Notice2021-22887
Resident Home, LLC; Analysis of Proposed Consent Order To Aid Public Comment
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 21, 2021
Issuing agencies
Federal Trade Commission
Abstract
The consent agreement in this matter settles alleged violations of federal law prohibiting unfair or deceptive acts or practices. The attached Analysis of Proposed Consent Order to Aid Public Comment describes both the allegations in the draft complaint and the terms of the consent order--embodied in the consent agreement-- that would settle these allegations.
Full Text
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<title>Federal Register, Volume 86 Issue 201 (Thursday, October 21, 2021)</title>
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[Federal Register Volume 86, Number 201 (Thursday, October 21, 2021)]
[Notices]
[Pages 58279-58284]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-22887]
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FEDERAL TRADE COMMISSION
[File No. 202 3179]
Resident Home, LLC; Analysis of Proposed Consent Order To Aid
Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement; request for comment.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices. The attached Analysis of Proposed Consent Order to Aid
Public Comment describes both the allegations in the draft complaint
and the terms of the consent order--embodied in the consent agreement--
that would settle these allegations.
DATES: Comments must be received on or before November 22, 2021.
ADDRESSES: Interested parties may file comments online or on paper by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Please write ``Resident Home
LLC; File No. 202 3179'' on your comment, and file your comment online
at <a href="https://www.regulations.gov">https://www.regulations.gov</a> by following the instructions on the
web-based form. If you prefer to file your comment on paper, mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D),
Washington, DC 20580, or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC
20024.
FOR FURTHER INFORMATION CONTACT: Julia Solomon Ensor (202-326-2377),
Bureau of Consumer Protection, Federal Trade Commission, 600
Pennsylvania Avenue NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
at <a href="https://www.ftc.gov/news-events/commission-actions">https://www.ftc.gov/news-events/commission-actions</a>.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before November 22,
2021. Write ``Resident Home LLC; File No. 202 3179'' on your comment.
Your comment--including your name and your state--will be placed on the
public record of this proceeding, including, to the extent practicable,
on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
Due to the COVID-19 pandemic and the agency's heightened security
screening, postal mail addressed to the Commission will be subject to
delay. We strongly encourage you to submit your comments online through
the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website.
If you prefer to file your comment on paper, write ``Resident Home;
File No. 202 3179'' on your comment and on the envelope, and mail your
comment to the following address: Federal Trade Commission, Office of
the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D),
Washington, DC 20580; or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC
20024. If possible, submit your paper comment to the Commission by
courier or overnight service.
Because your comment will be placed on the publicly accessible
website at <a href="https://www.regulations.gov">https://www.regulations.gov</a>, you are solely responsible for
making sure your comment does not include any sensitive or confidential
information. In particular, your comment should not include sensitive
personal information, such as your or anyone else's Social Security
number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure your comment does not include
sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including in particular competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the <a href="https://www.regulations.gov">https://www.regulations.gov</a> website--as legally
[[Page 58280]]
required by FTC Rule 4.9(b)--we cannot redact or remove your comment
from that website, unless you submit a confidentiality request that
meets the requirements for such treatment under FTC Rule 4.9(c), and
the General Counsel grants that request.
Visit the FTC website at <a href="http://www.ftc.gov">http://www.ftc.gov</a> to read this document
and the news release describing the proposed settlement. The FTC Act
and other laws that the Commission administers permit the collection of
public comments to consider and use in this proceeding, as appropriate.
The Commission will consider all timely and responsive public comments
that it receives on or before November 22, 2021. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see <a href="https://www.ftc.gov/site-information/privacy-policy">https://www.ftc.gov/site-information/privacy-policy</a>.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``FTC'' or ``Commission'') has
accepted, subject to final approval, an agreement containing a consent
order from Resident Home LLC, also d/b/a Nectar Sleep, DreamCloud
Sleep, Awara Sleep, Level Sleep, Bundle Living, 1771 Living,
Cloverlane, Wovenly Rugs, Sleep Authority, and Home Well Designed, and
Ran Reske (``Respondents''). The proposed consent order has been placed
on the public record for thirty (30) days for receipt of comments from
interested persons. Comments received during this period will become
part of the public record. After thirty (30) days, the Commission will
again review the agreement and the comments received, and will decide
whether it should withdraw from the agreement or make final the
agreement's proposed order.
This matter involves Respondents' advertising of DreamCloud
mattresses as of U.S. origin. According to the FTC's complaint,
Respondents represented that DreamCloud mattresses were ``proudly made
with 100% USA-made premium quality materials.'' However, the complaint
alleges that, in numerous instances, DreamCloud mattresses are wholly
imported or incorporate significant imported materials. In all
instances, DreamCloud mattresses are finished overseas. Based on the
foregoing, the complaint alleges that Respondents engaged in deceptive
acts or practices in violation of Section 5(a) of the FTC Act.
