COVID-19: FTC Acts Fast, Lambasts Missing Masks
Section 5 of the Federal Trade Commission Act (15 U.S.C. Section 45(a)) provides worthwhile remedies for the types of unfair competition that intellectual property practitioners find quite familiar, and practitioners should give them due consideration. Selling COVID-19 masks you don't have provides a good example.
In a case filed in early July (FTC press release) the FTC took a Staten Island business to task, along with its owner, for claiming that masks, respirators and other "PPE’s" (personal protection equipment) was "in stock" and "would ship the next day" (Complaint). The website "supergooddeals.com" continues to lead off with its signature slogan, "Pay Today, Ships Tomorrow" (https://supergooddeals.com/; also accessed by the author on July 31, 2020).
Apparently starting in March 2021, supergooddeals.com began selling PPE. According to the FTC complaint, the website claimed that the desired masks were "IN STOCK" (complaint paragraphs 19 and 20). The FTC complaint gives no indication as to whether or not the "in stock" claim was accurate, but instead pleads the examples of several consumers who never received masks, and numerous complaints to which supergooddeals.com never responded.
The FTC complaint also implies that to the extent that some orders may have been shipped, they were shipped on terms that were far less favorable than supergooddeals.com advertised, and when shipments never arrived (or perhaps were never sent) supergooddeals.com failed to give buyers the opportunity to change their mind, or offer a refund or any modification in price terms (e.g. Complaint paragraphs 29-31).
Supergooddeals.com also apparently attempted to conceal their failures (worse verbs could be applied) by producing shipment labels carrying the promised shipping date, but for packages that either would never ship, or shipped much later than the labelled date. Supergooddeals.com apparently didn’t realize that when a business creates its own USPS shipping labels, “An electronic record is generated on the ship date indicating that your package has been mailed and the Postal Service is expecting to see your package that day.” Click-N-Ship Field Information Kit
(For those of us that may merely be tardy, the same USPS webpage suggests mailing the package on the next business day. Checking for a friend.)
The FTC also asserted MITOR (“Mail, Internet, or Telephone Order Merchandise,” 16 CFR Part 435) which defines the terms in the name, defines unfair and deceptive practices in context, requires certain activities, and lists some exceptions (including, for reasons known only on K Street, “orders of seeds and growing plants”).
So, the alleged infractions include:
- Advertising a delivery date that you know you cannot meet,
- Advertising items that you don't have in stock
- Producing a false mailing label in an attempt to prove the shipping date, and
- Failing to cancel orders when requested or provide prompt refunds
The Federal Trade Commission Act has worthwhile remedies for such activities, and as the Complaint indicates (paragraphs 58 and 59) the FTC plans to seek them against supergooddeals.com.
So, the people get their money back from supergooddeals.com and all's well that ends well. Right?
Not exactly. The FTC Act offers no private right of action in these circumstances. The Fair Debt Collection Practices Act (FDCPA) 15 USC Section 1692(d) which is generally under the Federal Trade Commission, provides private remedies in the consumer debt arena, but a private party otherwise has no right to the remedies sought against supergooddeals.com under the FTC Act.
At this point, however, the intellectual property ("IP") practitioner may have an extra arrow up his or her sleeve: Section 43(a) of the Lanham Act (15 USC 1125(a)) if—IF—the parties can be defined as competitors in the section 43(a) sense.
FTC § 5(a)
Lanham Act § 43(a)
(1)Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—
is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
The Lanham Act applies to false representations (etc.) about goods and services in interstate commerce, but plaintiffs attempting to stretch section 43 (a) too far have been turned down e.g., Radiance Found., Inc. v. NAACP, 786 F.3d 316 (4th Cir., 2015) (The Radiance Foundation, an African American influenced pro-life organization, criticized the NAACP over the NAACP position on abortion. The NAACP issued a cease and desist letter and the Radiance Foundation filed a declaratory judgment complaint arguing that neither trademark infringement nor dilution had occurred. The NAACP counterclaimed under (inter alia) section 43(a). The Fourth Circuit held that for a number of reasons, including the lack of competing goods or services in the section 43(a) sense, the NAACP did not have a trademark remedy in these circumstances.)
Supergooddeals.com certainly dealt (and continues to deal) in "goods" in the sense of section 43(a). Nevertheless, the "hundreds of" consumers listed in (e.g.) paragraph 26 of the FTC complaint don't have a section 43(a) remedy against supergooddeals.com because such customers are not “competitors” of supergooddeals.com in the sense required by section 43(a). Stated more formally, for individual defrauded customers, the answer to, "whether a legislatively conferred cause of action encompasses a particular plaintiff's claim" is "no." (Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 132 (2014). (“A consumer who is hoodwinked into purchasing a disappointing product may well have an injury-in-fact cognizable under Article III, but he cannot invoke the protection of the Lanham Act—a conclusion reached by every Circuit to consider the question.”)
Does Pat Peoples have any Silver Lining here? Well, yes. In addition to a possible contractual remedy, most states have some form of general "unfair competition is illegal" statute as well as consumer protection remedies.
For the time being, however, these defrauded consumers have Uncle Sam on their side, and when "Uncle" sues he usually gets the job done.