did not direct the FTC to promulgate

implementing regulations. 25

Telemarketing Sales Rule: The TSR prohibits deceptive telemarketing acts or practices,

including those involving negative option offers, and certain types of payment methods common

in deceptive negative option marketing. Specifically, the TSR requires telemarketers to disclose

all material terms and conditions of the negative option feature, including the need for

affirmative consumer action to avoid the charges, the date (or dates) the charges will be

submitted for payment, and the specific steps the customer must take to avoid the charges. It

also prohibits telemarketers from misrepresenting such information and contains specific

requirements related to payment authorization. 26 Finally, the TSR prohibits the use of payment

methods often used in deceptive marketing, including negative options, such as remotely created

checks. 27 The Rule, however, only applies to negative option offers made over the telephone.

Prenotification Plan Rule: The Commission promulgated the “Use of Prenotification

Negative Option Plans” Rule (“Prenotification Plan Rule”) (16 C.F.R. Part 425). 28 The

Prenotification Plan Rule requires sellers of such plans to clearly and conspicuously disclose

15 U.S.C. § 57b(a)(1) and (b).

ROSCA states that a violation “of this chapter or any regulation prescribed under this chapter

shall be treated as a violation of a rule under section 18 of the Federal Trade Commission Act

(15 U.S.C. 57a) regarding unfair or deceptive acts or practices.” 15 U.S.C. § 8404(a).

16 C.F.R. Part 310.3(a).

80 Fed. Reg. 77520 (Dec. 14, 2015). The TSR Notice of Proposed Rulemaking (78 Fed. Reg.

41200 (July 9, 2013)) noted negative option cases where the defendants used unauthorized

remotely created checks. E.g., FTC v. FTN Promotions, Inc., Civ. No. 8:07-1279 (M.D. Fla.

Dec. 30, 2008) (Stip. Perm. Inj.) (defendants allegedly caused more than $171 million in

unauthorized charges to consumers’ accounts for bogus travel and buyers’ clubs in part by using

unauthorized remotely created checks).

The Commission issued the Rule after finding some negative option marketers committed

unfair and deceptive practices that violated Section 5 of the Act, 15 U.S.C. § 45.

their plan’s material terms before consumers subscribe. It enumerates seven material terms

sellers must disclose: (1) how subscribers must notify the seller if they do not wish to purchase

the selection; (2) any minimum purchase obligations; (3) the subscribers’ right to cancel; (4)

whether billing charges include postage and handling; (5) that subscribers have at least ten days

to reject a selection; (6) that, if any subscriber is not given ten days to reject a selection, the seller

will credit the return of the selection and postage to return the selection, along with shipping and

handling; and (7) the frequency with which announcements and forms will be sent. 29 In

addition, sellers must provide particular periods during which they will send introductory

merchandise, give consumers a specified period to respond to announcements, provide

instructions for rejecting merchandise in announcements, and promptly honor written

cancellation requests. 30

The Prenotification Plan Rule applies only to plans like book-of-the-month clubs in

which sellers provide periodic notices offering goods to participating consumers and then send—

and charge for—those goods only if the consumers take no action to decline the offer. These

types of plans, however, account for only a small fraction of current negative option marketing.

Therefore, the Rule does not reach most modern negative option marketing. 31

16 C.F.R. § 425.1(a)(1)(i)-(vii).

16 C.F.R. §§ 425.1(a)(2) and (3); § 425.1(b).

The Prenotification Plan Rule defines “negative option plan” narrowly to apply only to

prenotification plans. 16 C.F.R. § 425.1(c)(1). In 1998, the Commission clarified the Rule’s

application to such plans in all media, stating that it “covers all promotional materials that

contain a means for consumers to subscribe to prenotification negative option plans, including

those that are disseminated through newer technologies . . . .” 63 Fed. Reg. 44555, 44561 (Aug.

20, 1998). In 2017, the Commission estimated that fewer than 100 sellers (“clubs”) were subject

to the current Rule’s requirements. 82 Fed. Reg. 38907, 38908 (Aug. 16, 2017).

Other Relevant Requirements: EFTA 32 and the Unordered Merchandise Statute 33 also

contain provisions relevant to negative option marketing. EFTA prohibits sellers from imposing

recurring charges on a consumer’s debit cards or bank accounts without written authorization.

The Unordered Merchandise Statute provides that mailing unordered merchandise, or a bill for

such merchandise, constitutes an unfair method of competition and an unfair trade practice in

violation of Section 5 of the FTC Act.

II.

Principles For Negative Option Marketing

Given the number of applicable statutory and regulatory requirements and the ongoing

problems in the marketplace, the Commission now issues the following enforcement guidance

based on its enforcement history. 34 This guidance covers three areas commonly addressed by the

Commission in its negative option cases: disclosures, consent, and cancellation. These

principles convey the Commission’s current views on the application of relevant statutes and

regulations to negative option marketing and, as such, should help marketers in their compliance

efforts and better understand how the Commission enforces the law.

Disclosures: ROSCA 35 requires marketers to clearly and conspicuously disclose the

material terms of the transaction. 36 Pursuant to longstanding precedent, any express claim or

15 U.S.C. §§ 1693-1693r.

39 U.S.C. § 3009.

In an October 2, 2019 Notice (84 Fed. Reg. 52393), the Commission sought comment on the

need for amendments to the “Rule Concerning the Use of Prenotification Negative Option Plans”

(i.e., “Negative Option Rule” (16 CFR Part 425)) to help consumers avoid recurring payments

for products and services they did not intend to order and to allow them to cancel such payments

without unwarranted obstacles. The Commission will continue to closely monitor compliance

with the rules and laws applicable to negative option marketing, and is still considering various

options in the rule review proceeding for the Negative Option Rule.

Any reference to ROSCA in these principles applies only to Internet transactions, consistent

with that statute’s coverage.

Of course, sellers fail to disclose adequately material terms if the disclosed terms are not

truthful and substantiated.

deliberately implied claim is presumed to be material. 37 Moreover, the FTC’s cases for failure to

disclose under Section 5 of the FTC Act are generally consistent with ROSCA. 38 Those terms at

minimum should include:

•

Any material terms related to the underlying product or service that are necessary

to prevent deception, regardless of whether that term directly relates to the terms

of the negative option offer; 39

•

That consumers will be charged 40 for the good or service, or that those charges

will increase after any applicable trial period ends, and, if applicable, that the

charges will be on a recurring basis, unless the consumer timely takes steps to

prevent or stop such charges;

•

Each deadline (by date or frequency) by which the consumer must act in order to

stop the charges;

•

The amount (or range of costs) the consumer will be charged or billed and, if

applicable, the frequency of such charges a consumer will incur unless the

consumer takes timely steps to prevent or stop those charges;

See, e.g., FTC Statement on Deception, 103 F.T.C. 174, 182 (1984) (appended to Cliffdale

Assocs., Inc., 103 F.T.C. 110 (1984)); Thompson Medical Co., 104 F.T.C. 648, 816 (1984).

The Commission has consistently brought cases for deceptive and pure omissions of material

fact. See, e.g., FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375, 1390 (M.D. Fla. 2018); FTC v.

NPB Advert., Inc., 218 F. Supp. 3d 1352, 1361 (M.D. Fla. 2016); FTC v. Am. Standard Credit

Sys., Inc., 874 F. Supp. 1080, 1088 (C.D. Cal. 1994); FTC v. BlueHippo Funding, LLC, 762 F.3d

238, 241 (2d Cir. 2014). But see, In re International Harvester, 104 F.T.C. 949, 1059 (1984)

(Not all omissions are deceptive or unfair. “The number of facts that may be material to

consumers-and on which they may have prior misconceptions-is literally infinite.”)

The Commission recently alleged that a negative option seller’s failure to disclose that it was

impeding access to its movie subscription service violates ROSCA. MoviePass, Inc.

“Charge,” “Charged,” or “Charging,” for the purposes of this Policy Statement, means any

attempt to collect money or other consideration from a consumer, including but not limited to

causing Billing Information to be submitted for payment, including against the consumer’s credit

card, debit card, bank account, telephone bill, or other account.

•

The date (or dates) each charge will be submitted for payment; and

•

All information necessary to cancel the contract.

These disclosures must be clear and conspicuous. 41 To meet this standard, offers should be

difficult to miss (i.e., easily noticeable) or unavoidable and easily understandable by ordinary

consumers, including:

•

In any communication that is solely visual or solely audible, the disclosure should

be made through the same means through which the communication is presented.

In any communication made through both visual and audible means, such as a

television advertisement, the disclosure should be presented simultaneously in

both the visual and audible portions of the communication even if the

representation requiring the disclosure is made in only one means.

•

A visual disclosure, by its size, contrast, location, the length of time it appears,

and other characteristics, should stand out from any accompanying text or other

visual elements so that it is easily noticed, read, and understood.

•

An audible disclosure, including by telephone or streaming video, should be

delivered in a volume, speed, and cadence sufficient for ordinary consumers to

easily hear and understand it.

•

In any communication using an interactive electronic medium, such as the

Internet or software, the disclosure should be unavoidable. A disclosure is not

clear and conspicuous if a consumer needs to take any action, such as clicking on

a hyperlink or hovering over an icon, to see it.

Supra at nn. 9 and 15.

•

The disclosure should use diction and syntax understandable to ordinary

consumers and should appear in each language in which the representation that

requires the disclosure appears.

•

The disclosure should comply with these requirements in each medium through

which it is received, including all electronic devices and face-to face

communications.

•

The disclosure should not be contradicted or mitigated by, or inconsistent with,

anything else in the communication. 42

•

When the representation or sales practice targets a specific audience, such as

children, the elderly, or the terminally ill, “ordinary consumers” includes

reasonable members of that group.

Additionally, if the disclosures are in writing (including on the Internet), they should:

•

if related to the negative option feature, appear immediately adjacent to the means

of recording the consumer’s consent for the negative option feature;

•

if not related to the negative option feature, appear before consumers make a

decision to buy (e.g., before they “add to shopping cart”); and

•

not contain any other information that interferes with, detracts from, contradicts,

or otherwise undermines the ability of consumers to read and understand the

An example of an inadequate disclosure is one where the consumer sees an offer upfront, in an

electronic or written advertisement or on the landing page of a website, which is materially

different from the terms of the offer presented in later stages, such as later web pages, of the

ordering process. See, e.g., FTC v. E.M.A. Nationwide, Inc., 767 F.3d 611, 633 (6th Cir. 2014);

FTC v. Fed. Loan Modification Law Ctr., LLP, No. SA-CV-09-401-CJC (MLGx) (C.D. Cal.

2010); FTC v. Grant Connect, LLC, 827 F. Supp. 2d 1199, 1214 (D. Nev. 2011).

disclosures, including any information not directly related to the material terms

and conditions of any negative option feature.

For all telephone and other oral offers, the disclosures should not contain any other

information that interferes with, detracts from, contradicts, or otherwise undermines the ability of

consumers to understand the disclosures, including any information not directly related to the

material terms and conditions of any negative option feature.

Consent: 43 ROSCA, judicial decisions applying Section 5, and cases brought by the

Commission under those laws make clear marketers should obtain the consumer’s express

informed consent before charging the consumer. 44 To attain express informed consent, the

negative option seller should:

•

obtain the consumer’s acceptance of the negative option feature offer separately

from any other portion of the entire transaction;

•

not include any information that interferes with, detracts from, contradicts, or

otherwise undermines the ability of consumers to provide their express informed

consent to the negative option feature; 45

•

obtain the consumer’s unambiguously affirmative consent to the negative option

feature; 46

Negative option sellers covered by the Telemarketing Sales Rule should also ensure that they

are complying with the consent requirements in 16 C.F.R. § 310.4 specifically applicable to

transactions involving a free-to-pay conversion and preacquired account information.