The proposed consent order contains provisions designed to prevent
Respondents from engaging in similar acts and practices in the future.
Consistent with the FTC's Enforcement Policy Statement on U.S.-Origin
Claims, Part I prohibits Respondents from making U.S.-origin claims for
their products unless either: (1) The final assembly or processing of
the product occurs in the United States, all significant processing
that goes into the product occurs in the United States, and all or
virtually all ingredients or components of the product are made and
sourced in the United States; (2) a clear and conspicuous qualification
appears immediately adjacent to the representation that accurately
conveys the extent to which the product contains foreign parts,
ingredients or components, and/or processing; or (3) for a claim that a
product is assembled in the United States, the product is last
substantially transformed in the United States, the product's principal
assembly takes place in the United States, and United States assembly
operations are substantial.
Part II prohibits Respondents from making any country-of-origin
claim about a product or service unless the claim is true, not
misleading, and Respondents have a reasonable basis substantiating the
representation.
Parts III through V are monetary provisions. Part III imposes a
judgment of $753,300. Part IV includes additional monetary provisions
relating to collections. Part V requires Respondents to provide
sufficient customer information to enable the Commission to administer
consumer redress, if appropriate.
Part VI is a notice provision requiring Respondents to identify and
notify certain DreamCloud mattress purchasers of the FTC's action
within 30 days after the issuance of the order, or within 30 days of
the customer's identification, if identified later. Respondents are
also required to submit reports regarding their notification program.
Parts VII through IX are reporting and compliance provisions. Part
VII requires Respondents to acknowledge receipt of the order, to
provide a copy of the order to certain current and future principals,
officers, directors, and employees, and to obtain an acknowledgement
from each such person that they have received a copy of the order. Part
VIII requires Respondents to file a compliance report within one year
after the order becomes final and to notify the Commission within 14
days of certain changes that would affect compliance with the order.
Part IX requires Respondents to maintain certain records, including
records necessary to demonstrate compliance with the order. Part X
requires Respondents to submit additional compliance reports when
requested by the Commission and to permit the Commission or its
representatives to interview Respondents' personnel.
Finally, Part XI is a ``sunset'' provision, terminating the order
after twenty (20) years, with certain exceptions.
The purpose of this analysis is to aid public comment on the
proposed order. It is not intended to constitute an official
interpretation of the proposed order or to modify its terms in any way.
By direction of the Commission, Commissioners Phillips and Wilson
dissenting.
April J. Tabor,
Secretary.
Joint Statement of Chair Lina M. Khan, Commissioner Rohit Chopra, and
Commissioner Rebecca Kelly Slaughter
The parties named in this matter are no strangers to the
Commission. In 2018, the FTC finalized a settlement with Nectar Brand
LLC (also doing business as DreamCloud, LLC, and DreamCloud Brand LLC)
(``Nectar'') related to false ``Assembled in USA'' claims about the
company's wholly imported mattresses. Shortly after that settlement,
CEO Ran Reske and Nectar's other officers reorganized the company and
its subsidiaries under a new ultimate parent entity, Resident Home LLC
(``Resident''). Despite the reorganization and being under active
compliance monitoring as part of the 2018 Nectar order, old habits die
hard. Misleading made in USA (``MUSA'') claims continued to appear on
the website of DreamCloud Brand LLC in 2019 and 2020, contrary to
Reske's statements made under penalty of perjury as part of required
compliance reports. Today's action sends an unambiguous message about
the importance of complying with prior Commission orders. In addition
to injunctive provisions, the proposed settlement contains monetary
relief of $753,300 and requires Resident to notify consumers of the
FTC's action. Together with the Commission's recent MUSA rule,\1\ these
remedies signal to businesses that MUSA abuses--which harm both
consumers and honest competitors--will not be tolerated by the FTC. Our
dissenting colleagues suggest that the proposed settlement is not
authorized by statute. This is incorrect. The settlement is squarely
within the Commission's statutory
[[Page 58281]]
authority. The dissent contends that the monetary relief in this
settlement goes beyond what is permitted by Section 19 of the FTC Act.
In fact, Section 19 expressly authorizes payment of redress and
damages. The dissent attempts to sidestep this clear statutory
authority by narrowly equating ``damages'' with restoration of money to
particular consumers. However, such an interpretation runs contrary to
the standard legal meaning of the term.\2\ Furthermore, MUSA fraud can
result in significant consequential damages, both to consumers and,
especially, to honest businesses that lose out on sales. Against this
backdrop, the proposed monetary relief, far from being a penalty of the
sort prohibited by Section 19, is reasonable and well within the
Commission's legal authority. The dissent also presents a highly
restrictive reading of the types of relief ``explicitly authorized'' by
Section 19. But despite admonishing the Commission ``that the words of
a statute matter'', the dissent misses the statute's language expressly
stating that the relief available is not limited to the types
explicitly enumerated (``Such relief may include, but shall not be
limited to . . .''). Thus, even if the dissent were not mistaken about
what is covered under ``damages'', the relief obtained here still would
not be foreclosed by the statutory language. Finally, even if the
dissent were not incorrect about the extent of the relief the
Commission could obtain under Section 19 at trial, it would still be
wrong about the lawfulness of the relief obtained in this settlement.
