Fanning v. Federal Trade Commission

821 F.3d 164, 2016 U.S. App. LEXIS 8519, 2016 WL 2621140
CourtCourt of Appeals for the First Circuit
DecidedMay 9, 2016
Docket15-1520P
StatusPublished
Cited by15 cases

This text of 821 F.3d 164 (Fanning v. Federal Trade Commission) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fanning v. Federal Trade Commission, 821 F.3d 164, 2016 U.S. App. LEXIS 8519, 2016 WL 2621140 (1st Cir. 2016).

Opinion

TORRUELLA, Circuit Judge.

Defendant-Appellant John Fanning petitions this court for review of the Federal Trade Commission’s (“the Commission”) summary decision finding him personally liable for misrepresentations contained on the website Jerk.com in violation of the Federal Trade Commission Act (“FTC Act”). We agree with the Commission’s findings that Jerk.com materially misrepresented the source of its content and its membership benefits. Nonetheless, we agree with Fanning that portions of the Commission’s remedial order are over-broad. We affirm the finding of liability and the remedial order recordkeeping, provisions and order acknowledgment requirement. Because we conclude the remedial order’s compliance monitoring provisions as to Fanning are overbroad, we vacate that portion of the Commission’s order and remand for proceedings consistent with this opinion.

I. Background 1

In 2009, Fanning founded Jerk LLC (“Jerk”) and Jerk.com. 2 From 2009 to 2014, Jerk operated Jerk.com. 3

*169 Jerk.com was a self-proclaimed reputation management website. Its homepage greeted users by asking them if they were “[l]ooking for the latest scoop on a world filled with jerks” and stated that “millions” of people “use[d] Jerk for important updates, business, dating, and more.” The homepage listed several benefits Jerk.com offered, including tracking one’s own and other people’s reputations, “entering] comments and reviews for [other] people,” “[h]elp[ing] others avoid the wrong people,” and “prais[ing] those who help you.”

Jerk,com’s main feature was its profile pages. Each page corresponded with a particular individual and displayed that person’s name. The profiles allowed users to vote on whether someone was a “Jerk” or “not a Jerk” and displayed the total number of “Jerk” and “not a Jerk” votes received. Jerk.com users could also post anonymous reviews about a person, which were visible on that person’s profile page. By 20ÍÓ, Jerk.com contained 85 million profile pages. Very few of these profile pages had reviews posted and those reviews that were posted were largely derogatory.

Jerk.com also had a “Remove Me!” page, which stated that individuals could “manage [their] reputation and resolve disputes” regarding content on .their profile pages through a paid subscription. The “Remove Me!” page contained a link to a separate subscription page- where users could enter their billing and credit card information to purchase a $30 membership. The subscription page reiterated that only paid members could “create a dispute” about the content of a profile,

Despite its large number of profile pages, Jerk.com had relatively few users. Jerk.com had a “Post a Jerk” page that allowed users to create a profile for themselves or others by entering a person’s first and last name, e-mail address, university affiliation, and location. But Jerk created the vast majority of profiles by using a computer program that populated profile pages with names, photos,’ and other content obtained from searching Facebook — a fact Jerk.com did not disclose on any of its pages. ' ‘

In April 2014, the Federal Trade Commission’s enforcement arm (“FTC”) filed a two-count administrative complaint charging Jerk and Fanning with engaging in “deceptive acts or practices in or affecting commerce”, in violation of section 5(a) of the FTC Act. 15 U.S.C. § 45(a)(2). The first count alleged that Jerk.com misrepresented the source of its content by. claiming that it was entirely user, generated, The second count alleged that Jerk.com misrepresented the benefits of purchasing a $30 membership.

The FTC moved for summary decision (the administrative equivalent of summary judgment) on both counts in September 2014. The Commission granted the motion on both counts and found Fanning personally liable 4 for Jerk’s misrepresentations. The Commission also issued an order enjoining Jerk and Fanning from making certain misrepresentations and imposing monitoring and recordkeeping requirements. Fanning (but not Jerk) filed this timely petition.

*170 II. Liability

The FTC Rules of Practice and Procedure allow the Commission to grant “summary decision,” which is reviewed under the same standard as summary judgment -before a district court. See 16 C.F.R. § 3.24(a)(2); P.R. Aqueduct & Sewer Auth. v. EPA, 35 F.3d 600, 607 (1st Cir.1994). . Under the summary judgment standard, we “draw all reasonable inferences in favor of the non-moving party,” but- disregard “conclusory allegations, improbable inferences, and unsupported speculation.” Méndez-Aponte v. Bonilla, 645 F.3d 60, 64 (1st Cir.2011) (quoting Del Toro Pacheco v. Pereira, 633 F.3d 57, 62 (1st Cir.2011)). This court then asks whether a reasonable decision maker could conclude there was no “genuine issue of material fact” that “may affect the outcome of the case.” P.R. Aqueduct, 35 F.3d at 605. Nonetheless, judicial review of FTC findings is deferential. See Kraft, Inc. v. FTC, 970 F.2d 311, 316 (7th Cir.1992). Although “the words ‘deceptive practices’ set forth a legal standard” and “must get their final meaning from judicial construction,” “the Commission is often in a better position than are courts to determine when a practice is ‘deceptive’ ” and “the Commission’s judgment is to be given great weight by reviewing courts.” FTC v. Colgate-Palmolive Co., 380 U.S. 374, 385, 85 act 1035, 13 L.Ed.2d 904 (1965).

In determining whether a defendant has engaged in deceptive acts or practices,, the Commission uses a three-part test considering (1) “what claims are conveyed;” (2) “whether those claims are false, misleading, or unsubstantiated;” and (3) “whether the claims are material to prospective consumers.” POM Wonderful, LLC v. FTC, 777 F.3d 478, 490 (D.C.Cir.2015); see also Kraft, 970 F.2d at 314; Novartis Corp., 127 F.T.C. 580, 679 (1999). As explained below, Jerk.com contained false and material statements about the source of its content and the benefits of a paid membership such that the Commission’s grant of summary decision was proper.

A. Count I

’Under Count I, the FTC alleged that Jerk.com contained material misrepresentations that its content was user generated. Weagfeé.

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Bluebook (online)
821 F.3d 164, 2016 U.S. App. LEXIS 8519, 2016 WL 2621140, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fanning-v-federal-trade-commission-ca1-2016.