Supra at nn. 11 and 16.

Such information could appear on the product page itself (e.g., extraneous language that

interferes with the consumer’s ability to provide consent) or in another location (e.g., a separate

webpage containing information materially contradicting the information on the consent page).

A “pre-checked box” does not constitute affirmative consent. In addition, the seller should

clearly disclose the name of the billing entity authorized by the consumer’s consent.

•

obtain the consumer’s unambiguously affirmative consent to the entire

transaction; and

•

be able to verify the consumer’s consent.

Cancellation: ROSCA requires negative option sellers to provide a simple, reasonable

means for consumers to cancel their contracts. 47 To meet this standard, negative option sellers

should provide cancellation mechanisms that are at least as easy to use as the method the

consumer used to initiate the negative option feature. For example, to ensure compliance with

this simple cancellation mechanism requirement, negative option sellers should not subject

consumers to new offers or similar attempts to save the negative option arrangement that impose

unreasonable delays on consumers’ cancellation efforts. 48 In addition, negative option sellers

should provide their cancellation mechanisms at least through the same medium (such as website

or mobile application) the consumer used to consent to the negative option feature. The negative

option seller should provide, at a minimum, the simple mechanism over the same website or

web-based application the consumer used to purchase the negative option feature. If the seller

also provides for telephone cancellation, it should provide, at a minimum, a telephone number,

and answer all calls to this number during normal business hours, within a short time frame, and

ensure the calls are not lengthier or otherwise more burdensome than the telephone call the

consumer used to consent to the negative option feature.

Finally, to comply with Section 5, a seller’s cancellation procedures for negative option

features should be effective. Sellers should not impede the effective operation of promised

Supra at 17.

While a request to consider an offer or discount would not amount to an unreasonable delay,

multiple requests for a consumer to listen to additional offers, lengthy pitches, or ignoring a

consumer’s request to decline further offers could amount to an unreasonable delay.

cancellation procedures, and should honor cancellation requests that comply with such

procedures. In implementing effective cancellation procedures, marketers should not, among

other things: hang up on consumers who call to cancel; place them on hold for an unreasonably

long time; provide false information about how to cancel; or misrepresent the reasons for delays

in processing consumers’ cancellation requests. 49 If ROSCA applies, sellers must comply with

both that statute and Section 5 of the FTC Act.

See, e.g., FTC v. Universal Premium Services; FTC v. Remote Response; FTC v. Hispanexo;

FTC v. Berkeley Premium Nutraceuticals.

Policy Statement of the Federal Trade Commission on Education Technology

and the Children’s Online Privacy Protection Act

The Federal Trade Commission (“Commission”) is committed to ensuring that education

technology (“ed tech”) tools and their attendant benefits do not become an excuse to ignore

critical privacy protections for children. When Congress enacted the Children’s Online Privacy

Protection Act1 (“COPPA”), it empowered the Commission with tools beyond administering

compliance with notice and consent regimes. The Commission’s COPPA authority demands

enforcement of meaningful substantive limitations on operators’ ability to collect, use, and retain

children’s data, and requirements to keep that data secure. The Commission intends to fully

enforce these requirements—including in school and learning settings where parents may feel

they lack alternatives.

Protecting children’s privacy online has been a priority for the Commission since 1998,

when the Commission recommended “that Congress develop legislation placing parents in

control of the online collection and use of personal information from their children.”2 Thereafter,

Congress enacted COPPA and charged the Commission with enforcing the law, entrusting the

FTC to take the lead in protecting children’s privacy just as the country was entering the Internet

age. To implement COPPA, the Commission issued the COPPA Rule, which became effective in

2000.3

In the decades since COPPA’s enactment, there has been a steady proliferation of

technologies that allow, and business models that depend on, the online collection and

monetization of consumers’ personal information. The development of ever more sophisticated

targeting practices, in some cases based on comprehensive collection of users’ activities across

the Internet, has raised concerns that businesses might engage in harmful conduct and led to calls

for strengthening children’s privacy protections. Partly in response to these concerns, the

Commission revised the COPPA Rule4 in 2013, including to hold third parties such as

advertising networks liable for collection of children’s personal information from child-directed

sites in violation of the Rule5 and to expand the definition of personal information to include

15 U.S.C. §§ 6501–6505.

FED. TRADE COMM’N, PRIVACY ONLINE: A REPORT TO CONGRESS, at 42 (June 1998). See also Complaint, In re

Liberty Fin. Cos., Inc., FTC File No. 982-3522 (Aug. 12, 1999)(alleging that website operator falsely represented

that personal information collected from children in a survey would be maintained anonymously and that

participants would be sent an e-mail newsletter and prizes); Complaint, In re GeoCities, FTC File No. 982-3015

(Feb. 5, 1999) (alleging that website operator misrepresented which entity collected and maintained personal

identifying information collected from children).

16 C.F.R. Part 312. As discussed below, the Commission strengthened the COPPA Rule through amendments that

became effective in 2013. See Children’s Online Privacy Protection Rule, 78 Fed. Reg. 3,972 (Jan. 17, 2013) (Final

Rule amendments codified at 16 C.F.R. Part 312).

See id.

See id. at 4,010. See also Complaint, United States v. OpenX Techs., Inc., Case No. 2:21-cv-09693 (C.D. Cal. Dec.

15, 2021) (alleging that online advertising platform collected and transmitted location information and persistent

identifiers from users of child-directed apps without complying with COPPA); Complaint, FTC and the State of

New York v. Google LLC and YouTube, LLC, Case No. 1:19-cv-2642 (D.D.C. Sept. 4, 2019) (alleging that YouTube

persistent identifiers used to target advertising to children.6 Since that time, companies’

information collection practices have continued to become more extensive, and concerns remain

that children’s information may be used to target them.

Concerns about data collection are particularly acute in the school context, where

children and parents often have to engage with ed tech tools in order to participate in a variety of

school-related activities. School-issued personal computing devices and online learning services

have provided substantial benefits to students, particularly as the COVID-19 pandemic closed

schools and forced families to switch from in-person to remote learning for their children. At the

same time, parents may have reasonable questions and concerns about the personal information

that ed tech providers collect and how they use and potentially share that information with third

parties, including for marketing purposes. And parent groups, among others, have expressed

concern that children are a captive audience in the school setting and should not be targeted with

advertising as they pursue their educations.7 School-issued devices and applications also enter

families’ homes, potentially allowing for even more private information to be collected and

shared. Commission staff has provided extensive guidance8 on COPPA’s application to ed tech

providers to address these concerns.

In investigating potential violations of COPPA by providers of ed tech and other covered

online services, the Commission intends to scrutinize compliance with the full breadth of the

substantive prohibitions and requirements of the COPPA Rule and statutory language. In

particular, the Commission will focus on:

•

Prohibition Against Mandatory Collection: COPPA-covered companies, including ed

tech providers, must not condition participation in any activity on a child disclosing more

information than is reasonably necessary for the child to participate in that activity.9

These businesses cannot stop students from engaging in an ed tech activity if they do not

provide information beyond what is reasonably needed to administer the students’

collected persistent identifiers used for targeted advertising from users of child-directed channels without complying

with COPPA); Complaint, United States v. InMobi Pte Ltd., Case No. 3:16-cv-3474 (N.D. Cal. June 22, 2016)

(alleging that mobile advertising network collected geolocation information from users of apps directed to children

under the age of 13 without complying with COPPA).

78 Fed. Reg. 3,972, 4,009. See also Complaint, United States v. HyperBeard, Inc., Case No. 3:20-cv-3683 (N.D.

Cal. June 3, 2020) (alleging that app developer allowed third-party ad networks to use persistent identifiers to track

users of its child-directed apps without complying with COPPA); Complaint, FTC and the State of New York v.

Google LLC and YouTube, LLC, Case No. 1:19-cv-2642 (D.D.C. Sept. 4, 2019); Complaint, United States v. Retro

Dreamer, Case No. 5:15-cv-2569 (C.D. Cal. Dec. 17, 2015) (alleging that app developer allowed third-party

advertisers to collect persistent identifiers through its child-directed apps without complying with COPPA);

Complaint, United States v. LAI Sys., LLC, Case No. 2:15-cv-9691 (C.D. Cal. Dec. 17, 2015).

See, e.g., COPPA Rule Review, FTC-2019-0054 (Project No. P195404), Comments of Campaign for a

Commercial-Free Childhood, et al., Comment No. 117343, at 8 (Dec. 11, 2019) (“In many cases, parents and

students are not even aware of what data is being collected, why it is being collected, who is collecting it, or where it

is being stored. This data is often used to build behavioral profiles that allow third parties to create more effective

marketing campaigns, targeted advertisements, and, ultimately, psychological manipulation of other children.”).

See Complying with COPPA: Frequently Asked Questions, FED. TRADE COMM’N (July 2020) § N,

https://www.ftc.gov/business-guidance/resources/complying-coppa-frequently-askedquestions#N.%20COPPA%20AND%20SCHOOLS.

16 C.F.R. § 312.7. See also Complaint, United States v. Looksmart Ltd., Civ. Action No. 01-606-A (E.D. Va. Apr.

19, 2001); Complaint, United States v. BigMailbox.com, Inc., Civ. Action No. 01-605-A (E.D. Va. Apr. 19, 2001).

participation in the activity.10 For example, if an ed tech provider does not reasonably

need to be able to email students, it cannot condition the student’s access to schoolwork

on students providing their email addresses.11 Students must not be required to submit to

unnecessary data collection in order to do their schoolwork.

•

Use Prohibitions: COPPA-covered companies, including ed tech providers, are strictly

limited in how they can use the personal information they collect from children. For

example, operators of ed tech that collect personal information pursuant to school

authorization12 may use such information only to provide the requested online education

service. In this context, ed tech companies are prohibited from using such information for

any commercial purpose, including marketing, advertising, or other commercial purposes

unrelated to the provision of the school-requested online service.13

•

Retention Prohibitions: COPPA-covered companies, including ed tech providers, must

not retain personal information collected from a child longer than reasonably necessary to

fulfill the purpose for which it was collected.14 It is unreasonable, for example, for an ed

tech provider to retain children’s data for speculative future potential uses.

•

Security Requirements: COPPA-covered companies, including ed tech providers, must

have procedures to maintain the confidentiality, security, and integrity of children’s

personal information.15 For example, even absent a breach, COPPA-covered ed tech

providers violate COPPA if they lack reasonable security.16

Such limitations on collection, use, and retention, along with security requirements, place

significant responsibility on COPPA-covered businesses to implement strong privacy

protections, in addition to the notice and consent requirements of the COPPA Rule. The

responsibility for COPPA compliance is on businesses, not schools or parents—and agreements

must reflect that.

The text of the COPPA Rule addressing prohibitions against conditioning access (16 C.F.R. § 312.7), which is

described here, restates nearly verbatim the text of the statutory language (15 U.S.C. § 6502(b)(1)(C)). As part of its

ongoing rule review, the Commission is carefully analyzing this provision to ensure that operators are aware of their

obligations. See Request for Public Comment on the Federal Trade Commission’s Implementation of the Children’s

Online Privacy Protection Rule, 64 Fed. Reg. 35,842, 35,846 (July 25, 2019).

See Children’s Online Privacy Protection Rule, 64 Fed. Reg. 22,750, 22,758 (proposed Apr. 27, 1999) (codified at

16 C.F.R. § 312) (discussing email address example).

Children’s Online Privacy Protection Rule, 64 Fed. Reg. 59,888, 59,903 (Final Rule released Nov. 3, 1999)

(codified at 16 C.F.R. § 312).