Supreme Court precedent makes clear that federal courts may approve
settlements that include relief beyond what could have been awarded at
trial.\3\ We agree with our dissenting colleagues that Congress should
act swiftly to restore our Section 13(b) authority, and like them we
have directly urged Congress to do so.\4\ But, as we have also
consistently emphasized, the FTC needs to use all its tools to protect
consumers and competition within the bounds of our existing
authority.\5\ While Congress works to deliver a Section 13(b) fix,
Section 19 and other extant statutory tools \6\ will be crucial in
allowing the FTC to obtain monetary redress in consumer protection
cases.
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\1\ See Press Release, Fed Trade Comm'n, FTC Issues Rule to
Deter Rampant Made in USA Fraud (July 1, 2021), <a href="https://www.ftc.gov/news-events/press-releases/2021/07/ftc-issues-rule-deter-rampant-made-usa-fraud">https://www.ftc.gov/news-events/press-releases/2021/07/ftc-issues-rule-deter-rampant-made-usa-fraud</a>.
\2\ See Rohit Chopra and Samuel Levine, The Case for
Resurrecting the FTC Act's Penalty Offense Authority, U. PA. L. REV.
(forthcoming), fn. 37, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=</a> 3721256 (``Black's Law Dictionary defines
consequential damages as `[l]osses that do not flow directly and
immediately from an injurious act but that result indirectly from
the act.' DAMAGES, Black's Law Dictionary (11th ed. 2019). We have
been unable to identify a Section 19 matter where the FTC pursued
damages, which is traditionally understood to be a legal remedy
rather than an equitable remedy. Unlike equitable relief, damages
can conceivably capture a broad range of harms, including indirect
consequences of deception. As the FTC faces threats to its authority
to seek equitable relief, the agency should consider pursuing this
alternative form of relief in more cases.'').
\3\ Firefighters v. City of Cleveland, 478 U.S. 501, 525 (1986)
(``a federal court is not necessarily barred from entering a consent
decree merely because the decree provides broader relief than the
court could have awarded after a trial'').
\4\ See Press Release, Fed. Trade Comm'n, FTC Asks Congress to
Pass Legislation Reviving the Agency's Authority to Return Money to
Consumers Harmed by Law Violations and Keep Illegal Conduct from
Reoccurring (Apr. 27, 2021), <a href="https://www.ftc.gov/news-events/press-releases/2021/04/ftc-asks-congress-pass-legislation-reviving-agencysauthority">https://www.ftc.gov/news-events/press-releases/2021/04/ftc-asks-congress-pass-legislation-reviving-agencysauthority</a>. See also Hearing on ``Strengthening the Federal
Trade Commission's Authority to Protect Consumers'': Before the U.S.
Senate Committee on Commerce, Science, and Transportation, Prepared
Oral Statement of FTC Commissioner Noah Joshua Phillips, Fed. Trade
Comm'n (Apr. 20, 2021), <a href="https://www.ftc.gov/system/files/documents/public_statements/1589176/formatted_prepared_statement_0420_senate_hearing_42021_final.pdf">https://www.ftc.gov/system/files/documents/public_statements/1589176/formatted_prepared_statement_0420_senate_hearing_42021_final.pdf</a>;
Hearing on ``Strengthening the Federal Trade Commission's Authority
to Protect Consumers'': Before the U.S. Senate Committee on
Commerce, Science, and Transportation, Oral Statement of
Commissioner Christine S. Wilson, Fed. Trade Comm'n (Apr. 20, 2021),
<a href="https://www.ftc.gov/system/files/documents/public_statements/1589180/opening_statement_final_for_postingrevd.pdf">https://www.ftc.gov/system/files/documents/public_statements/1589180/opening_statement_final_for_postingrevd.pdf</a>; Hearing on
``Strengthening the Federal Trade Commission's Authority to Protect
Consumers'': Before the U.S. Senate Committee on Commerce, Science,
and Transportation, Opening Statement of Acting Chairwoman Rebecca
Kelly Slaughter, Fed. Trade Comm'n (Apr. 20, 2021), <a href="https://www.ftc.gov/system/files/documents/public_statements/1589184/opening_statement_april_20_senate_oversight_hearing_420_final.pdf">https://www.ftc.gov/system/files/documents/public_statements/1589184/opening_statement_april_20_senate_oversight_hearing_420_final.pdf</a>;
Hearing on ``Strengthening the Federal Trade Commission's Authority
to Protect Consumers'': Before the U.S. Senate Committee on
Commerce, Science, and Transportation, Prepared Opening Statement of
Commissioner Rohit Chopra, Fed. Trade Comm'n (Apr. 20, 2021),
<a href="https://www.ftc.gov/system/files/documents/public_statements/1589172/final_chopra_opening_statement_for_senate_commerce_committee_20210420.pdf">https://www.ftc.gov/system/files/documents/public_statements/1589172/final_chopra_opening_statement_for_senate_commerce_committee_20210420.pdf</a>.
