Digital businesses that don’t keep their promises to consumers can pay a heavy price if caught by the Federal Trade Commission (FTC). Enforcement actions in cases involving unfair and deceptive practices by digital businesses have produced tens of millions of dollars in consumer redress or civil penalties, sometimes exceeding $100 million, alongside operational restrictions and ongoing monitoring. Company officers can also face personal monetary penalties.
According to a Sept. 28 alert by Hogan Lovells Cadwalader, businesses should build compliance programs around a basic comparison. Do their platforms deliver what they promise about prices, payments, subscriptions and access? Reviewing advertisements alone is insufficient when software, billing systems or internal rules produce a different result.
The analysis identifies five recurring categories of conduct, providing a framework for assessing exposure under the FTC Act and related consumer-protection laws.
The first involves unauthorized charges and account lockouts. Complaints challenged payment services that failed to verify authority over accounts and platforms that denied access to purchased benefits. Grubhub allegedly froze gift-card balances through fraud controls while continuing to charge some blocked users subscription fees.
The second concerns subscription enrollment and cancellation, including inadequately disclosed recurring charges, enrollment without informed consent, unexpected cancellation fees and difficult exit procedures. The third covers misleading claims about earnings and available work, such as advertised pay rates few workers achieved or job listings that overstated actual opportunities.
The fourth involves price and fee disclosures, including checkout charges inconsistent with advertised prices and fine print that failed to correct misleading impressions. The fifth category concerns discrepancies between advertised rules and actual practices, including undisclosed benefit limits, eligibility restrictions or exceptions to ticket-purchase limits. These examples concern allegations in complaints; settlements and court decisions have differing procedural status.
For businesses, the response should begin with defined responsibility, Hogan Lovells advised. Marketing, product, billing and customer-support teams must supply information for reviews before launch and whenever services change. Companies should specify who evaluates concerns, approves corrections and resolves disagreements.
Training should cover everyone who creates, approves or communicates representations, including growth teams, engineers and senior executives. Using actual advertisements and product screens can help employees recognize when claims require legal review. Training should change when product changes affect what employees can accurately tell users.
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The analysis recommends structuring reviews around five questions.
First, who verified each material statement and the user’s authorization? Businesses should examine claims about price, pay, eligibility, access and cancellation, preserve evidence of notice and consent, and substantiate earnings claims. An “up to” earnings figure requires evidence showing how many similarly situated workers achieve it. Payment services should verify both identity and authority over the charged account.
Second, who tested actual system behavior? Reviews should examine software, interfaces, models, operating procedures and staff decisions against advertised promises. They should also assess whether companies charge users whose eligibility rules prevent them from receiving the advertised service.
Third, can users understand material terms before committing and charges afterward? Disclosures should be clear and conspicuous. The analysis cited the Grubhub order’s requirement that covered interactive disclosures be unavoidable, without clicking links or hovering over icons. Claims such as free, unlimited and cancel anytime deserve particular attention.
Fourth, what do complaints, internal records and testing reveal? Increased enrollment after making a disclosure less prominent may warrant examination of whether users overlooked or misunderstood it. Customer complaints and employee warnings should be weighed against supporting evidence before deciding whether practices need correction.
Fifth, which substantiated concerns remain unresolved? Companies should maintain a list with an accountable owner and deadline for each issue, then verify that corrections work before closing them. Procedures for unauthorized transactions and account blocks should reflect the business’s risks and legal obligations.
Documentation completes the program. Material reviews should record the issue, evidence, decision and corrective follow-up. Counsel should direct appropriate legal reviews and establish retention periods reflecting legal requirements and preservation obligations.
The objective is an ongoing process capable of detecting discrepancies, responding to warnings and demonstrating why a business changed or retained a practice before regulators demand answers.