Complying with COPPA: Frequently Asked Questions, FED. TRADE COMM’N § N, https://www.ftc.gov/businessguidance/resources/complying-coppa-frequently-asked-questions#N.%20COPPA%20AND%20SCHOOLS (last

visited May 18, 2022).

16 C.F.R. § 312.10. See also Complaint, United States v. Kurbo, Inc. and WW Int’l, Inc., No. 3:22-cv-00946 (N.D.

Cal. Feb. 16, 2022). Complaint, United States v. Musical.ly, Case No. 2:19-cv-1439 (C.D. Cal. Feb. 27, 2019).

15 U.S.C. § 6502(b)(1)(D); 16 C.F.R. § 312.8. See also Complaint, In re Retina-X Studios, LLC, FTC File No.

1723118 (Mar. 26, 2020). Complaint, United States v. Unixiz, Inc. d/b/a/ iDressup.com, No. 5:19-cv-02222-NC

(N.D. Cal. April 24, 2019); Complaint, United States v. VTech Elecs. Ltd., Case No. 1:18-cv-114 (N.D. Ill. Jan. 8,

2018); Complaint, United States v. RockYou, Inc., No 3:12-cv-01487-SI (N.D. Cal. Mar. 26, 2012).

16 C.F.R. § 312.10.

Children should not have to needlessly hand over their data and forfeit their privacy in

order to do their schoolwork or participate in remote learning, especially given the wide and

increasing adoption of ed tech tools. Going forward, the Commission will closely scrutinize the

providers of these services and will not hesitate to act where providers fail to meet their legal

obligations with respect to children’s privacy.

Policy Statement of the Federal Trade Commission on Rebates and Fees in Exchange for

Excluding Lower-Cost Drug Products

American families and businesses should never pay higher prices for medicine due to

unlawful business practices. For this reason, challenging healthcare industry conduct that may

raise prices and stifle innovation is a top priority for the Federal Trade Commission (“FTC” or

“Commission”), and the Commission will use its full authority under the FTC Act to do so. The

FTC has long pursued a comprehensive agenda to address unlawful conduct in the healthcare and

pharmaceutical industries. 1

For many years, the Commission has received complaints about rebates and fees paid by

drug manufacturers to pharmacy benefit managers (PBMs) and other intermediaries to favor

high-cost drugs that generate large rebates and fees that are not always shared with patients. 2

These rebates and fees may shift costs and misalign incentives in a way that ultimately increases

patients’ costs and stifles competition from lower-cost drugs, especially when generics and

biosimilars are excluded or disfavored on formularies.

For an overview of FTC healthcare actions generally, see MARKUS H. MEIER ET AL., OVERVIEW OF FTC ACTIONS,

FED. TRADE COMM’N (Apr. 2022).

See H. Rep. 16-456, 116th Cong., (2021), www.congress.gov/116/crpt, (that accompanied H.R. 7668, Fin. Serv’s

and General Gov’t Appropriations Bill, (2021)). The Report states: “The Committee urges the FTC to prioritize

investigations into manufacturers that erect rebate walls to block competition from new branded therapies,

biosimilars, generics, and other innovative products.” Id at 67; see also FED. TRADE COMM’N, REP. ON REBATE

WALLS, at 1 n. 3. Previous discussions of the potential for pharmaceutical rebate agreements to foreclose

competition were discussed at an FDA/FTC Workshop on a Competitive Marketplace for Biosimilars and an FTC

workshop on prescription drug markets. See Public Workshop: FDA/FTC Workshop on a Competitive Marketplace

for Biosimilars, U.S. FOOD AND DRUG ADMIN. (Mar. 9, 2020), https://www.fda.gov/drugs/news-events-humandrugs/public-workshop-fdaftc-workshop-competitive-marketplace-biosimilars-03092020-03092020#eventmaterials; Understanding Competition in Prescription Drug Markets: Entry and Supply Chain Dynamics, FED.

TRADE COMM’N (Nov. 8, 2017), https://www.ftc.gov/news-events/events/2017/11/understanding-competitionprescription-drug-markets-entry-supply-chain-dynamics. The FTC has been aware of the issues surrounding drug

rebate practices since at least 1999. See ROY LEVY, THE PHARMACEUTICAL INDUSTRY: A DISCUSSION OF

COMPETITIVE AND ANTITRUST ISSUES IN AN ENVIRONMENT OF CHANGE, BUREAU OF ECON. STAFF REP., FED. TRADE

COMM’N (Mar. 1999).

The Commission is issuing this Policy Statement to explain its enforcement policy with

respect to these practices. 3 We do so by highlighting insulin, which many have cited as one

prominent example of a prescription drug impacted by high rebates and fees to PBMs and other

intermediaries. 4 Insulin is a life-sustaining treatment for roughly 8 million Americans who rely

on it to control diabetes. 5 Research indicates that the wholesale price of insulin nearly tripled

between 2009 and 2017, 6 increasing out-of-pocket costs for both insured 7 and uninsured

patients. 8 The list price for a year’s supply of insulin has risen to nearly $6,000, with out-ofpocket costs for insulin alone averaging $1,288 for uninsured patients and $613 for insured

patients as of 2017. 9

This Policy Statement does not confer any rights on any person and does not operate to bind the FTC or the public.

In any enforcement action, the Commission must prove the challenged act or practice violates one or more existing

statutory or regulatory requirements. In addition, this Policy Statement does not preempt federal, state, or local

laws. Compliance with those laws, however, will not necessarily preclude Commission law enforcement action

under the FTC Act or other statutes. Pursuant to the Congressional Review Act (5 U.S.C. § 801 et seq.), the Office

of Information and Regulatory Affairs designated this Policy Statement as not a “major rule,” as defined by 5 U.S.C.

§ 804(2).

U.S. SEN. FINANCE COMM., STAFF REP., INSULIN: EXAMINING THE FACTORS DRIVING THE RISING COST OF A

CENTURY OLD DRUG, at 71 (Jan. 2021) (“certain contracting and business practices may create incentives for PBMs

to favor drugs with high rebates and, in turn, discourage manufacturers from competing to lower WAC prices.”). See

also Karen Von Nuys et al., Estimation of the Share of Net Expenditures on Insulin Captured by US Manufacturers,

Wholesalers, PBMs, Pharmacies, and Health Plans from 2014 to 2018, 2 J. AM. MED. ASSOC. H. FORUM 1, 3 (2021)

(suggesting business practices of intermediaries may influence rising list prices for insulin).

See CARDINAL H., 2022 BIOSIMILARS REPORT: THE U.S. JOURNEY AND PATH AHEAD, at 18 (“over eight million

people use insulin daily to effectively manage their diabetes”); William T. Cefalu et al., Insulin Access and

Affordability Working Group: Conclusions and Recommendations, 41 DIABETES CARE 1299 (2018).

See Brian Sable-Smith, How Much Difference Will Eli Lilly’s Half Price Insulin Make, KAISER FAMILY

FOUNDATION (Mar. 12, 2019), https://khn.org/news/how-much-difference-will-eli-lillys-half-price-insulin-make/

(“Between 2009 and 2017 the wholesale price of a single vial of Humalog . . . nearly tripled — rising from $92.70 to

$274.70.”).

Cefalu et al., supra note 5, at 1302; Samantha Willner et al., "Life or death": Experiences of insulin insecurity

among adults with type 1 diabetes in the United States, 11 SSM POPULATION H. 1, 3 (2020).

See Cefalu et al., supra note 5, at 1308 (explaining uninsured patients pay the full list price without financial

assistance).

See Sherry Glied & Benjamin Zhu, Not so sweet: Insulin Affordability over Time, THE COMMONWEALTH FUND

(Sept. 25, 2020), https://www.commonwealthfund.org/publications/issue-briefs/2020/sep/not-so-sweet-insulinaffordability-over-time; Chien-Wen Tseng et al, Impact of Higher Insulin Prices on Out-of-Pocket Costs in

Medicare Part D, 43 J. DIABETES CARE 50 (2020) (“From 2014 to 2019, the average annual insulin price rose 55%

from $3,819 to $5,917… the projected yearly out-of-pocket cost for insulin increased 11% from $1,199 to $1,329.”).

These studies note significant heterogeneity in patient out-of-pocket costs depending on several factors including

which insulin product(s) is used, the amount of insulin needed, and whether the patient has commercial insurance,

Medicare, Medicaid or is uninsured.

Patients with diabetes have described how rising insulin costs have rendered this essential

product unaffordable and harmed them in different ways. 10 The increased cost of insulin has

caused many patients to ration it, 11 causing suffering, severe illness, and death. 12 During the

Commission’s Open Meeting in October 2021, one commenter discussed the death of her son

who was forced to ration insulin due to high costs. 13 Others have described how insulin costs and

the fear of losing health insurance have dissuaded them from leaving their current jobs and

limited their ability to pursue other opportunities 14 For example, one small business owner

expressed the fear of expanding his business because of insulin costs. 15 High insulin costs also

have an outsized impact on those least able to absorb or avoid these additional costs, including

patients from historically underserved communities. 16

In addition to other factors, some have suggested that high rebates and fees to PBMs and

other intermediaries may incentivize higher list prices for insulin and discourage coverage of the

Willner et al., supra, note 7; Fed. Trade Comm’n, Tr. of Open Comm’n Meeting, at 14-15, 19-20 (Oct. 21, 2021),

www.ftc.gov/openmeetingtranscript.pdf.

See Darby Herkert et al., Cost-Related lnsulin Underuse Among Patients With Diabetes, 179 J. AM. MED. ASSOC.

INTERN MED. 112-114 (2019) (finding one of every four patients rations insulin due to cost within one sample);

INSULIN SENATE REP., supra note 4, at 14.

See FTC Open Meeting Tr., supra note 10, at 14 -15, 18-19 (public commenters Matthew Dinger, Anna Squires,

and Nicole Smith Holt); see also S. Vincent Rajkumar, The High Cost of Insulin in the U.S.: An Urgent Call to

Action, 95 MAYO CLINIC PROC. 22 (Jan. 2020) (“Alec Smith was 23 when he was diagnosed with type 1 diabetes.…

At age 26, he could no longer stay on his mother’s health care insurance plan and needed to find his own coverage.

…The insurance available to him came with a $7600 deductible and a monthly premium of approximately $440.

Because he could not afford this, Alec decided to temporarily forego insurance coverage and purchase insulin with

cash. Unfortunately for him, the cash price of insulin was far beyond his means. He decided to try and ration the

amount of insulin he took till he had enough savings to purchase insurance. Sadly, on June 27, 2017, he was found

dead in his apartment of diabetic ketoacidosis.”).

FTC Open Meeting Tr., supra note 10, at 18-19 (public commenter Nicole Smith Holt describes the death of her

son, Alec Smith, and others from rationing insulin).

See Willner et al., supra note 7, at 6 (“the only reason that I'm working my job currently … is because I'm afraid

to get off of it because there goes my insurance, there goes my method to get any kind of insulin or supplies for

anything); see also FTC Open Meeting Tr., supra note 10, at 14-15; see also COLORADO ATT’Y GEN., PRESCRIPTION

INSULIN DRUG PRICING REP., at 53 (2020) (“Many survey respondents reported they feel hostage to jobs they would

like to leave but need to keep for the insurance because they could not afford insulin and supplies without it.”).

See, e.g., COLORADO ATT’Y GEN. INSULIN REP., supra, note 14, at 53 (“One survey respondent expressed the fear

of expanding his small business because of high insulin costs and overall expensive insurance costs.”).