\5\ See, e.g., Joint Statement of Commissioner Rohit Chopra and
Commissioner Rebecca Kelly Slaughter Concurring in Part, Dissenting
in Part, In the Matter of Flo Health, Inc., Fed. Trade Comm'n (Jan.
13, 2021), <a href="https://www.ftc.gov/system/files/documents/public_statements/1586018/20210112_final_joint_rmrks_statement_on_flo.pdf">https://www.ftc.gov/system/files/documents/public_statements/1586018/20210112_final_joint_rmrks_statement_on_flo.pdf</a>; Remarks of
Commissioner Rebecca Kelly Slaughter, FTC Data Privacy Enforcement:
A Time of Change, Cybersecurity and Data Privacy Conference, New
York University School of Law (Oct. 16, 2020), <a href="https://www.ftc.gov/system/files/documents/public_statements/1581786/slaughter_-_remarks_on_ftc_data_privacy_enforcement_-_a_time_of_change.pdf">https://www.ftc.gov/system/files/documents/public_statements/1581786/slaughter_-_remarks_on_ftc_data_privacy_enforcement_-_a_time_of_change.pdf</a>.
\6\ For instance, violators of administrative orders are subject
to penalties and various forms of relief under Section 5(l) of the
FTC Act. See Statement of Rohit Chopra In the Matter of Resident
Home LLC Commission File No. 202 3179, Oct. 8, 2021.
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Statement of Commissioner Rohit Chopra
Wow, that was fast. Soon after the Federal Trade Commission
``punished'' Nectar Sleep through a no-money, no-fault order, the
company and its affiliates clearly realized the FTC wasn't serious
about Made in USA fraud, so here we are again.
FTC orders are not suggestions, but many bad actors view them as
such.\1\ And when companies do not adhere to agency orders, it is often
a sign of more serious problems.\2\ Violations of FTC orders are
punishable with civil penalties and a broad range of other relief.
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\1\ This follows a slew of other repeat offenders when it comes
to Made in USA requirements, a clear demonstration of the need for
the policy shift the FTC is now making. See Rohit Chopra,
Commissioner, Fed. Trade Comm'n., Statement of Commissioner Rohit
Chopra Regarding the Notice of Proposed Rulemaking on Made in USA
(June 22, 2020), <a href="https://www.ftc.gov/system/files/documents/public_statements/1577107/p074204musachoprastatementrev.pdf">https://www.ftc.gov/system/files/documents/public_statements/1577107/p074204musachoprastatementrev.pdf</a>. See
e.g., In the Matter of Williams-Sonoma, Inc., No. C-4724 (July
2020), <a href="https://www.ftc.gov/system/files/documents/cases/2023025c4724williamssonomaorder.pdf">https://www.ftc.gov/system/files/documents/cases/2023025c4724williamssonomaorder.pdf</a>. The Commission opened an
investigation but, after some behavior alterations by Williams-
Sonoma, the 2018 investigation was closed, only to be renewed in
2020 when Williams-Sonoma was at it again. See also U.S. v. iSpring
Water Systems, LLC, et al., No. 1:16-cv-1620-AT (N.D. Ga. 2019).
After making false claims that its water filtration systems were
made in the United States and entering into an administrative order
with the FTC in 2017, iSpring went back to making false claims only
a year later, triggering the violation of the 2017 order.
\2\ Rohit Chopra, Comm'r, Fed. Trade Comm'n. Repeat Offenders
Memo (May 14, 2018), <a href="https://www.ftc.gov/system/files/documents/public_statements/1378225/chopra_-_repeat_offenders_memo_5-14-18.pdf">https://www.ftc.gov/system/files/documents/public_statements/1378225/chopra_-_repeat_offenders_memo_5-14-18.pdf</a>.
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The Commission is proposing to settle the matter by ordering
Resident Home, Nectar Sleep's new parent company, to pay $753,300. The
Commission's complaint also charges Resident's CEO, Ran Reske, with
serious wrongdoing. Reske signed a report, under penalty of perjury,
stating that Resident Home had removed all covered Made in USA claims
from its subsidiaries' websites and that Resident had never made Made
in USA claims about its DreamCloud mattress. This was false.
