Antitrust Law Daily Wrap Up, TOP STORY: FTC requires TRUSTe to alter practices, pay $200,000 to settle deception allegations, (Nov 17, 2014)

By Jeffrey May, J.D.

True Ultimate Standards Everywhere, Inc., better known as “TRUSTe,” has agreed to settle FTC charges that it misrepresented its review and verification of the online businesses that participated in its privacy certification program. A proposed consent order also would resolve FTC concerns that TRUSTe perpetuated the misrepresentation of its status as a non-profit entity after it became a for-profit entity (In the Matter of True Ultimate Standards Everywhere, Inc., FTC File No. 132 3219).

As alleged in the FTC complaint, TRUSTe failed to follow through on a promise to consumers to annually recertify its self-regulatory program participants for compliance with TRUSTe’s privacy program requirements. TRUSTe certifies compliance with, among other things, the FTC’s Children’s Online Privacy Protection Act Rule and the U.S.-EU Safe Harbor Framework for transatlantic data transfers.

In addition, TRUSTe allegedly misrepresented that it was a non-profit entity, even though it had transitioned to a for-profit entity in 2008. “Some TRUSTe clients’ privacy policies continued to describe TRUSTe as a non-profit entity until fall of 2013,” the complaint alleged.

TRUSTe also was alleged in a separate count in the complaint to have furnished the means and instrumentalities for the commission of the deceptive acts or practices. According to the FTC, the company failed to require companies using TRUSTe seals to update references to the organization’s non-profit status.

Settlement. The proposed FTC consent order contains provisions designed to prevent respondent from engaging in the challenged acts and practices in the future. It also would require TRUSTe to pay $200,000 as disgorgement and to comply with various reporting requirements due to its role as a COPPA safe harbor.

The proposed order would prohibit TRUSTe from misrepresenting: (1) the steps it takes to evaluate, certify, review, or recertify a company’s privacy practices; (2) the frequency with which it evaluates, certifies, reviews, or recertifies a company’s privacy practices; (3) the corporate status of TRUSTe and its independence; and (4) the extent to which any person or entity is a member of, adheres to, complies with, is certified by, is endorsed by, or otherwise participates in any privacy program sponsored by TRUSTe. TRUSTe also would be prohibited from providing to any person or entity the means and instrumentalities (including any required or model language for use in any privacy policy or statement) to misrepresent TRUSTe's conduct or status.

Partial dissent. Commissioner Maureen K. Ohlhausen issued a partial dissent, opposing the use of “means and instrumentalities” liability in Count II of the complaint. To be liable of deception under means and instrumentalities requires that the party itself must make a misrepresentation, according to Ohlhausen. However, the statement that TRUSTe provided to its clients about its non-profit status was truthful at that time. Because TRUSTe accurately represented its non-profit status to its clients, TRUSTe cannot be primarily liable for deceiving consumers under a means and instrumentalities theory, in Ohlhausen's view.

In response, Chairwoman Edith Ramirez and Commissioners Julie Brill and Terrell McSweeny issued a statement, noting that “one who places the means of deception in the hands of another is also liable for the deception under Section 5.” They explained that TRUSTe for years continued to recertify some of its clients that neglected to update their policies to reflect TRUSTe’s change to for-profit status and instead included the statement about the non-profit status that TRUSTe itself had disseminated.

Attorneys: Jamie E. Hine for FTC. D. Reed Freeman, Jr. (Morrison & Foerster, LLP) for True Ultimate Standards Everywhere, Inc.

Companies: True Ultimate Standards Everywhere, Inc.

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