See Herkert, et al., supra note 11 (“Patients with lower incomes were more likely to report cost-related

underuse…”).

lowest-cost insulin products. 17 As the Commission’s previous Report on Rebate Walls explained,

most consumers have insurance that covers a portion of their prescription costs. 18 Health plans,

usually through PBMs, use formularies to define which drugs are covered. Drug manufacturers

commonly pay PBMs and other intermediaries rebates and fees to have their drugs included on

formularies or placed on preferred formulary tiers. 19 Some rebates and fees are conditioned on

the sales volume of specific drugs or the exclusion of competing drug products from the same

formulary tier. 20

These rebate and fee agreements may incentivize PBMs and other intermediaries to steer

patients to higher-cost drugs over less expensive alternatives. 21 This practice could lead to

increased costs for both patients and payers, including increased out-of-pocket costs at the point

of sale. It may also insulate more expensive drugs from competing with less expensive

alternatives. Nothing prevents drug manufacturers, PBMs, and health plans from negotiating

good-faith rebates and fees for legitimate services that increase value to payers and patients.

However, when dominant drug manufacturers or intermediaries stifle or foreclose competition

from significantly less expensive generic and biosimilar alternatives, the Commission has the

Cefalu et al., supra note 5, at 1309 (“The current pricing and rebate system encourages high list prices. . . PBMs

negotiate rebates from manufacturers using formulary placement as leverage. PBMs often exclude from formularies

the insulins made by the manufacturer who offers the lowest rebate. . . People with diabetes are financially harmed

by high list price and high out of pocket costs.”); INSULIN SENATE REP., supra note 4, at 71 (“Information collected

for this investigation suggests that certain contracting and business practices may create incentives for PBMs to

favor drugs with high rebates and, in turn, discourage manufacturers from competing to lower WAC prices.”).

See FTC REBATE WALL REP., supra note 2, at 2.

Id. at 2; INSULIN SENATE REP., supra note 4, at 67 (“manufacturers offer substantial rebates to PBMs and their

clients for the purposes of securing preferred formulary placement for their products”).

See id., at 68 (“Manufacturers have increased their rebates in order to win preferred formulary placement and

block competitors.”).

See e.g., Stacie Dusetzina et al., Patient and Payer Incentives to Use Patented Brand-Name Drugs vs Authorized

Generic Drugs in Medicare Part D, 181 J. AM. MED. ASSOC. INTERN. MED. 1605, 1611 (2021) (describing Part D

plans’ use of high-list price brand insulins, including insulin lispro (Humalog), and insulin as part (Novolog) over

50% lower-list price authorized generic versions).

legal authority to investigate these practices and take enforcement action against unlawful

conduct. 22

The Commission has several legal authorities that may apply to these practices, including

Section 5 of the FTC Act, Section 3 of the Clayton Act, Section 2 of the Robinson-Patman Act,

and the Sherman Act. 23

Exclusionary rebates that foreclose competition from less expensive alternatives may

constitute unreasonable agreements in restraint of trade under Section 1 of the Sherman Act;

unlawful monopolization under Section 2 of the Sherman Act; or exclusive dealing under

Section 3 of the Clayton Act. 24 Moreover, inducing PBMs or other intermediaries to place

higher-cost drugs on formularies instead of less expensive alternatives in a manner that shifts

costs to payers and patients may violate the prohibition against unfair methods of competition or

unfair acts or practices under Section 5 of the FTC Act.

Finally, paying or accepting rebates or fees in exchange for excluding lower-cost drugs

may violate Section 2(c) of the Robinson-Patman Act, which prohibits payments to agents,

representatives, and intermediaries who represent another party’s interests in connection with the

purchase or sale of goods. 25 At least one court has held that this provision may reach rebates paid

At the request of Congress, the FTC has previously investigated certain PBM business practices. See FED. TRADE

COMM’N, PHARMACY BENEFIT MANAGERS: OWNERSHIP OF MAIL-ORDER PHARMACIES (Aug. 2005).

The Commission’s authority to address unfair methods of competition under Section 5 of the FTC Act include,

but are not limited to, conduct that would violate the Sherman Act. See, e.g., Oregon Lithoprint, Inc., Analysis to

Aid Public Comment, 83 Fed. Reg. 11529, 11531 (Mar. 15, 2018) (“The Commission has long held that an

invitation to collude violates Section 5 of the FTC Act even where there is no proof that the competitor accepted the

invitation.”).

See Fed. Trade Comm’n Act, 15 U.S.C. § 45; Sherman Act §§ 1 and 2; Clayton Act, 15 U.S.C. § 14.

15 U.S.C. § 13(c) (“It shall be unlawful for any person engaged in commerce, in the course of such commerce, to

pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, or any

allowance or discount in lieu thereof, except for services rendered in connection with the sale or purchase of goods,

wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other

intermediary therein where such intermediary is acting in fact for or in behalf, or is subject to the direct or indirect

control, of any party to such transaction other than the person by whom such compensation is so granted or paid.”).

by drug manufacturers to PBMs. 26 The Commission has a long history of addressing commercial

bribery and will continue to do so. 27

The FTC intends to closely scrutinize the impact of rebates and fees on patients and

payers to determine whether any of these provisions have been violated. In addition, the

Commission will monitor private litigation and file amicus briefs where it can aid courts in

analyzing unlawful conduct that may raise drug prices. The Commission will also continue to

study this issue to understand the full range of practices and implications.

The Commission recognizes the life-and-death stakes of this work and is committed to

acting expeditiously. As it has done throughout its history, the FTC will bring an

interdisciplinary approach, using resources and expertise from throughout the agency to combat

unlawful practices in the prescription drug industry.

See also PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW: AN ANALYSIS OF ANTITRUST PRINCIPLES

AND THEIR APPLICATION ⁋ 2362i (4th & 5th ed. 2015-2021) (collecting and discussing cases involving commercial

bribery under Section 2(c)); JOSEPH BAUER ET AL., KINTNER'S FEDERAL ANTITRUST LAW § 26.12 (2021).

In re Warfarin Sodium Antitrust Litig., Civ. No. 97-659 (D. Del.)1998 WL 883469, at *16 (D. Del. Dec. 7, 1998),

rev'd on other grounds, 214 F.3d 395 (3d Cir. 2000).

See Hon. Garland S. Ferguson, Jr., Chairman of FTC, Commercial Bribery: An Address to the Conf. on Com.

Bribery to the Comm. Standards Council and the Better Bus. Bureau of N.Y .City (Oct. 17, 1930),

www.ftc.gov/systemstatementsferguson_commercial_bribery (explaining the Commission’s focus on commercial

bribery as an unfair method of competition even before it gained authority under the Robinson-Patman Act); see

also Donald S. Clark, Sec’y of FTC, Remarks Regarding The Robinson-Patman Act: Annual Update, Before the

Robinson Patman Act Comm., Section of Antitrust Law, 46th Annual Spring Meeting (Apr. 2, 1998),

www.ftc.gov/public-statements/1998/04/robinson-patman-act-annual-update (recognizing the Robinson-Patman’s

prohibition on commercial bribery).

FTC Policy Statement on Enforcement Related to Gig Work

American workers deserve fair, honest, and competitive labor markets. Over the past

decade, internet-enabled “gig” companies have grown exponentially, and gig work now

composes a significant part of the United States economy.1 One study suggests the gig economy

will generate $455 billion in annual sales by 2023.2 The rapid growth of the gig economy is

made possible by the contributions of drivers, shoppers, cleaners, care workers, designers,

freelancers, and other workers. Protecting these workers from unfair, deceptive, and

anticompetitive practices is a priority, and the Federal Trade Commission (“FTC” or

“Commission”) will use its full authority to do so.3 As the Commission’s past work and current

initiatives illustrate, the agency’s broad-based jurisdiction and interdisciplinary approach to

market harms make it well positioned to confront the challenges this model can pose to workers.4

See, e.g., Ben Zipperer et al., Econ. Pol’y Inst., National Survey of Gig Workers Paints a Picture of Poor Working

Conditions, Low Pay, at 1 (June 1, 2022) (“While the concept of nontraditional, short-term, and contract work has

been around since well before the digital age, it wasn’t until the 2010s that digital platform companies like Uber,

DoorDash, Instacart, and TaskRabbit began to rise to prominence and shape the way we define gig work today.”).

Mastercard & Kaiser Assocs., Mastercard Gig Economy Industry Outlook and Needs Assessment, at 2 (May 2019).

While this Statement focuses on potential harms to gig workers and how the Commission might address them,

misconduct against any consumer—customers who use services offered through the platform, workers who supply

labor, and businesses on or off the platform—is prohibited. See, e.g., Decision & Order, In re Uber Techs., Inc., Dkt.

No. C-4662 (FTC Oct. 25, 2018) (requiring Uber to implement a comprehensive privacy program to protect personal

data collected from both riders and drivers); Decision & Order, Amazon.com., Dkt. No. C-4746 (FTC June 10, 2021)

(requiring Amazon to refund Amazon Flex drivers $61.7 million in tips that Amazon promised drivers but failed to

pay); Compl. ¶¶ 61–69, In re HomeAdvisor, Inc., Dkt. No. 9407 (FTC Mar. 11, 2022) (FTC challenging a leadgeneration platform’s alleged misrepresentations to small businesses about the platform’s effectiveness); see also

Letter from Protect Our Rests. to Fed. Trade Comm’n (July 21, 2021) (explaining how various practices that result

in diners paying higher prices to food delivery platforms also harm small businesses).

This Policy Statement elaborates on principles adopted by the Commission in individual cases and rules over the

course of many years. This Policy Statement does not confer any rights on any person and does not operate to bind

the FTC or the public. In any enforcement action, the Commission must prove the challenged act or practice violates

at least one existing statutory or regulatory requirement. In addition, this Policy Statement does not preempt federal,

state, or local laws. Compliance with those laws, however, will not necessarily preclude Commission law

enforcement action. Pursuant to the Congressional Review Act, 5 U.S.C. §§ 801 et seq., the Office of Information

and Regulatory Affairs designated this Policy Statement as not a major rule, as defined by 5 U.S.C. § 804(2).

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Background on Gig Work

The gig economy touches nearly every aspect of American life, from food delivery to

transportation to household services. Gig work involves activity where people earn income

providing on-demand work, often through a digital service like an app.5 Ride-hailing companies

recruit workers to drive customers in the worker’s personal vehicle. Food delivery services find

workers to deliver items from restaurants, grocery stores, and other merchants to customers.

Service apps connect workers with customers seeking help with cleaning, home repair, and other

temporary jobs. The gig work model is expanding into healthcare, retail, and other segments of

the economy.6 Demand for some services gig workers provide grew during the COVID-19

pandemic.7 Demand for other gig services, particularly transportation, decreased during that

same time and caused financial struggles for some workers, illustrating the precarious nature of

gig work.8

Sixteen percent of Americans report earning money through an online gig platform.9 Gig

workers live throughout the United States, in urban, suburban, and rural areas.10 As highlighted

See, e.g., Internal Revenue Serv., Gig Economy Tax Center (last updated Mar. 15, 2022); Elka Torpey & Andrew

Hogan, Working in a Gig Economy, U.S. Bureau of Labor Stat. (May 2016). Gig work also may be referred to as

“crowdwork,” contract work, on-call arrangements, or temporary work. See Gallup, Inc., Gallup’s Perspective on

the Gig Economy and Alternative Work Arrangements, at 7 (2018).

See, e.g., Fiona Greig & Daniel M. Sullivan, The Online Platform Economy Through the Pandemic JPMorgan

Chase Inst. (Oct. 2021) (reporting that some gig workers “transport people or goods” while other workers “offer a

growing variety of services including dog walking, home repair, telemedicine, and many others”); see also U.S.