The proposed settlement binds Nectar Sleep, as well as its new
parent company, ensuring that any corporate musical chairs will not
allow the company to dodge the FTC's order. The proposed order also
requires the companies to provide notice to consumers who purchased a
mattress while the false claims appeared.
Commissioner Slaughter has rightfully noted that the Commission
must use all of its tools to protect the marketplace and make victims
whole. This case is no exception. The settlement is reasonable and
squarely within the Commission's legal authority.
[[Page 58282]]
Disguised Opposition
My dissenting colleagues purport that this proposed action--which
was agreed to by Resident Home and Reske--is not authorized by statute.
Their arguments fail on policy and legal grounds.
Commissioners Phillips and Wilson have consistently supported no-
money, no-fault settlements, even in cases of egregious Made in USA
fraud.\3\ I understand that, as a matter of policy, they do not support
serious consequences for Made in USA fraud and have expressed support
for the longstanding permissive policy of the past.\4\ However, their
dissenting statement disguises this policy opposition as an argument
about the Commission's legal authority. There are several pieces of
evidence to suggest that Commissioners Phillips and Wilson's resistance
is based on policy grounds, not on legal grounds.
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\3\ See Press Release, Fed Trade Comm'n, FTC Approves Final
Consents Settling Charges that Hockey Puck Seller, Companies Selling
Recreational and Outdoor Equipment Made False `Made in USA' Claims
(Apr. 17, 2019), <a href="https://www.ftc.gov/news-events/press-releases/2019/04/ftc-approves-final-consentssettling-charges-hockey-puck-seller">https://www.ftc.gov/news-events/press-releases/2019/04/ftc-approves-final-consentssettling-charges-hockey-puck-seller</a>; In the Matter of Sandpiper Gear of California, Inc. et al.,
No. 182-3095, <a href="https://www.ftc.gov/enforcement/cases-proceedings/182-3095/sandpiper-california-inc-et-al-matter">https://www.ftc.gov/enforcement/cases-proceedings/182-3095/sandpiper-california-inc-et-al-matter</a>; In the Matter of
Underground Sports d/b/a Patriot Puck, et al., No. 182-3113 (Apr.
2019), <a href="https://www.ftc.gov/enforcement/casesproceedings/182-3113/underground-sports-inc-doing-business-patriot-puck-et-al">https://www.ftc.gov/enforcement/casesproceedings/182-3113/underground-sports-inc-doing-business-patriot-puck-et-al</a>.
\4\ Id.
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First, Commissioners Phillips and Wilson argue they must have
express statutory authorization to accept monetary remedies in
settlements. However, less than two months after the Supreme Court
ruled that the FTC cannot obtain monetary relief in certain federal
court actions, both Commissioners Phillips and Wilson voted for an $18
million order to settle a complaint brought under Section 13(b) of the
FTC Act--the exact authority the Supreme Court explicitly ruled against
the FTC on.\5\ This not the only example where Commissioners Phillips
and Wilson have agreed to settle complaints with remedies that are not
specifically enumerated by statute.
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\5\ See Press Release, Fed Trade Comm'n, LendingClub Agrees to
Pay $18 Million to Settle FTC Charges (July 14, 2021), <a href="https://www.ftc.gov/news-events/press-releases/2021/07/lendingclub-agrees-pay-18-million-settle-ftccharges">https://www.ftc.gov/news-events/press-releases/2021/07/lendingclub-agrees-pay-18-million-settle-ftccharges</a>. Given the alternative paths the
Commission could have pursued to address the conduct at hand, I
believe the settlement was appropriate even in spite of the Supreme
Court's ruling. Indeed, the Commission's proposed stipulated
judgment was entered by the court.
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To further disguise the nature of their opposition, Commissioners
Phillips and Wilson assert that the Commission is accepting monetary
remedies in an administrative settlement not permitted by Section 19 of
the Federal Trade Commission Act. In reality, Section 19 of the FTC Act
expressly authorizes the payment of redress and damages. Consequential
damages in Made in USA fraud can be considerable, particularly when it
comes to harms to law-abiding businesses whose sales were siphoned. In
settlements, parties can save time and resources by making the best
estimates--adjusted for risk--on the right resolution. It would have
been costly to specifically identify each harmed consumer and business,
but it is clear the proposed monetary relief is reasonable, given our
legal authority.
In addition, Commissioners Phillips and Wilson imply that to obtain
the proposed remedies, the Commission must file multiple complaints in
our administrative tribunal and in federal court. However, Commissioner
Phillips and Wilson know that the Commission does not regularly
prosecute the same conduct in multiple fora. Commissioners need not
concurrently charge an entity for the same consumer protection
violation of law in its administrative tribunal and in federal court,
even when it may be authorized, like in civil penalty actions under
Section 5(l).
