# Compendium of Recent

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A654f8825cbbd3963

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

Compendium of Recent
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.
I.

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

1

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.

2

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.”).
3

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.
4

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

5

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.”).
6

7

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

8

Id. at 4-5.

9

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.
10

2

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).
11

12

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

13

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

14

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

15

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

16

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).

17

3

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.”).

18

19

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

20

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).

21

22

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)).

23

24

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”).
25

4

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.”).
26

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.”).
27

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.”).
28

29

See Qualcomm Complaint, supra note 10.

30

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
31

5

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).
32

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).
33

34

See supra pp. 2-3.

35

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).
36

6

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.
37

7

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.
2
See id. at 3-4.
3
Id. at 4-5.
1

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.
5
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.
6
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).
7
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.
8
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).
4

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.
2
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).
3
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).
4
See 16 C.F.R. § 318.2(a)
5
See id. § 318.2; 42 U.S.C. § 1320d(6), d(3).
1

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.”).

6

2

1

Enforcement Policy Statement Regarding Negative Option Marketing
I.

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
1

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).
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).

2

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.
4
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.
5
See, e.g., n. 6 infra.
3

3

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.

6

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).

4

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
7

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)).
8
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.
9
See, e.g., FTC v. JAB Ventures; FTC v. Complete Weightloss Center; FTC v. NutraClick, LLC I.
10
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.

5

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

11

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.
12
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.
13
See, e.g., Negative Options: A Report By the Staff of the FTC’s Division of Enforcement, 28.
14
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.
15
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).

6

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.
17
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.
18
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).
19
15 U.S.C. § 8402(a).
20
15 U.S.C. § 8402(b).
21
15 U.S.C. § 8404. Section 18 of the FTC Act is 15 U.S.C. § 57a.
22
15 U.S.C. § 45(m)(1)(A).
23
15 U.S.C. § 53(b).
16

7

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
24

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).
26
16 C.F.R. Part 310.3(a).
27
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).
28
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.
25

8

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

29

16 C.F.R. § 425.1(a)(1)(i)-(vii).
16 C.F.R. §§ 425.1(a)(2) and (3); § 425.1(b).
31
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).
30

9

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
32

15 U.S.C. §§ 1693-1693r.
39 U.S.C. § 3009.
34
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.
35
Any reference to ROSCA in these principles applies only to Internet transactions, consistent
with that statute’s coverage.
36
Of course, sellers fail to disclose adequately material terms if the disclosed terms are not
truthful and substantiated.
33

10

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;

37

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).
38
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.”)
39
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.
40
“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.

11

•

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.

41

Supra at nn. 9 and 15.

12

•

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

42

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).

13

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.
44
Supra at nn. 11 and 16.
45
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).
46
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.
43

14

•

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

47

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.
48

15

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.

49

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
1

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).
3
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).
4
See id.
5
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
2

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).
6
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).
7
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.”).
8
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.
9
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).

2

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.

10

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).
11
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).
12
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).
13
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).
14
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
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
16 C.F.R. § 312.10.

3

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.

4

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).
2
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).
1

1

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).
4
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).
5
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).
6
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.”).
7
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).
8
See Cefalu et al., supra note 5, at 1308 (explaining uninsured patients pay the full list price without financial
assistance).
9
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.
3

2

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.
11
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.
12
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.”).
13
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).
14
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.”).
15
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.”).
16
See Herkert, et al., supra note 11 (“Patients with lower incomes were more likely to report cost-related
underuse…”).
10

3

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.”).
18
See FTC REBATE WALL REP., supra note 2, at 2.
19
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”).
20
See id., at 68 (“Manufacturers have increased their rebates in order to win preferred formulary placement and
block competitors.”).
21
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).
17

4

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).
23
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.”).
24
See Fed. Trade Comm’n Act, 15 U.S.C. § 45; Sherman Act §§ 1 and 2; Clayton Act, 15 U.S.C. § 14.
25
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.”).
22

5

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).
27
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).
26

6

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

1
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.”).
2
Mastercard & Kaiser Assocs., Mastercard Gig Economy Industry Outlook and Needs Assessment, at 2 (May 2019).
3
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).
4
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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I.

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

5

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).
6
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).
7
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”).
8
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).
9
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).
10
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).
2 of 17

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.

11

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).
12
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).
13
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.
14
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”).
15
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).
16
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.”).
17
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,

18

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.”).
19
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).
20
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).
4 of 17

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

21

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).
22
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).
23
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).
24
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.
25
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)).
5 of 17

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 valu

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Aftc%3A654f8825cbbd3963. Public record. Not legal advice.