Census Bureau, Selected Industries That Contributed to the U.S. Gig Economy: 2019 (June 30, 2022).

See, e.g., Accenture, Platforms Work, at 21 & ex.4 (2021) (showing with Uber data that “COVID-19 suppressed

demand for rideshare and enabled strong growth in delivery”).

See, e.g., Greig & Sullivan, The Online Platform Economy Through the Pandemic (noting that drivers for rideshare

platforms were “most likely to have received unemployment insurance” during the COVID-19 pandemic).

Anderson et al., The State of Gig Work in 2021, at 3, 16; see also Fed. Rsrv. Sys. Bd. of Governors, Report on the

Economic Well-Being of U.S. Households in 219, Featuring Supplemental Data from April 2020, at 18 (May 2020)

(“Nearly one in three adults earned money from gigs.”); cf. Katherine G. Abraham et al., Nat’l Bureau of Econ.

Rsch. Working Paper 24950, Measuring the Gig Economy: Current Knowledge and Open Issues (Aug. 2018)

(explaining why precisely measuring the number of gig workers in the U.S. economy is so difficult).

See Anderson et al., The State of Gig Work in 2021, at 24 (noting that comparable percentages of adults in urban,

suburban, and rural areas have earned money through an online gig platform in the past year); see also Ctr. for Rural

Innovation & Rural Innovation Strategies, Inc., The Growing Gig Economy in Rural America, at 4 (Nov. 2021).

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in the FTC’s Serving Communities of Color report, gig workers are disproportionately people of

color11: 30% of Latino adults, 20% of Black adults, and 19% of Asian adults report having

engaged in gig work, compared to only 12% of White adults.12 Many gig workers have lower

incomes and, because they may not be covered by wage and hour laws, can earn less than the

minimum wage.13 More than half of American gig workers report that the money they earn

through the gig economy is essential or important for meeting their basic needs.14

Gig workers are paid in different ways, including weekly, in “batches” after completing

multiple gigs, or immediately upon completing a gig (for a fee).15 Many workers are heavily

dependent on customer tips.16 Gig companies may generate revenue from multiple sources,

including a “take rate”17 (a percentage of customer payments for workers’ services), customer

fees, and commissions charged to merchants.

Fed. Trade Comm’n, Serving Communities of Color: A Staff Report on the Federal Trade Commission’s Efforts to

Address Fraud and Consumer Issues Affecting Communities of Color, at 19 & n.70 (Oct. 2021).

Anderson et al., The State of Gig Work in 2021, at 5; see DoorDash, 2021 DoorDash ESG Report: Growing and

Empowering Local Economies, at 41 (Apr. 19, 2022) (nearly 40% of DoorDash gig workers identify as people of

color, 58% are women, and 15% are veterans); Uber, 2021 ESG Report, at 28 (July 2021) (about half of Uber’s U.S.

delivery personnel identify as people of color).

See Zipperer et al., National Survey of Gig Workers, at 1 (“[A] survey of gig workers reveals that these workers

often are paid low wages, in some instances less than the minimum wage [and] they face economic insecurity at

high rates . . . .”); see also Anderson et al., The State of Gig Work in 2021, at 4–5, 7, 23; Gallup, Gallup’s

Perspective on the Gig Economy and Alternative Work Arrangements, at 8.

See Anderson et al., The State of Gig Work in 2021, at 31 (reporting that 58% of current or recent gig workers said

that money earned via gig jobs has been “essential or important for meeting their basic needs”).

See, e.g., DoorDash, What Is Fast Pay? (2020); Grubhub for Drivers, What Is Instant Cashout? (2020); Uber

Techs., Inc., Your Money When You Need It (2022).

See Chris Benner, UC Santa Cruz, On-Demand and On-the-Edge: Ride-Hailing and Delivery Workers in San

Francisco, at 28 (May 5, 2020) (“Delivery workers are particularly dependent on tips, which account for 30% of

their estimated earnings.”).

See Cong. Rsch. Serv., R44365, What Does the Gig Economy Mean for Workers?, at 3 (Apr. 28, 2017); see also

Aaron Gordon & Dhruv Mehrotra, Uber and Lyft Take a Lot More from Drivers Than They Say, Jalopnik (Aug. 26,

2019, 12:04 PM).

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II.

The Market for Gig Workers

As with any evolving sector of the economy, the Commission is attuned to gig work’s

promises and pitfalls. This Statement focuses on three market features that implicate the

Commission’s consumer protection and competition missions:

Control Without Responsibility. Companies frequently promote gig work as a flexible

opportunity for people to set their own hours and work on their own terms.18 These companies

often categorize their workers as independent contractors. Yet in practice these firms may tightly

prescribe and control their workers’ tasks in ways that run counter to the promise of

independence and an alternative to traditional jobs. This tension has contributed to litigation

across the country over allegations that gig workers are being misclassified as independent

contractors rather than employees.19 When misclassification occurs, workers are often deprived

of critical rights to which they are entitled under law (such as the right to organize, overtime pay,

and health and safety protections), and saddled with inordinate risks (such as unclear and

unstable pay, or responsibility for a vehicle, equipment, or supplies) and business expenses that

employers commonly bear (such as insurance, gas, maintenance, and taxes).20 At the same time,

See, e.g., Cong. Rsch. Serv., What Does the Gig Economy Mean for Workers?, at i (“The apparent availability of

gig jobs and the flexibility they seem to provide workers are frequently touted features of the gig economy.”).

See, e.g., Lawson v. Grubhub, Inc., 13 F.4th 908 (9th Cir. 2021); Waithaka v. Amazon.com, Inc., 966 F.3d 10 (1st

Cir. 2020); Razak v. Uber Techs., Inc.¸ 951 F.3d 137 (3d Cir. 2020); Hood v. Uber Techs., Inc., Case

No. 1:16-CV-998, 2019 WL 93546 (M.D.N.C. Jan. 3, 2019).

See, e.g., National Labor Relations Act, 29 U.S.C. §§ 151 et seq. (protecting, among other rights, employees’

rights to act together to address working conditions); U.S. Dep’t of the Treasury, The State of Labor Market

Competition, at 12 (“Classifying workers as independent contractors can especially reduce costs by shifting nonwage costs typically paid by employers (e.g. healthcare benefits) onto the employee. These costs are non-trivial—

approximately 30 percent of per-hour employer costs come from costs other than wages and salaries.”); see also Ken

Jacobs & Michael Reich, Inst. for Rsch. on Labor & Emp., Massachusetts Uber/Lyft Ballot Proposition Would

Create Subminimum Wage, at 2, Univ. Cal. Berkeley. (Sept. 2021) (estimating the financial impact of undisclosed

terms of work for rideshare drivers); James A. Parrott & Michael Reich, An Earnings Standard for New York City’s

App-Based Drivers: Economic Analysis and Policy Assessment, at 49 (July 2018) (noting the large amount of unpaid

“idle” time for rideshare drivers). Moreover, high inflation and other economic shocks may cause certain workerborne costs to rise without any corresponding increase in pay. See Gerrit De Vynck et al., Inflation Is Helping Gig

Companies Like Uber—and Hurting Their Workers, Wash. Post (Aug. 7, 2022, 6:00 AM EDT).

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gig companies may use nontransparent algorithms to capture more revenue from customer

payments for workers’ services than customers or workers understand.21 This dynamic calls for

scrutiny of promises gig platforms make, or information they fail to disclose, about the financial

proposition of gig work.

Diminished Bargaining Power. Gig workers often do not have the information they

need to know when work will be available, where they will have to perform it, or how they will

be evaluated.22 Behind the scenes, ever-changing algorithms may dictate core aspects of

workers’ relationship with a given company’s platform, leaving them with an invisible,

inscrutable boss.23 Workers have little leverage to demand transparency from gig companies: A

decentralized work environment, the potential lack of legal protections to organize, and a high

turnover rate driven by companies’ treatment of workers as replaceable all contribute to workers’

diminished bargaining power.24 Mandatory arbitration and class-action waivers are also

increasingly common among gig workers, meaning that most efforts to vindicate worker rights

occur in nonpublic, isolated proceedings.25 This power imbalance may leave gig workers more

See, e.g., Compl. ¶¶ 30–34, In re Amazon.com, Inc., Dkt. No. C-4746 (alleging that Amazon adopted a “variable

base pay” model for Amazon Flex so it could capture drivers’ tips); Dan Calacci, MIT Media Lab, Bargaining with

the Algorithm: Pooling Worker Data to Estimate Gig Economy Worker Pay (Oct. 15, 2020).

See, e.g., Compl. ¶¶ 35–47, Amazon.com, Dkt. No. C4746 (alleging that Amazon concealed changes to an

algorithm by falsely telling workers that no change had actually occurred).

See, e.g., Hatim A. Rahman, The Invisible Cage: Workers’ Reactivity to Opaque Algorithmic Evaluations, 66

Admin. Sci. Q. 945, 976 (2021); Spencer Soper, Fired by Bot at Amazon: “It’s You Against the Machine”,

Bloomberg (June 28, 2021, 5:00 AM); see also Noam Scheiber, How Uber Uses Psychological Tricks to Push Its

Drivers’ Buttons, N.Y. Times (Apr. 2, 2017).

See U.S. Dep’t of the Treasury, The State of Labor Market Competition, at 11 (“By removing the immediate nexus

between workers and the firm for which they provide services, workers are prevented from bargaining directly with

the entity that has the economic power.”); Christopher Mims, In a Tight Labor Market, Gig Workers Get Harder to

Please, Wall St. J. (May 4, 2019) (noting “[t]he unusually high rate of turnover [of workers] in the gig economy”);

see also Zipperer et al., National Survey of Gig Workers, at 7.

See, e.g., Elizabeth C. Tippett & Bridget Schaaf, How Concepcion and Italian Colors Affected Terms of Service in

the Gig Economy, 70 Rutgers U. L. Rev. 459, 461 (2018) (analyzing the high prevalence of mandatory arbitration

and class-action waivers in the gig economy even before Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018)).

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exposed to harms from unfair, deceptive, and anticompetitive practices and is likely to amplify

such harms when they occur.

Concentrated Markets. Markets populated by businesses that run online platforms are

often concentrated, resulting in reduced choice for workers, customers, and businesses. As a

platform grows by attracting more users (e.g., riders), it can become more valuable to users on

the other side of the platform (e.g., drivers) by generating so-called “network effects.” Because

network effects can lock in a dominant player’s market position, these businesses can be

incentivized to pursue tactics designed to quickly capture a large share of the market, leading the

market to “tip” and raising significant barriers to entry. Gig companies in concentrated markets

may be more likely to have and exert market power over gig workers or engage in

anticompetitive unilateral or coordinated conduct. Such conduct may eliminate or further weaken

competition among existing gig companies for workers’ services or prevent new gig companies

from getting off the ground or being able to enter the market. The resulting loss in competition

may enable gig companies to suppress wages below competitive rates, reduce job quality, or

impose onerous terms on gig workers.26 In the absence of robust competition among gig

companies, unfair and deceptive practices by one platform can proliferate across the labor

market, creating a race to the bottom that participants in the gig economy, and especially gig

workers, have little ability to avoid.

III.

FTC Enforcement Priorities

The FTC plays a vital role in addressing these and other challenges facing gig workers,

including practices directed toward customers, workers, and honest businesses. As the only

federal agency dedicated to enforcing consumer protection and competition laws in broad sectors

See, e.g., Exec. Order No. 14,036, Promoting Competition in the American Economy, § 1, 86 Fed. Reg. 36,987,

36,987 (July 14, 2021); U.S. Dep’t of the Treasury, The State of Labor Market Competition, at i.