The facts and evidence clearly show that DreamCloud violated an
administrative order, triggering penalties and a broad range of relief
under Section 5(l) of the FTC Act. Even if Section 19 of the FTC Act
did not authorize damages, it is perfectly appropriate for the
Commission to settle all of these claims at once, rather than pursue an
additional action for civil penalties. It is obvious that today's
proposed action is legally sound. If Commissioners Phillips and Wilson
are voting against the proposed settlement because of their preference
for no-consequences settlements in Made in USA fraud matters, then they
should be upfront with the public and state so plainly.
Conclusion
The FTC has a troubling history of strong-arming small and
independent business owners--including church organists \6\ and skating
teachers \7\--into settlements, while allowing those who repeatedly
break the law to escape unscathed,\8\ often with the help of high-
priced FTC alumni. In this matter, the Commission is proposing a
settlement to hold accountable a repeat offender represented by a
sophisticated law firm. I am pleased that the agency's abusive and
inappropriate double standard is starting to fade away.
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\6\ In the Matter of American Guild of Organists, Fed. Trade
Comm'n, <a href="https://www.ftc.gov/enforcement/casesproceedings/151-0159/american-guild-organists">https://www.ftc.gov/enforcement/casesproceedings/151-0159/american-guild-organists</a>.
\7\ In the Matter of Professional Skaters Association, Inc.,
Fed. Trade Comm'n, <a href="https://www.ftc.gov/enforcement/cases-proceedings/131-0168/professional-skaters-association-inc-matter">https://www.ftc.gov/enforcement/cases-proceedings/131-0168/professional-skaters-association-inc-matter</a>.
\8\ See e.g. Devin Coldewey, 9 reasons the Facebook FTC
settlement is a joke, TechCrunch (July 24, 2019), <a href="https://techcrunch.com/2019/07/24/9-reasons-the-facebook-ftc-settlement-is-a-joke/">https://techcrunch.com/2019/07/24/9-reasons-the-facebook-ftc-settlement-is-a-joke/</a>.
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Finally, for decades, there was a bipartisan consensus among FTC
Commissioners that Made in USA fraud should not be penalized. In 1994,
Congress granted the FTC strong tools to combat Made in USA fraud, but
Commissioners essentially ignored them. Fortunately, that era is also
over.
Effective August 13, 2021, individuals and companies engaging in
Made in USA fraud, including first-time offenders, will be subject to
stricter sanctions under the FTC's Made in USA Labeling Rule. I hope my
colleagues will fully support enforcement actions to hold bad actors
accountable under this rule. The families and honest businesses--long
ignored by past Commissioners--are counting on us to live up to the
law.
Dissenting Statement of Commissioners Noah Joshua Phillips and
Christine S. Wilson
That didn't take long. Soon after the Supreme Court unanimously
rebuked the Federal Trade Commission for seeking monetary remedies not
permitted by Section 13(b) of the FTC Act \1\--remedies that, in
fairness to the agency, were blessed by appellate courts for decades
\2\--the Commission now votes to accept monetary remedies not permitted
by Section 19.
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\1\ AMG Capital Management, LLC v. FTC, 141 S. Ct. 1341 (2021).
\2\ See, e.g., FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1112-
1113 (9th Cir. 1982); FTC v. Rare Coin & Bullion Corp., 931 F.2d
1312, 1314-1315 (8th Cir. 1991); FTC v. Bronson Partners, LLC, 654
F.3d 359, 365 (2d Cir. 2011).
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We commend staff for their diligent work on this case, and remain
committed to continued Made in the U.S.A. enforcement.\3\ But we
believe that the monetary redress in this case
[[Page 58283]]
exceeds our authority, and so we respectfully dissent.
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\3\ See, In the matter of Chemence, Inc., File No. X1600321
(Feb. 2021), <a href="https://www.ftc.gov/enforcement/casesproceedings/X160032/chemence-inc">https://www.ftc.gov/enforcement/casesproceedings/X160032/chemence-inc</a>; In the matter of Gennex Media, File No.
2023122 (Apr. 2021), <a href="https://www.ftc.gov/enforcement/cases-proceedings/2023122/gennex-media-matter">https://www.ftc.gov/enforcement/cases-proceedings/2023122/gennex-media-matter</a>; In the matter of Williams-
Sonoma, Inc., File No. 2023025 (July 2020), <a href="https://www.ftc.gov/enforcement/cases-proceedings/202-3025/williams-sonoma-inc-matter">https://www.ftc.gov/enforcement/cases-proceedings/202-3025/williams-sonoma-inc-matter</a>.
