On August 9, the US District Court of Georgia ruled that the FTC had provided “broad and detailed evidence” for its allegations that a tech company and its CEO engaged in deceptive advertising and unfair fee practices in violation of Section 5 of the FTC Act. The FTC’s 2019 complaint alleged the defendants made deceptive representations to customers and charged hidden, unauthorized fees in connection with the company’s “fuel card” as well as through co-branded cards, to companies in the trucking and commercial fleet industry. The FTC’s factual allegations include the following:
- Waiting to charge fees until a few billing cycles have passed, making the fees harder to detect among a customer’s monthly bill fluctuations.
- Failing to post customer payments when they were received, leading to late fees and “high credit risk” fees.
- Not stopping unauthorized charges as promised, such that despite advertising the cards as “fuel only” cards, cardholders were able to purchase any item sold at fueling locations, including beer and snacks.
- Not providing advertised per-gallon savings to card users.
- Charging fees for set-up, transactions, and membership despite having made representations that the company does not charge such fees.
- Charging recurring fees for programs without customer authorization.
The FTC sought monetary equitable relief under 13(b) of the FTC Act. However, in April of 2021, the Supreme Court decided AMG Capital Management, LLC v. FTC, holding that the FTC does not, in fact, have the statutory authority to seek equitable monetary relief under Section 13(b) of the FTC Act (see previous blog posts here and here). The case continued, however, with the FTC focused on injunctive relief.
In its ruling, the court found that the FTC had presented detailed evidence from a wide variety of sources demonstrating that the advertisements were deceptive and that the fee practices related to improper late fees and other unauthorized fees were “unfair practices.” Thus, the court granted the FTC’s summary judgment motion in full. The court will hold a hearing in September to determine the scope of injunctive relief to be awarded.
Putting It Into Practice: We note that while the FTC stayed the administrative proceeding mentioned above, it filed the administrative action to preserve the possibility of obtaining monetary relief. Specifically, if the FTC successfully established the respondents’ UDAP liability in the administrative action, it can then seek monetary relief in federal district court pursuant to Section 19(a)(2). Under Section 19, the FTC has to show that the challenged acts or practices were ones that a reasonable [person] would have known under the circumstances were dishonest or fraudulent. While the contours of this standard have not been clearly established in case law, we are likely to see its continued use in post-AMG FTC enforcement.