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A Slammed (Open)Door: FTC Reaches $62 Million Proposed Settlement with Real Estate Company

By Baldassare Vinti, Jeffrey Warshafsky & Jana R. Ruthberg on September 6, 2022
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Last month, the FTC announced that it reached a $62 million proposed settlement with Opendoor Labs, related to the Commission’s investigation of the company’s representations in advertising to prospective home sellers. Opendoor is an online real estate business in the “iBuying” (or “instant buying”) space. iBuying companies use algorithms to determine a home’s value and make instant offers to consumers, allowing them to purchase homes directly from consumer sellers as an alternative to traditional sales through a broker.  iBuying companies often tout their offering as a simpler, more convenient alternative to a traditional home sales.

According to the FTC’s complaint, Opendoor misrepresented to prospective home sellers that they would make more money from selling their homes to Opendoor than by selling on the open market. In actuality, the FTC maintains that most home sellers who used Opendoor’s services made thousands of dollars less than they would have had they sold it via traditional channels.

The FTC alleged Opendoor advertised it would save consumers money by providing “market-value” offers and reducing transaction costs.  For example, the FTC’s complaint cited charts in Opendoor’s marketing materials that purported to compare consumers’ net proceeds from selling to Opendoor versus on the open market. The agency alleged these representations were deceptive because Opendoor’s offers were, on average, consistently significantly below market. Additionally, according to the FTC, Opendoor’s costs were higher than those of traditional sales because it requires consumers to pay for repairs they would not have had to make otherwise. Opendoor further misled consumers, according to the FTC, by overstating the costs of traditional sales.

iBuying is currently estimated to account for about 1 percent of all home sales in the U.S., though in certain metro areas, it may be as high as 6 percent. While iBuying still makes up just a small segment of the market, it may increasingly represent the future of real estate – in which case, the FTC’s settlement with Opendoor will be instructive to companies looking to enter this space. This decision is also a reminder that companies making cost comparisons should make sure those comparisons are accurate at the time they are first made, remain accurate throughout their use, and do not fail to disclose material differences with competing options.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at bvinti@proskauer.com /212-969-3249

 

Photo of Baldassare Vinti Baldassare Vinti

Baldassare (“Baldo”) Vinti heads Proskauer’s Intellectual Property Litigation Group.

Baldo’s practice focuses on litigating patent, false advertising, trade secret, life sciences, trademark and contractual matters in federal and state courts and before the International Trade Commission. He is a seasoned trial attorney responsible…

Baldassare (“Baldo”) Vinti heads Proskauer’s Intellectual Property Litigation Group.

Baldo’s practice focuses on litigating patent, false advertising, trade secret, life sciences, trademark and contractual matters in federal and state courts and before the International Trade Commission. He is a seasoned trial attorney responsible for all aspects of litigation, including Markman hearings, appeals before the Federal Circuit, case preparation and strategy, depositions, motion practice, and settlement negotiations. He has represented clients in high-stakes matters involving a broad range of technologies, including medical devices, diagnostics, immunoassays, prosthetics, pharmaceuticals, dental implants, electronic medical records systems, encryption technology, wound dressings, digital video compression, electronic book delivery and security systems, mobile media technologies, navigation and location-based services, bandwidth management, bar code scanning, lasers , and other technologies. Baldo has represented numerous major corporations, including Arkema S.A., British Telecommunications PLC, Church & Dwight Co., Inc., Henry Schein, Inc., Maidenform Brands Inc., Mitsubishi Electric Corp., Ossur North America Inc., Panasonic Corp., Sony Corp., Welch Foods, Inc., and Zenith Electronics LLC.

In addition, Baldo regularly handles transactional work, including intellectual property due diligence, licensing, intellectual property structural transactions, patentability studies, infringement/non-infringement opinions, and client counseling in intellectual property matters.

Baldo is an author and frequent commentator on patent issues pertaining to medical devices and a host of other intellectual property topics, and has been quoted in the National Law Journal, Bloomberg BNA, Law360, Westlaw Journal and Inside Counsel magazine. He is also a regular contributor of articles published in Medical Product Outsourcing magazine that deal with the medical device industry.

Baldo served as a judicial intern for Hon. John E. Sprizzo of the United States District Court for the Southern District of New York and for Hon. Charles A. LaTorella of the New York Supreme Court.

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Photo of Jeffrey Warshafsky Jeffrey Warshafsky

Jeff Warshafsky is a partner in the Litigation Department. A versatile commercial litigator and strategic advisor, Jeff specializes in consumer class actions, sports litigation, false advertising, trademark, and other intellectual property disputes.

Jeff defends companies in connection with consumer class actions involving advertising…

Jeff Warshafsky is a partner in the Litigation Department. A versatile commercial litigator and strategic advisor, Jeff specializes in consumer class actions, sports litigation, false advertising, trademark, and other intellectual property disputes.

Jeff defends companies in connection with consumer class actions involving advertising and privacy issues. He has handled dozens of class actions around the country for multinational companies across diverse sectors including consumer product companies, retailers, and sports leagues. Jeff also counsels clients to avoid being targeted in such actions, helps them respond to demand letters from plaintiffs’ counsel, and negotiates resolutions.

Additionally, Jeff represents clients in competitor versus competitor advertising disputes, including in Lanham Act cases and advertising self-regulation disputes before the National Advertising Division and the National Advertising Review Board. He also counsels companies on advertising substantiation issues, with an emphasis on complex scientific testing, such as clinical trials and sensory testing. Jeff regularly advises major sports leagues on complex business disputes.

Jeff maintains a robust pro bono immigration practice, assisting clients with asylum and U-Visa applications and in connection with removal proceedings. In addition to his active practice, Jeff is an editor of and contributor to the Firm’s false advertising blog, Watch This Space: Proskauer on Advertising Law.

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Photo of Jana R. Ruthberg Jana R. Ruthberg

Jana Ruthberg is an associate in the Litigation Department.

While at the University of Virginia, Jana was as an editor of the Virginia Journal of International Law and served on the boards of the Feminist Legal Forum and the Jewish Law Students Association.

Jana Ruthberg is an associate in the Litigation Department.

While at the University of Virginia, Jana was as an editor of the Virginia Journal of International Law and served on the boards of the Feminist Legal Forum and the Jewish Law Students Association. During law school, she worked at the Department of Justice in the Office of Policy and Legislation. Prior to law school, Jana taught English to elementary and middle school students abroad, and interned at the King’s County Brooklyn District Attorney’s office in the Appeals Bureau. Jana graduated from the University of Michigan with high distinction.

Jana maintains an active pro bono practice, which includes representing asylum seekers throughout their asylum application process.

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  • Posted in:
    Communications, Media & Entertainment, Featured Posts
  • Blog:
    Proskauer on Advertising Law
  • Organization:
    Proskauer Rose LLP
  • Article: View Original Source

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