Unlike Commissioners Chopra and Slaughter, we have supported every
Made in U.S.A. enforcement action brought during our tenure.
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In 2018, the Commission entered an administrative order against
Nectar Brand LLC, also d/b/a Nectar Sleep, DreamCloud LLC, and
DreamCloud Brand LLC (``Nectar Order'') and its successors and assigns
for making ``Assembled in USA'' claims for wholly-imported mattresses.
Despite being under order, over at least two periods between December
2018 and June 2020, the Complaint alleges that Nectar deceptively
advertised DreamCloud mattresses as ``proudly made with 100% USA-made
premium quality materials''.
Since entry of the Nectar Order, the 2018 Respondent underwent
several changes to its corporate structure. In 2019, Resident Home LLC
was created as the parent company of Nectar Brand LLC and DreamCloud
Brand LLC. We do not have reason to believe that Resident Home LLC is a
successor or assign of Nectar Brand LLC and is covered by the Nectar
Order.
This state of play left the Commission with at least two choices.
It could choose to pursue an order enforcement action in federal court
and seek civil penalties.\4\ Alternatively, or in addition to taking
action against Nectar Brand, LLC, it could choose to pursue a de novo
administrative action and seek a new order that would cover the
company, its corporate parent Resident Home LLC, and Resident Home's
CEO Ran Reske, while ensuring that any future violations would result
in a civil penalty. While valid justifications support any of these
approaches, the Commission ultimately determined that seeking a new,
broader order would best protect consumers.
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\4\ The Commission statement and Commissioner Chopra's separate
statement assert that evidence clearly showed that DreamCloud
violated an administrative order. Despite the majority's paean to
the value of vindicating Commission orders, we do not plead an order
violation in the complaint. We support the FTC's longstanding view
that order obligations should reflect pleadings.
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The Commission statement and Commissioner Chopra's separate
statement assert that evidence clearly showed that DreamCloud violated
an administrative order. Despite the majority's paean to the value of
vindicating Commission orders, we do not plead an order violation in
the complaint. We support the FTC's longstanding view that order
obligations should reflect pleadings.
In choosing to proceed only administratively, the Commission gave
up its ability to obtain civil penalties; but it can still seek redress
on behalf of injured consumers pursuant to Section 19 of the FTC Act.
While the process is somewhat convoluted, Section 19 permits the
Commission to secure certain monetary relief, including, inter alia,
``the refund of money'' and ``the payment of damages''.\5\ As the
legislative history underscores, the purpose of this relief is to allow
the Commission to act ``to make specific consumers whole . . .''.\6\
Section 19 allows the Commission to obtain refunds for specific,
identified injured consumers.\7\ It expressly precludes ``the
imposition of any exemplary or punitive damages''.\8\ Under Section 19,
the FTC does not have authority to obtain disgorgement of ill-gotten
gains, another (more penal) \9\ form of equitable monetary relief.
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\5\ 15 U.S.C. 57b(b).
\6\ S. Rept. 93-151, 93d Cong., 2d Sess., at 27-28 (May 14,
1973).
\7\ See FTC v. Figgie Int'l, Inc., 994 F.2d 595 (9th Cir. 1993).
\8\ 15 U.S.C. 57b(b).
\9\ See Liu v. Securities and Exchange Commission, 140 S. Ct.
1936 (2020).
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Despite these clear limitations, the Commission's proposed order
includes monetary redress of $753,300, with any remainder not used for
redress to be disgorged to the Treasury. The complaint does not include
details that would help the public understand how the Commission
arrived at this amount, and we are not at liberty to reveal non-public
information. But our view of the facts is that the figure obtained far
exceeds any injury suffered by those consumers who saw the deceptive
statement and purchased a DreamCloud mattress or any reasonable
estimate of damages. The majority points to language in Section 19 that
also authorizes redress of injury to ``other persons'' (besides
consumers) resulting from the unlawful practices alleged.\10\ We have
seen no evidence of such harm in this matter. No one quibbles that the
amount of money here exceeds any reasonable estimate of injury.\11\ It
might plausibly be consistent with a penalty or with the disgorgement
of ill-gotten gains, but we have no authority to obtain such relief
under Section 19.\12\ The Commission makes clear in its statement that
the purpose of the monetary relief in question is to penalize, not to
make consumers whole.\13\
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\10\ 15 U.S.C. 57b(b) (``The court . . . shall have jurisdiction
to grant such relief as the court finds necessary to redress injury
to consumers or other persons, partnerships, and corporations
resulting from the rule violation or the unfair or deceptive act or
practice, as the case may be.''); see also Joint Statement of
Commissioner Slaughter, Chair Khan, and Commissioner Chopra In the
Matter of Resident Home, 2, FN4 File No. 202317.
