United States: The State AG Report Weekly Update September 12, 2019

Last Updated: September 20 2019
Article by Lori Kalani and Bernard Nash

Antitrust

50 Attorneys General to Investigate Tech Company Over Advertising and Search Engine Practices

  • 50 AGs, led by Texas AG Ken Paxton, announced an investigation into Google over allegedly anticompetitive behavior in violation of state and federal antitrust laws.
  • According to AG Paxton, Google's control of online advertising markets and search traffic may have led to anticompetitive behavior, limited consumer choice, and/or violated consumers' privacy, among other things.

Consumer Financial Protection Bureau

CFPB and 7 Attorneys General Launch American Consumer Financial Innovation Network

  • The Consumer Financial Protection Bureau ("CFPB") launched and invited state regulators to join the American Consumer Financial Innovation Network ("ACFIN"), a federal-state partnership to facilitate financial innovation.
  • Seven AGs—those of Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah—agreed to join ACFIN as initial members.
  • According to the ACFIN charter, the partnership has three objectives:(1) establish coordination among its members; (2) minimize unnecessary regulatory burdens and bolster regulatory certainty; and (3) help ensure market innovations are free from fraud, discrimination, and deceptive practices.

Consumer Protection

FTC Obtains Preliminary Injunction Against Cosmetic and Dietary Supplement Company Over Allegedly Deceptive Free Trial Offers and Subscriptions

  • The Federal Trade Commission ("FTC") obtained a preliminary injunction AH Media Group, LLC and its owners (collectively, "AH Media") over allegations that it sold cosmetics and dietary supplements online through deceptive "free trial" offers and ongoing monthly subscriptions in violation of the FTC Act, the Restore Online Shoppers' Confidence Act ("ROSCA"), and the Electronic Fund Transfer Act.
  • According to the complaint, AH Media allegedly advertised products promoting younger-looking skin or weight loss by claiming consumers would only pay for shipping and handling, while actually charging consumers for the trial products and enrolling them in subscription plans with monthly charges that were difficult to cancel, among other things.
  • According to the FTC, under the terms of the preliminary injunction, AH Media is temporarily barred from misleading consumers about free trial offers, enrolling consumers in unwanted continuity plans, billing consumers without authorization, or creating barriers to cancel subscriptions or obtain refunds.

For-Profit Colleges

Massachusetts Attorney General Sues For-Profit Language Institute Over Allegedly Misleading Statements to Students

  • Massachusetts AG Maura Healey filed a lawsuit against the Boston Language Institute and its owner (collectively, "BLI") over allegations that prior to the school closing in January 2019 BLI made misleading statements to current and prospective students in violation of the state consumer protection law.
  • According to the complaint, BLI allegedly failed to disclose the school's poor financial situation, continued to enroll students, continued marketing classes through discounts and other special offers with knowledge the school would close, and continued to guarantee refunds for BLI programs in spite of knowledge that the school was about to close, among other things.
  • The complaint seeks restitution and civil penalties.

Labor & Employment

Washington Attorney General Reaches Agreements with Eight More Franchisors to Eliminate "No-Poach" Provisions

  • Washington AG Bob Ferguson reached agreements with franchisors Curves NA, Inc., EWC Franchise, LLC, Figaro's Italian Pizza, Inc., HBG Franchise, LLC d/b/a Habit Burger, Home Instead, Inc., ITEX Corporation, The Melting Pot Restaurants, Inc., and Wetzel's Pretzels, LLC to eliminate "no-poach" provisions in their franchise contracts.
  • According to the AG's office, the franchisors incorporated provisions in their contracts with franchise owners that prohibited employees from moving among stores within the same corporate chain.
  • Each of the franchisors signed an assurance of discontinuance requiring that they cease enforcing the no-poach provisions currently in their franchise contracts and remove such provisions from current and future franchise contracts.
  • As previously reported, AG Ferguson has reached settlements and agreements with a large number of other franchisors in various industries over the last two years regarding the use of no-poach provisions.

Pharmaceuticals

Texas Attorney General Sues Opioid Manufacturer Over Alleged Medicaid Fraud

  • Texas AG Ken Paxton filed a lawsuit against Johnson & Johnson, its subsidiary Janssen Pharmaceuticals, Inc., and related entities (collectively, "J&J") over allegations that it made misrepresentations regarding an opioid drug to the state Medicaid program in violation of state Medicaid Fraud Prevention Act.
  • According to the complaint, J&J allegedly directed sales representatives to make false and misleading statements regarding its opioid drug Duragesic to doctors in the state, including that it carried a lower risk of addition and lesser side effects than other opioids, and received Medicaid reimbursements for sales of Duragesic.
  • The complaint seeks reimbursement of Medicaid funds received, civil penalties, injunctive relief, expenses, costs, and attorneys' fees, and pre- and post-judgment interest.

State v. Federal

8 Attorneys General Sue Securities & Exchange Commission Over Alleged Failure to Adopt Investor Protections

  • Eight AGs, led by New York AG Letitia James, filed a lawsuit against the Securities & Exchange Commission ("SEC") over allegations that the SEC's "Regulation Best Interest" rule fails to meet basic investor protections required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
  • According to the complaint, the SEC adopted Regulation Best Interest—implemented to address industry confusion over the standard of conduct for broker-dealers and investment advisors—in June 2019 in contravention of the express direction of the Dodd-Frank Act, which authorizes the SEC to set such standards and require that broker-dealer and investment advisor recommendations be made "without regard" to their own interests. The AGs argue that the new rule fails to meaningfully elevate such standards, allows broker-dealers to consider their own interests when making recommendations, and will produce additional industry confusion, among other things.
  • The complaint seeks declaratory and injunctive relief.

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