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of the economy, the FTC examines unlawful business practices and harms to market participants

holistically, complementing the efforts of other enforcement agencies with jurisdiction in this

space. This integrated approach to investigating unfair, deceptive, and anticompetitive conduct is

especially appropriate for the gig economy, where law violations often have cross-cutting causes

and effects.

While online gig platforms may seem novel, traditional legal principles of consumer

protection and competition apply.27 And the manifold protections enforced by the Commission

do not turn on how gig companies choose to classify working consumers.28 The Commission will

use the full portfolio of laws it enforces to prevent unfair, deceptive, anticompetitive, and

otherwise unlawful practices affecting gig workers.

Holding Gig Companies Accountable for Their Claims and Conduct

Concerning Gig Work’s Costs & Benefits

Gig companies that classify their workers as independent contractors may seek to retain

control over their workforce while simultaneously shifting costs and risks onto workers. So

classified, workers may be deprived of the protections of an employment relationship to, for

example, insist on minimum pay and recordkeeping standards,29 understand what comprises an

hour of payable work,30 or share information about their income with coworkers to assess unfair

compensation practices or organize for higher compensation.31 A range of FTC authorities can

apply when gig companies seek to exploit this vulnerability by disclosing pay and costs in an

For example, the Commission regulates earnings claims made to gig workers just as it would in any other business

or money-making opportunity. See Advance Notice of Proposed Rulemaking: Deceptive or Unfair Earnings Claims,

87 Fed. Reg. 13,951, 13,953 & n.26 (Mar. 11, 2022) [hereinafter “Earnings Claims ANPRM”].

“The use of the word ‘consumer’” in the FTC Act “is to be read in its broadest sense.” S. Rep. No. 93–151, at 27

(1973); see, e.g., Decision & Order, Amazon.com, Dkt. No. C-4746 (FTC recovering $61.7 million in unpaid tips to

Amazon Flex drivers, regardless of the drivers’ employment classification); Compl. ¶ 5, Uber Techs., Dkt.

No. C-4662 (“Uber Drivers are consumers who use the [Uber] App to locate Riders in need of transportation.”).

See 29 U.S.C. §§ 206–07 (minimum pay and overtime), 211(c) (recordkeeping).

See id. § 203(o) (defining “[h]ours worked” for purposes of calculating minimum pay and overtime pay).

See id. § 157.

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unfair or deceptive manner. The Commission also recognizes that misleading claims about the

costs and benefits of gig work can impair fair competition among companies in the gig economy

and elsewhere.

Deceptive or Unfair Pay Practices. False, misleading, or unsubstantiated claims about

earnings may violate Section 5 of the FTC Act,32 the Franchise Rule, or the Business

Opportunity Rule,33 and can trigger civil penalties.34 Likewise, withholding money owed to

workers without consent can violate Section 5’s prohibition against unfairness.35 Gig companies

often advertise hourly pay to prospective workers or promise a specific amount or range of pay

to existing workers for completing a gig.36 Yet fewer than half of gig workers understand how

their pay is determined, and misleading or unsupported claims about their earnings can leave

workers in a financial bind.37 Deceptive earnings claims and opaque compensation criteria can

also impede competition by preventing workers from accurately comparing opportunities

presented by gig companies.

15 U.S.C. § 45. Unfortunately, the Commission’s ability to refund consumers for violations of Section 5 is

hampered following the U.S. Supreme Court’s decision in AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341

(2021), which stripped the Commission of its most potent tool to recover money for consumers. Indeed, AMG would

have prevented recovery of more than $81 million in consumer redress obtained in two of the Commission’s recent

victories for gig workers. See Decision & Order, Amazon.com, Dkt. No. C-4746 (recovering $61.7 million for

Section 5 violations); Stipulated Order, FTC v. Uber Techs., Inc., Case No. 3:17-cv-261-JST (N.D. Cal. Jan. 19,

2017) (recovering $20 million for Section 5 violations).

16 C.F.R. pts. 436 (Franchise Rule), 437 (Business Opportunity Rule). Whether the Franchise Rule or the

Business Opportunity Rule applies to a particular gig arrangement requires a case-by-case factual analysis. See id.

§ 436.1(h) (defining a franchise); id. § 437.1(c) (defining a business opportunity). The Commission may seek civil

penalties and consumer redress from companies that violate FTC rules. See 15 U.S.C. §§ 45(m)(1)(A), 57b(a)–(b).

See Fed. Trade Comm’n, Press Release, FTC Puts Businesses on Notice That False Money-Making Claims Could

Lead to Big Penalties (Oct. 26, 2021); see also 15 U.S.C. § 45(m)(1)(B).

Cf. Decision & Order, Amazon.com, Dkt. No. C-4746 (requiring a gig company to obtain workers’ “express

informed consent” before changing how workers’ tips are distributed).

See, e.g., Compl. ¶¶ 21–22, Uber Techs., Case No. 3:17-cv-261-JST (FTC alleging that Uber made various hourly

earnings claims targeted to multiple U.S. cities that did not align with what drivers in those cities actually earned);

see also Compl. ¶¶ 30–34, Amazon.com, Dkt. No. C-4746 (alleging that Amazon promised that workers would keep

100% of their tips, but instead used tips to reduce workers’ base pay).

See Anderson et al., The State of Gig Work in 2021, at 35 (“Overall, 44% of people who have ever earned money

through online or delivery platforms say they at least somewhat understand how the companies that run these apps

or sites determine how much they get paid . . . .”); see also Zipperer et al., National Survey of Gig Workers, at 6–7

(describing high rates of financial hardship among gig workers).

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The Commission has initiated rulemaking proceedings to strengthen its ability to detect

and deter deceptive earnings claims and has sought comment on the prevalence of deceptive

earning claims relating to gig work.38 In the meantime, misleading earnings claims remain

prohibited by Section 5 of the FTC Act.39 Likewise, pursuant to the Franchise Rule or the

Business Opportunity Rule, gig companies that require new participants to make required

payments may need to disclose any claims they make about potential earnings and have a

reasonable basis for, and written materials on hand to support, those claims.40 The Commission

has also issued Notices of Penalty Offenses related to earnings claims and testimonials41 to place

gig companies, among others, on notice that the Commission is working to deter misleading

representations throughout the gig economy, including by seeking civil penalties where

appropriate.42

Undisclosed Costs or Terms of Work. By the same token, deceptive claims or

nondisclosures about startup costs, training fees, other expenses, or other material terms can

violate Section 5,43 and the failure to make required disclosures can violate the Franchise Rule or

Business Opportunity Rule.44 When a firm requires consumers to make one or more required

payments to sign up for a work opportunity, that arrangement may fall under the Franchise Rule

See Earnings Claims ANPRM, 87 Fed. Reg. at 13,955–56.

See id. at 13,951–52 (describing the FTC’s extensive history of prior enforcement actions against a wide variety

of companies offering employment and other work opportunities with misleading earnings claims).

See 16 C.F.R. § 436.5(s) (describing the disclosures that franchisors must make to franchisees about financial

performance); id. § 437.4 (explaining how sellers of business opportunities must substantiate any earnings claims

regarding the opportunity, including when claims are presented in the general media).

See Fed. Trade Comm’n, Notice of Penalty Offenses Concerning Money-Making Opportunities (Oct. 26, 2021);

Fed. Trade Comm’n, Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct Around Endorsements

and Testimonials (Oct. 26, 2021).

See FTC Press Release, FTC Puts Businesses on Notice That False Money-Making Claims Could Lead to Big

Penalties (announcing that Notices of Penalty Offenses were sent to more than 1,100 businesses and advising that

violating the Notices could result in civil penalties that now amount to $46,517 per violation, see 16 C.F.R.

§ 1.98(e)).

See, e.g., Compl. ¶¶ 31–33, 38, Uber Techs., Case No. 3:17-cv-261-JST (alleging that Uber violated Section 5 by

understating the price and overstating the advantages of its auto financing program for drivers).

See 16 C.F.R. §§ 436.2, 437.2.

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or the Business Opportunity Rule.45 The Rules require accurate, upfront disclosures—including

information about the franchise or business opportunity, other workers, and prior lawsuits—

before consumers make any commitment.46

Combating Unlawful Practices and Unlawful Constraints Imposed on Gig

Workers

Gig workers may lack key information about their working conditions, and can be subject

to onerous contract terms and arbitrary evaluation requirements. Increasingly, gig workers are

managed by algorithms, which use extensive data collected from workers and other consumers to

make important management decisions using undisclosed criteria. Multiple laws enforced by the

Commission may apply when these practices are deceptive, unfair, anticompetitive, or otherwise

unlawful.

Unfair or Deceptive Practices by an Automated Boss. Section 5 of the FTC Act

prohibits unfair or deceptive practices in any form, including practices involving artificial

intelligence (“AI”) tools or algorithm-based decision-making.47 In the gig economy, companies

may employ algorithms to govern how gigs are made available to workers, how workers are

paid, how worker performance is rated, and when workers are suspended or terminated from the

platform. Firms may deploy surveillance technology to monitor workers’ every move without

See id. § 436.1(h) (defining a franchise); id. § 437.1(c) (defining a business opportunity).

See id. §§ 436.2(a), 436.4, 436.5 (requiring franchisors to provide a disclosure document in business relationships

that qualify as franchises covered by the Franchise Rule); id. §§ 437.3, 437.4, apps. A–B (requiring a disclosure

document for business opportunities and providing templates).

Running these algorithms requires collecting troves of sensitive data from workers, which heightens the

importance of FTC rules governing data security, see, e.g., 16 C.F.R. pt. 314 (Safeguards Rule), and gig companies’

obligation under Section 5 to safeguard collected information in line with their promises, see Compl. ¶¶ 28–32, Uber

Techs., Dkt. No. C-4662 (alleging that, despite public representations, Uber failed to monitor internal access to

drivers’ personal information and failed to provide reasonable security against potential data breaches). Workers are

also entitled under the Fair Credit Reporting Act to know when a gig platform uses a background screening or other

consumer report to take an adverse action against them, whether through an algorithm or otherwise. See 15 U.S.C.

§ 1681m(a). If information in a consumer report results in a worker being denied the requested opportunity, the

consumer must receive notice that the denial was based on a consumer report and a chance to view the report and

request any needed corrections. See id.

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transparency about how it impacts worker pay or performance evaluation.48 Workers report

unexpected drops in their performance ratings,49 unexplained changes in their pay,50 assignment

of impossible or dangerous delivery routes,51 or other arbitrary evaluations that could lead to

wrongful terminations.52 Companies are responsible for fulfilling their promises to their workers,

even if they use automated management technologies.53 Gig companies that employ algorithmic

tools to govern their workforce should ensure that they do so legally.54

Unfair Contractual Terms & Restrictions on Mobility. Restrictive contract terms may

constitute unfair or deceptive acts and practices in violation of Section 5 of the FTC Act if they

unfairly harm workers, render a gig company’s representations misleading, or prevent fair

competition for workers. Gig companies often present workers with nonnegotiable contracts that

may include lopsided provisions.55 Such take-it-or-leave-it provisions may, for example, hinder

workers from seeking other jobs during or after their time with a company, bar negative reviews,

See Advance Notice of Proposed Rulemaking: Trade Regulation Rule on Commercial Surveillance and Data

Security, 87 Fed. Reg. 51,273, 51,274 (Aug. 22, 2022) (noting the lack of transparency and informed consent around

increasingly extensive data collected from workers).