\11\ In his separate statement, Commissioner Chopra
misrepresents our position in LendingClub. In that case, the
Commission would have been entitled to consumer redress for injuries
under Section 19. In LendingClub, unlike here, the settlement amount
was not punitive; it reflected the monetary harm suffered by
consumers. See, In the matter of LendingClub Corporation, File No.
1623088 (July 2021), <a href="https://www.ftc.gov/enforcement/casesproceedings/162-3088/federal-trade-commission-v-lendingclub-corporation">https://www.ftc.gov/enforcement/casesproceedings/162-3088/federal-trade-commission-v-lendingclub-corporation</a>.
\12\ The majority is correct that Section 19 permits
``damages''. The majority, though, is not entitled to its own facts.
The facts alleged in the complaint and Analysis to Aid Public
Comment provide no basis for a Section 19 damages remedy of this
amount. Although we cannot share the underlying analysis with the
reader, the monetary remedy far exceeds any reasonable estimate of
Section 19 damages. As the majority makes clear in the Commission
statement, it is assessing a penalty under cover of Section 19.
\13\ In his separate statement, Commissioner Chopra also claims
that we do not support consequences for Made in the U.S.A. fraud. By
that logic, Commissioner Chopra's votes against privacy enforcement
in cases like Facebook and Google/YouTube show his enthusiasm for
their business models and distaste for enforcement against large
technology platforms. The issue here is the Commission trying to eat
its Section 19 cake and have its civil penalties too. We cannot do
both, however we feel about policy. See Statement of Rohit Chopra In
the Matter of Resident Home LLC, Commission File No. 202317. See
also, Dissenting Statement of Commissioner Rohit Chopra In re:
Facebook, Inc., Commission File No. 1823109 (July 24, 2019), <a href="https://www.ftc.gov/system/files/documents/public_statements/1536911/chopra_dissenting_statement_facebook_7-24-19.pdf">https://www.ftc.gov/system/files/documents/public_statements/1536911/chopra_dissenting_statement_facebook_7-24-19.pdf</a>; Dissenting
Statement of Commissioner Rohit Chopra In the Matter of Google LLC
and YouTube, LLC, Commission File No. 1723083 (Sep. 4, 2019),
<a href="https://www.ftc.gov/system/files/documents/public_statements/1542957/chopra_google_youtube_dissent.pdf">https://www.ftc.gov/system/files/documents/public_statements/1542957/chopra_google_youtube_dissent.pdf</a>.
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The Supreme Court handed down its decision in AMG Capital
Management, LLC v. FTC in April,\14\ and made clear that the words of a
statute matter. Those words trump the policy preferences of
commissioners. That decision should have been a wake-up call, a
reminder to the Commission that, no matter how egregious the conduct or
righteous our cause, the Commission is not entitled to go beyond the
bounds of what the law permits. If we continue to flout the limits of
our authority, the Commission should fully expect additional rebukes
from the courts.
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\14\ AMG Capital Mgmt., LLC v. FTC, 141 S. Ct. 1341 (2021).
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The AMG decision has significantly impacted the ability of the FTC
to pursue wrongdoers and remediate law violations through the
imposition of monetary relief. So we reiterate our call to Congress to
pass legislation to restore the ability of the FTC to seek monetary
remedies under Section 13(b) of the FTC Act in appropriate
circumstances. But the law says what it says, and we do not support
using the cloak of a settlement to overstep the authority we have.\15\
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\15\ The majority is correct that, as a practical matter, the
government has the ability to extort that to which it is not
entitled under law. As we have said on other occasions, though, just
because we can does not mean that we should. Joint Statement of
Commissioners Noah Joshua Phillips and Christine S. Wilson, U.S. v.
iSpring Water Systems, LLC, Commission File No. C4611 (Apr. 12,
2019), <a href="https://www.ftc.gov/system/files/documents/public_statements/1513499/ispring_water_systems_llc_c4611_modified_joint_statementof_commissioners_phillips_and_wilson_4-12.pdf">https://www.ftc.gov/system/files/documents/public_statements/1513499/ispring_water_systems_llc_c4611_modified_joint_statementof_commissioners_phillips_and_wilson_4-12.pdf</a>.
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[[Page 58284]]
If the goal in this case were to maximize money paid by the
Respondents as punishment and to deter others from engaging in similar
conduct, the Commission was free to enforce the original Nectar Order
and seek civil penalties. That was the road not taken. In choosing this
road, with a new and broader order, the Commission is obligated to
limit monetary relief to the amount necessary to redress injury, as
explicitly authorized by Section 19. Because this settlement exceeds
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those clearly delineated bounds, we must respectfully dissent.
[FR Doc. 2021-22887 Filed 10-20-21; 8:45 am]
BILLING CODE 6750-01-P
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