Emerald Consultancy, a brokerage firm, advertises that it will double its customers' money in five years. However, it fails to do so. Some of the customers file a complaint with the Federal Trade Commission (FTC)
The commission's staff finds that the advertising is "deceptive" or "unfair" within the meaning of Section 5 of the Federal Trade Commission Act. How will the FTC seek to stop the advertising campaign? What is the benefit of this method?
The FTC, which includes the Bureau of Competition and the Bureau of Consumer Protection, was obliged to conduct an investigation into Emerald Consultancy's advertisement when it received a complaint from the consumers. Since the commission's staff has found that the advertising is "deceptive" or "unfair" within the meaning of Section 5 of the Federal Trade Commission Act, it will seek to stop the advertising campaign in one of two ways:
a. Voluntary compliance: The staff will ask Emerald Consultancy to voluntarily stop the advertising campaign. Usually, no penalty is assessed if the company agrees to do this.
b. Consent order: If voluntary compliance is not obtained, the staff will notify Emerald Consultancy that it has 10 days to enter into a consent order, or the staff will issue a formal complaint.
The case may be closed at this stage because, under a consent order, Emerald Consultancy does not have to admit that it was deceptive or unfair in its advertising; it only has to promise that it will not do such unlawful advertising again and agree to the remedy that the commission imposes. The latter may be some form of corrective advertising that tells the public that their investment can be increased but not doubled. A consent order helps the commission staff to obtain a binding cease-and-desist order with limited effort and time. It also benefits Emerald Consultancy, because by agreeing to a consent order, the company avoids both an admission of guilt and the cost of litigation and shareholder and consumer lawsuits that might ensue if the next steps in the adjudication process—a formal complaint and a hearing by an ALJ—resulted in an adverse decision for the company.
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