See, e.g., Soper, Fired by Bot at Amazon: “It’s You Against the Machine”; see also Rahman, The Invisible Cage,

66 Admin. Sci. Q. at 964; Pierre Bérastégui, Eur. Trade Union Inst., Exposure to Psychosocial Risk Factors in the

Gig Economy: A Systemic Review, at 47 (Jan. 2021) (noting that workers “are unsure about what data is gathered

from them and how it is used to compute wages and ratings,” leading to “frustration about not being rated on the

basis of ‘true’ performance”).

See, e.g., Alina Selyukh, At the Mercy of an App: Workers Feel the Instacart Squeeze, NPR (Nov. 25, 2019, 9:15

AM) (reporting that multiple gig platforms use “ever-changing pay structures” governed by algorithms); see also

Calacci, Bargaining with the Algorithm (describing a gig platform’s pay structure as a “black-box algorithm”).

See Eve Livingston, Food Delivery Drivers Fired After “Cut Price” GPS App Sent Them on “Impossible” Routes,

Guardian (July 2, 2022, 2:39 PM EDT).

See, e.g., Madhumita Murgia, Workers Demand Gig Economy Companies Explain Their Algorithms, Fin. Times

(Dec. 12, 2021).

See Compl. ¶ 32, Amazon.com, Dkt. No. C-4746 (alleging that Amazon Flex changed the algorithm governing

delivery drivers’ base pay, allowing Amazon to capture a greater portion of customer tips than it had disclosed).

Elisa Jillson, Fed. Trade Comm’n, Aiming for Truth, Fairness, and Equity in Your Company’s Use of AI (Apr. 19,

2021).

See U.S. Dep’t of the Treasury, The State of Labor Market Competition, at 14, 18 (noting that “restrictive

employment agreements can both result from and reinforce employer market power,” while other clauses can reduce

workers’ options “within the legal system”); Fed. Trade Comm’n, Strategic Plan for Fiscal Years 2022-2026, at 19

(Aug. 26, 2022) (announcing FTC interest in “non-compete and other potentially unfair contractual terms resulting

from power asymmetries between workers and employers”).

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or waive fundamental protections.56 If those provisions cause substantial injury that is not

reasonably avoidable and not outweighed by countervailing benefits, they may constitute an

unfair act or practice under Section 5(n) of the FTC Act.57 The Commission has used its

unfairness authority to prohibit certain one-sided clauses in credit contracts,58 to stop abusive use

of a one-sided clause allowing a financing entity to obtain uncontested judgments against small

businesses,59 to prevent contractual clauses suppressing negative consumer reviews,60 and to

invalidate illusory choice-of-law and venue-selection clauses that, in very fine print, left the

forum state undetermined.61 The Commission will continue to scrutinize potentially unfair terms

companies impose on gig workers or other consumers.

Certain unfair terms may also implicate the antitrust laws and raise concerns about unfair

methods of competition with respect to gig labor markets. The Commission will continue to

investigate the effects on workers and competition of any non-compete clauses in the gig

economy. Non-compete provisions may undermine free and fair labor markets by restricting

workers’ ability to obtain competitive offers for their services from existing companies, resulting

in lower wages and degraded working conditions.62 These provisions may also raise barriers to

See, e.g., Exec. Order No. 14,036, 86 Fed. Reg. at 36,987–88; FTC v. Roca Labs, Inc., 345 F. Supp. 3d 1375,

1393–97 (M.D. Fla. 2018); U.S. Dep’t of the Treasury, The State of Labor Market Competition, at 18.

15 U.S.C. § 45(n); FTC Unfairness Policy Statement, Letter from the FTC to Hon. Wendell Ford & Hon. John

Danforth, S. Comm. on Commerce, Sci. & Transp. (Dec. 17, 1980), appended to In re Int’l Harvester Co., 104

F.T.C. 949, 1070 (1984).

See FTC Trade Regulation Rule; Credit Practices, 49 Fed. Reg. 7,740, 7,744 (Mar. 1, 1984) (codified at 16 C.F.R.

pt. 444).

See 1st Am. Compl. ¶¶ 24–28, 39–41, FTC v. RCG Advances, LLC, Case No. 20-CV-4432 (S.D.N.Y. June 10,

2021).

See Roca Labs, 345 F. Supp. 3d at 1393; see also 15 U.S.C. § 45b; FTC v. World Patent Mktg., Inc., Case

No. 17-cv-20848-GAYLES, 2017 WL 3508639, at *15–16 (S.D. Fla. Aug. 16, 2017) (preliminarily enjoining a

defendant’s “consumer complaint suppression practices” as unfair).

See Compl. ¶¶ 18, 32–33, FTC v. NorVergence, Inc., Civil Action No. 04-5414 (D.N.J. Nov. 4, 2004).

See Exec. Order No. 14,036, 86 Fed. Reg. at 36,987 (noting that non-compete agreements can “mak[e] it harder

for workers to bargain for higher wages and better work conditions”); Matthew S. Johnson et al., The Labor Market

Effects of Legal Restrictions on Worker Mobility, at 2 (Oct. 12, 2021) (“We find that increases in [non-compete

clauses] decrease workers’ earnings and mobility.”); Evan P. Starr et al., Noncompetes in the U.S. Labor Force, 64

J.L. & Econ. 53, 81 (2021) (finding that non-compete provisions imposed in employment contracts “appear to be

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entry for new companies.63 Such provisions may violate Section 1 of the Sherman Act64 and the

FTC Act’s prohibition on unfair methods of competition.65 The Commission will also investigate

contractual limitations, such as liquidated damages clauses66 or nondisclosure agreements,67 that

may be excessive or overbroad and effectively operate as non-compete provisions. Moreover, the

Commission recognizes that companies may be able to effectuate the same harmful results

through imposing a variety of other restraints that restrict worker mobility.

Policing Unfair Methods of Competition That Harm Gig Workers

Anticompetitive mergers or practices may prevent gig workers from obtaining

competitive compensation or more favorable terms or working conditions. Such conduct may

also lead to higher prices or fees, diminished service, or less favorable contractual terms for

customers or businesses. Firms that undertake such conduct may run afoul of the antitrust laws,

and the Commission will focus its resources on investigating potential unlawful conduct by or

linked to lower job satisfaction” and do not correlate with greater pay or training); see also FTC Comm’r Noah J.

Phillips, Prepared Remarks at FTC Workshop on Non-compete Clauses in the Workplace, at 2–3 (Jan. 9, 2020)

(“When you can exit a job, you have greater leverage to improve the terms of your employment.”); FTC Comm’r

Rebecca Kelly Slaughter, Prepared Remarks at FTC Workshop on Non-Compete Clauses in the Workplace, at 5

(Jan. 9, 2020) (prioritizing investigation into “potential restraints that may be inhibiting competition for labor” and

noting that non-compete clauses can “affect people’s livelihoods and ability to earn a living”).

See, e.g., Matt Marx & Lee Fleming, Non-Compete Agreements: Barriers to Entry … and Exit?, 12 Innovation

Pol’y & Econ. 39, 51 (2012) (“Non-competes assist in preserving the firm’s competitive position by discouraging

entry.”); see also U.S. Dep’t of the Treasury, The State of Labor Market Competition, at 16 (“Lower worker

mobility increases recruitment costs for all firms as fewer workers are seeking to switch jobs than otherwise would,

absent the post-employment restrictive employment agreement.”).

15 U.S.C. § 1.

See, e.g., Statement of Interest of the United States at 6, Beck v. Pickert Med. Grp., P.C., Case No. CV21-02092

(Nev. Dist. Ct. Feb. 25, 2022) (“Non-compete agreements between employers and employees constitute concerted

action properly subject to scrutiny under Section 1 of the Sherman Act.”); see also U.S. Dep’t of the Treasury, The

State of Labor Market Competition, at 16 (“[R]estrictive employment agreements can both result from and reinforce

employer market power.”).

See, e.g., Wegmann v. London, 648 F.2d 1072, 1073 (5th Cir. Unit A 1981) (“The contract clauses to which

plaintiff object are, given the prohibitive magnitudes of liquidated damages they specify, de facto covenants not to

compete . . . .”).

See, e.g., Brown v. TGS Mgmt. Co., 271 Cal. Rptr. 3d 303, 319 (Cal. Ct. App. 2020) (“Collectively, these overly

restrictive [confidentiality] provisions operate as a de facto noncompete provision . . . .”).

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among gig companies, from wage-fixing to the unlawful consolidation or exercise of market

power.68

Wage-Fixing & Coordination. The Commission will investigate evidence of agreements

between gig companies to fix wages, benefits, fees, or other terms relating to gig work that

should be subject to competition.69 The Commission will also investigate evidence of nopoaching agreements, where companies agree not to solicit or hire each other’s workers, and

agreements to share competitively sensitive information that might suppress compensation for

workers.70 The Commission may further examine any use by gig companies of technologyenabled methods of collusion or exclusion. Agreements among gig companies that

anticompetitively harm workers violate Section 1 of the Sherman Act and may be challenged by

the Commission directly, and, in the case of wage-fixing or no-poaching agreements, may be

referred to the U.S. Department of Justice (“DOJ”) for potential criminal prosecution.71

Market Consolidation & Monopolization. The Commission will review and, as

appropriate, challenge mergers and other combinations of gig companies that may substantially

At least one court has ruled that the labor-dispute exemption under Section 1 of the Sherman Act applies to

workers regardless of whether they are classified as employees or independent contractors. See Confederación

Hípica de P.R., Inc. v. Confederación de Jinetes Puertorriqueños, 30 F.4th 306, 314–15 (1st Cir.

2022). Commission enforcement therefore will not focus on organizing efforts undertaken by gig workers. Despite

past efforts, the Commission will also refrain from other enforcement or policy efforts that might undermine the

ability of gig workers to organize. See, e.g., Brief for the United States & FTC as Amici Curiae Supporting

Appellant at 2, 8, Chamber of Commerce v. City of Seattle, 890 F.3d 769 (9th Cir. 2018) (No. 17-35640), 2017 WL

5166667, at *2, *8 (arguing that the state action doctrine did not apply to shield a municipal ordinance allowing

drivers to organize from antitrust scrutiny).

See, e.g., Compl. ¶¶ 11–27, In re Your Therapy Source, LLC, Dkt. No. C-4689 (FTC July 31, 2018) (alleging an

agreement and invitation to collude among staffing agencies to lower payments to their independent contractors).

See U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals, at 4–5

(“[P]eriodic exchange of current wage information in an industry with few employers could establish an antitrust

violation because, for example, the data exchange has decreased or is likely to decrease compensation.”); U.S. Dep’t

of Justice & Fed. Trade Comm’n, Antitrust Guidelines for Collaborations Among Competitors, at 15 (Apr. 2000)

(“[T]he sharing of information related to a market in which the collaboration operates or in which the participants

are actual or potential competitors may increase the likelihood of collusion on matters such as price, output, or other

competitively sensitive variables.”).

See U.S. Dep’t of Justice & Fed. Trade Comm’n, Antitrust Guidance for Human Resource Professionals, at 3–4

(explaining that naked wage-fixing agreements are per se illegal and DOJ intends to proceed criminally against

naked wage-fixing).

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lessen competition between or among gig companies.72 The Commission will also investigate

any exclusionary or predatory conduct by dominant firms that may unlawfully create or maintain

a monopoly (a dominant seller) or a monopsony (a dominant buyer or employer), resulting in

harm to customers or reduced compensation or poorer working conditions for gig workers. Such

conduct may include the use of exclusive contracting, predatory pricing, or other forms of

monopolization, and may be subject to legal action by the Commission as a violation of

Section 2 of the Sherman Act.73

IV.

Policy, Partnerships, & Outreach

In addition to robust enforcement, the Commission addresses issues in the gig economy

through policy work, outreach, and partnerships with other law enforcement agencies.

