Penalties that Pack a Pinch

June 19th, 2013

By Miriam Kelliher
Contributing Writer

A settlement in the millions with a company making false claims about its products sounds high when touted by the Federal Trade Commission. But compare the dollar amounts of some of these FTC consent orders to the revenue figures of the bad actors in question, and the settlements go from looking like a wallop to a minor cost of doing business.

How penalties are tabulated

Congress has never given the FTC the authority to levy fines or bring criminal sanctions against companies engaged in deceptive marketing. As a result, the most that the FTC can demand of a company at trial is a permanent Injunction prohibiting it from engaging in false advertising, and other equitable relief such as disgorgement of the wrongfully obtained funds or forfeiture of the profits from the fraud. However, the number of cases that the agency actually pursues in court is quite limited. Factors such as the cost and time commitment of a trial, and the risk of losing the case more often than not seem to sway the FTC to settle cases with companies engaged in deceptive marketing schemes.

But is the FTC settling for too little with companies that made millions or even billions based on their deceptive advertising?

A sample of FTC settlements reveals that the amount of money paid by companies charged with deceptive advertising when compared to their revenues appears to be small potatoes.

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Federal government agency charged with enforcing various consumer protection laws and overseeing identity-theft related matters. Information on the FTC’s identity theft programs can be found at www.ftc.gov/idtheft.

Punishment for violating criminal laws.

A court order that requires a person or company to do a particular act or to refrain from doing a particular act. Example? A court order prohibiting a company from using an ad that’s been deemed deceptive.

A remedy imposed by a judge, rather than a specific law, in order to correct a “wrong.”

The forced giving up of profits that were wrongfully obtained.

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