The Federal Trade Commission (“FTC”) has suffered another loss in the federal courts—this time in a case against DirecTV in California. The FTC alleged that the satellite dish company’s advertisements did not properly alert consumers that their subscription prices would go up when promotional periods end. To support this, the FTC hand-selected 116 out of over 40,000 advertisements DirecTV broadcast, using expert witness testimony to argue that these advertisements created a deceptive “net impression” in the minds of consumers.
When the FTC finished presenting its case at trial, DirecTV moved for judgment in its favor without presenting any evidence of its own. DirecTV argued that the FTC had simply failed to meet its burden. The judge agreed and dismissed most of the case.
The court found that the FTC failed on several fronts. First, the FTC could not show, even in its hand-picked 116 examples, that DirecTV’s advertisements created any sort of “net impression” that deceived consumers. Instead, DirecTV’s advertisements effectively communicated, usually in multiple places highlighted with all-caps lettering and bold font, that the promotional pricing applied to the promotional period only. The FTC attempted to rely on the testimony of expert witnesses, but the judge dismissed those arguments, finding that the experts’ surveys and theories didn’t support the Government’s case.
Furthermore, the court held that the FTC failed to show its 116 samples were representative of a database of over 40,000 pieces of advertising. While the court was not going to require the FTC to submit all 40,000 into evidence, the FTC had to at least try to argue why the samples were connected to the whole. They didn’t. Finally, after dismissing most of the FTC’s claims, the court questioned whether the FTC could even prove the monetary damages in this case, citing a lack of evidence.
For years, the FTC has dictated terms of trade to businesses without having to justify them either in rulemaking proceedings or litigation. The result is that the FTC has taken legal positions that are weak and ill-considered. The DirecTV case is an example of how unprepared the FTC is to defend those positions when challenged.
Cause of Action recently submitted a detailed comment to the FTC that suggests several reforms the agency can implement to stop these abuses and create a level playing field for litigants. Simply put, the FTC has enormous power to unilaterally destroy businesses that cannot afford to face them down. The ones that do litigate against them are winning, and this should send a signal to the Commissioners—it’s time to change.
Eric R. Bolinder is Counsel at Cause of Action Institute. You can follow him on Twitter @EricBolinderLaw.