Governmental Collaboration. The FTC’s Regional Offices have spearheaded the

agency’s efforts to identify law violations, develop policy, and collaborate with government

partners in this space. The Commission is also partnering with other agencies on broad labor

initiatives and individual enforcement actions. In December 2021, the FTC and DOJ hosted a

workshop to promote competitive labor markets and worker mobility.74 And in July 2022, the

FTC and National Labor Relations Board signed a Memorandum of Understanding that deepens

the agencies’ collaboration around issues facing gig workers through sharing information,

conducting cross-training for staff at each agency, and partnering on investigative efforts within

each agency’s authority.75

See Exec. Order No. 14,036, § 1, 86 Fed. Reg. at 36,988 (directing federal attention “to enforce the antitrust laws

to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly

and monopsony—especially as these issues arise in labor markets”).

15 U.S.C. § 2.

Fed. Trade Comm’n, Making Competition Work: Promotion Competition in Labor Markets (Dec. 6–7, 2021).

Memorandum of Understanding Between the Federal Trade Commission (FTC) and the National Labor Relations

Board (NLRB) Regarding Information Sharing, Cross-Agency Training, and Outreach in Areas of Common

Regulatory Interest (July 19, 2022).

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Ensuring Equity. The FTC’s Equity Action Plan reaffirms the Commission’s

commitment to protecting the public, including meaningfully addressing barriers that historically

underserved communities face in participating in and benefiting from a fair and thriving

marketplace.76 As outlined in the Equity Action Plan, the FTC’s Bureau of Consumer Protection

is focusing resources to aid staff in assessing whether certain communities are disproportionately

affected or targeted by unfair or deceptive practices, including in the gig economy.77 Similarly,

the Equity Action Plan outlines the FTC’s Bureau of Competition’s commitment to consider

more explicitly the impact of mergers and anticompetitive conduct on workers, particularly lowwage workers.78 The FTC will address any such harms through robust law enforcement,

community outreach, and new initiatives to better understand and address the impact of emerging

technologies in the gig economy and elsewhere on historically underserved communities.

Public Participation. The Commission continues to seek input from consumer and labor

groups, industry, and experts on challenges facing gig workers through monthly Open

Commission Meetings79 as well as targeted workshops like those on dark patterns80 and labormarket competition.81 Gig workers harmed by unlawful practices should continue to file reports

at ReportFraud.ftc.gov so the Commission and other governmental agencies can promptly

identify and take action against deceptive, unfair, and otherwise unlawful acts and practices.

See Fed. Trade Comm’n, Federal Trade Commission (FTC) Equity Action Plan, at 1 (Apr. 14, 2022)

(promulgated pursuant to Executive Order No. 13985, Advancing Racial Equity and Support for Underserved

Communities Through the Federal Government, 86 Fed. Reg. 7,009 (Jan. 25, 2021)).

See id. at 4–5.

See id. at 6–7.

See Fed. Trade Comm’n, Open Meetings.

Fed. Trade Comm’n, Bringing Dark Patterns to Light: An FTC Workshop (Apr. 29, 2021) (exploring how user

interfaces can, intentionally or not, obscure, subvert, or impair consumer autonomy, decision-making, or choice).

FTC Workshop, Making Competition Work (exploring recent developments at the intersection of antitrust and

labor, as well as implications for efforts to protect and empower workers through enforcement and rulemaking).

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Conclusion

Successfully addressing the range of consumer protection and competition challenges

associated with the gig economy requires innovative and collaborative approaches by

governmental enforcers that are responsive to the public’s concerns and input. The Commission

will continue to capitalize on its broad jurisdiction and interdisciplinary expertise to combat

unlawful practices that harm gig workers.

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Policy Statement Regarding the Scope of Unfair Methods of Competition

Under Section 5 of the Federal Trade Commission Act

Commission File No. P221202

November 10, 2022

Section 5 of the Federal Trade Commission Act (FTC Act) prohibits “unfair methods of

competition in or affecting commerce.” 1 On July 1, 2021, the Federal Trade Commission (FTC)

rescinded its 2015 Statement of Enforcement Principles Regarding “Unfair Methods of

Competition” under Section 5 of the FTC Act. 2 This statement supersedes all prior FTC policy

statements and advisory guidance on the scope and meaning of unfair methods of competition

under Section 5 of the FTC Act.

Introduction

Pursuant to the FTC’s analysis of the decided cases and prior enforcement actions, this

policy statement describes the key principles of general applicability concerning whether

conduct is an unfair method of competition. Consistent with the Supreme Court’s interpretation

of the FTC Act in at least twelve decisions, this statement makes clear that Section 5 reaches

beyond the Sherman and Clayton Acts to encompass various types of unfair conduct that tend to

negatively affect competitive conditions. 3

Pub. L. No. 63-203, 38 Stat. 717; 15 U.S.C. § 45(a)(1).

Fed. Trade Comm’n, Statement of the Commission on the Withdrawal of the Statement of Enforcement Principles

Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act (July 9, 2021),

https://www.ftc.gov/legal-library/browse/statement-commission-withdrawal-statement-enforcement-principlesregarding-unfair-methods.

See, e.g. Fed. Trade Comm’n v. Ind. Fed’n of Dentists, 476 U.S. 447, 454 (1986) (holding that “[t]he standard of

"unfairness" under the FTC Act is, by necessity, an elusive one, encompassing not only practices that violate the

Sherman Act and the other antitrust laws”); Fed. Trade Comm’n v. Sperry & Hutchinson Co., 405 U.S. 233, 242

(1972) (holding that “the Commission has broad powers to declare trade practices unfair."); Fed. Trade Comm’n v.

Texaco, 393 U.S. 223, 262 (1968) (holding that “[i]n large measure the task of defining "unfair methods of

competition" was left to the [FTC]. . . and that the legislative history shows that Congress concluded that the best

check on unfair competition would be [a practical and expert administrative body] . . . [that applies] the rule enacted

by Congress to particular business situations”); Fed. Trade Comm’n v. Brown Shoe, 384 U.S. 316, 321 (1966)

(holding that the FTC “has broad powers to declare trade practices unfair[,] particularly . . . with regard to trade

practices which conflict with the basic policies of the Sherman and Clayton Acts”); Atlantic Refining Co. v. Fed.

Trade Comm’n, 381 U.S. 357, 369 (1965) (holding that all that is necessary is to discover conduct that runs counter

to the public policy declared in the Act. . .” and that “there are many unfair methods of competition that do not

assume the proportions of antitrust violations”); Fed. Trade Comm’n v. Colgate-Palmolive et al., 380 U.S. 377, 38485 (1965) (noting that the proscriptions in section 5 are flexible); PAN AM v. United States, 371 U.S. 296, 306 -308

(1963) (“[Section 5] was designed to bolster and strengthen antitrust enforcement[,] and the definitions are not

limited to precise practices that can readily be catalogued. They take their meaning from the facts of each case

and the impact of particular practices on competition and monopoly”); Fed. Trade Comm’n v. Nat’l Lead Co., 352

U.S. 419, 428-29 (1957) (affirming past rulings finding that the commission is clothed with “wide discretion in. . .

[bringing] an end to the unfair practices found to exist[;]. . . [is] ‘the expert body to determine what remedy is

necessary to eliminate the unfair or deceptive trade practices which have been disclosed[;] . . . has wide latitude for

This statement is intended to assist the public, business community, and antitrust

practitioners by laying out the key general principles that apply to whether business practices

constitute unfair methods of competition under Section 5 of the FTC Act. In considering whether

conduct, either in a specific instance or as a category, constitutes an unfair method of

competition, the Commission will directly consult applicable law. This statement does not

pertain to any other statutory provision within the FTC’s jurisdiction. 4

II.

Background and Legislative History of Section 5 of the FTC Act

The text, structure, and legislative history of Section 5 show that its mandate

extends beyond the Sherman and Clayton Acts and reaches unfair conduct

with a tendency to negatively affect competitive conditions

As the Commission explained in its July 2021 withdrawal of the previous policy

statement, the text, structure, and history of Section 5 reaches more broadly than the antitrust

laws. 5 Congress passed the FTC Act to push back against the judiciary’s adoption and use of the

open-ended rule of reason for analyzing Sherman Act claims, 6 which it feared would deliver

inconsistent and unpredictable results and “substitute the court in the place of Congress.” 7

judgment and[;]. . . [that] to attain the objectives Congress envisioned, [the FTC] cannot be required to confine its

road block to the narrow lane the transgressor has traveled”); American Airlines, Inc. v. North American Airlines,

Inc., 351 U.S. 79, 85 (1956) (finding that "[u]nfair or deceptive practices or unfair methods of competition". . . are

broader concepts than the common-law idea of unfair competition”); Fed. Trade Comm’n v. Motion Picture

Advertising Service Co., 344 U.S. 392, 394-95 (1953) (noting that “Congress advisedly left the concept [of unfair

methods of competition] flexible . . . [and] designed it to supplement and bolster the Sherman Act and the Clayton

Act[,] [so as] to stop . . . acts and practices [in their incipiency] which, when full blown, would violate those Acts[,].

. . as well as to condemn as "unfair methods of competition" existing violations of them”); Fed. Trade Comm’n v.

Cement Institute, 333 U.S. 683, 708 (1948) (holding that conduct that falls short of violating the Sherman Act may

violate Section 5); Fed. Trade Comm’n v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 310 (1934) (finding that unfair

methods of competition not limited to those “which are forbidden at common law or which are likely to grow into

violations of the Sherman Act”).

This statement does not address the Commission’s authority to prevent unfair or deceptive acts or practices in 15

U.S.C. §§ 45(a),(n). This statement is limited to the scope of standalone unfair methods of competition Section 5

violations. Such standalone unfair methods of competition Section 5 claims may be brought under one or more of

the theories set forth in this policy statement and combined with claims under other parts of the FTC Act or other

statutes enforced by the Commission as warranted.

This statement does not address the language of 15 U.S.C. § 45(b), which states that the Commission will act when

it has reason to believe such action is in the public interest. See generally Hills Bros. v. Fed. Trade Comm’n, 9 F.2d

481, 483–84 (9th Cir. 1926) (“the interest of the public, like the question whether the commission has reason to

believe that any person, partnership, or corporation has been or is using any unfair method of competition in

commerce, is committed to the discretion of the commission, is to be determined by the commission before

proceedings are instituted, and is not thereafter a subject of controversy either before the commission or before the

court, except in so far as the question of public interest is necessarily involved in the merits of the case, and, if the

commission finds that the method of competition in question is prohibited by the act, no other or further finding on

the question of public interest is required.”); see also Parke, Austin & Lipscomb, Inc., et al. v. Fed. Trade Comm’n,

142 F.2d 437, 441 (2d Cir. 1944).

Statement of Commission, supra note 2.

Standard Oil Co. of New Jersey v. United States, 221 U.S. 1, 60 (1911).

S. REP. NO. 62-1326, at 10 (1913) (“Cummins Report”). Senator Francis Newlands, one of the chief sponsors of

the bill that became the FTC Act, expressed concern that Standard Oil left antitrust regulation “to the varying

judgments of different courts.” 47 CONG. REC. 1225 (1911). After analyzing a series of Supreme Court decisions

Congress therefore determined it would “establish[ ] a commission for the better administration

of the law and to aid in its enforcement.” 8 This led to the creation of the FTC in 1914 and to the

enactment of a prohibition of “unfair methods of competition,” a new standard in federal

competition law. 9

In enacting Section 5, Congress’s aim was to create a new prohibition broader than, and

different from, the Sherman and Clayton Acts. Congress purposely introduced the phrase, “unfair

methods of competition,” in the FTC Act to disti

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