Last month, in a joint effort with the Department of Labor (DOL), the Federal Trade Commission (FTC) settled an action against Arise Virtual Solutions, Inc. related to charges that the company regularly used misleading advertisements concerning the earning potential from “gig economy jobs” for consumers who signed up for Arise’s platform. The FTC’s action marked the first time the agency has charged a company in the gig economy with violating the Business Opportunity Rule, which requires those offering a business opportunity for sale to give prospective buyers specific information, such as disclosures concerning earning claims, to help them evaluate the business opportunity.
In its promotions, Arise represented that consumers who signed up on its platform would have access to jobs that paid “up to $18/hour” doing remote customer service work for major companies. Instead, the FTC alleged that the actual average pay was $12/hour and that 99.9% of Arise’s customers made less than the promoted rates. When additional training, equipment, and operating costs that were often required from customers to get and maintain the job in the first place were factored in, Arise’s advertised pay for its offered positions was even more misleading.
The FTC charged Arise with violations of Section 5 of the FTC Act and the FTC’s Business Opportunity Rule. The complaint alleges that the FTC sent a “Notice of Penalty Offenses Concerning Money-Making Opportunities” to Defendant, in April 2022, notifying Arise that such behavior could result in civil penalties, revealing a new example of the FTC utilizing its “Penalty Offense Authority.”
Interestingly, this case produced three concurring statements from FTC Chair Lina Khan and Commissioners Andrew Ferguson and Melissa Holyoak indicating that perhaps they are not quite aligned on some of the finer points of the law supporting the allegations against Arise.
Ferguson wrote that he believes the FTC has in fact been inconsistent in its standard on what would be proper substantiation for Arise’s “up to $18/hour” claims. Particularly, he noted that he is unsure whether the order, requiring Arise to “provide substantiation showing that future ‘up to’ claims are ‘typical for consumers similarly situated to those to whom the Claim is made,’” is consistent with the FTC’s previously articulated standard that substantiation for an “up to” claim must show “that consumers are likely to achieve the maximum results promised under normal circumstances.”
In response, Khan stated that she views the issue to have been consistently evaluated “for decades” with respect to the FTC’s requirement that “up to” claims must not be “likely to mislead reasonable customers under the circumstances.” While the cases on these issues are “context specific,” Khan wrote that she fails to see the “‘monumental’ difference” in the FTC’s approach that appears to concern Ferguson.
Holyoak appeared to take issue with Khan’s view of what qualifies as a “business opportunity” for the purposes of the FTC’s Business Opportunity Rule, which Holyoak believes could be interpreted as improperly encompassing employment relationships. Khan did not directly respond to this except to say that it is not odd for the DOL and FTC to have collaborated in this matter, as such behavior is routine for federal enforcers and contemplated by the Memorandum of Understanding that the two agencies entered into in 2023.
Regardless, the commissioners agreed that Arise’s behavior met the threshold here for both violations. But these small differences concerning the nuances of the requirements of substantiation for “up to” claims, and what qualifies as a “business opportunity,” could become significant for future cases.
To settle these claims, Arise agreed to pay $7 million in consumer redress and to be permanently prohibited from making unsubstantiated earnings claims. Moreover, Arise has agreed to provide to its customers all required disclosures mandated by the Business Opportunity Rule. For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter. To learn more about Venable’s Advertising Law services, click here or contact one of the authors. And listen to the Ad Law Tool Kit Show—a new podcast from Venable.