The Federal Trade Commission is calling out technology firms and gig-based companies such as Amazon and Uber for potentially deceiving or misleading those in financial distress with money-making pitches during the pandemic.
The commission on Tuesday put over 1,100 businesses — including gig-based companies such as Lyft, DoorDash, Grubhub, and Instacart, along with multilevel marketing companies such as LuLaRoe, Avon, and Mary Kay — on notice for potentially breaking the law through deceptive money-making schemes. The companies face penalties of up to $43,792 per violation.
“As the pandemic has left many in dire financial straits, money-making pitches have proliferated,” FTC Chairwoman Lina Khan tweeted. “From ‘gig’ firms that promise a steady income to multi-level marketing firms that offer the chance to own a business, Americans are bombarded with offers that can prove deceptive or misleading.”
The commission cited examples of unfair pitches made by companies, including marketing companies offering individuals the dream of business ownership, investment “coaches” with promises of secrets on how to beat the odds, and part-time “gigs” that advertise a steady second income on flexible hours.
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Companies like Uber and Lyft, for example, are known for not paying a minimum wage, in part because they legally define drivers as independent contractors and not full-time employees, but oftentimes make promises of paying drivers thousands of dollars a month and good working conditions, which some drivers have contested.
The notice of penalty from the commission says that just because a company has been put on its list of companies that may have engaged in unfair conduct doesn’t mean they have actually done anything wrong but serves to make them aware of where the law stands.
The commission voted to authorize the notice and its distribution on a bipartisan basis, with both Democratic and Republican commissioners voting in favor of it.
“Preying on consumers and workers with bogus promises of big earnings should never be profitable,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “Today’s announcement helps ensure that companies that cheat struggling Americans will pay a heavy price.”
Companies receiving the warning notice also received a copy of the recently issued notice of penalty offenses concerning endorsements and testimonials, as gig companies and marketing firms frequently use misleading testimonials to advertise money-making opportunities.
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Both FTC notices are intended to make clear to companies that it is illegal to use testimonials or advertisements to mislead consumers about the payoff of participating in a money-making opportunity.
