Lead Opinion
In 2010, the FTC sued three debt-negotiation companies—Financial Freedom of America, Inc., Debt Consultants of America, Inc., and Debt Professionals of America, Inc. (“the Companies”)—as well as five of the individuals who owned or controlled them. According to the FTC, the defendants violated § 5 of the FTC Act by deceptively claiming, in radio ads, on their websites, and in sales calls, that the Companies could eliminate 30 to 60% of consumers’ credit card debt in as little as 18 to 36 months.
The district court’s § 5 analysis is dubious. The Companies deployed a marketing campaign that utilized a variety of media and involved a series of discrete communications with consumers. Circuits to apply § 5 in such circumstances have concluded that “the law is violated if the first contact is secured by deception, even though the true facts are made known to the buyer before he enters into the contract of purchase.”
The FTC, however, did not clearly challenge the district court’s § 5 analysis on this ground in its briefs or during oral argument—despite pointed questioning. Rather, it chose to challenge the district court’s factual determination that reasonable consumers at the point of purchase would have interpreted the Companies’ debt-reduction and timing claims in a non-deceptive manner. The FTC’s attempt to characterize this assessment of consumer perceptions as a legal conclusion is unavailing; we review such findings only for clear error.
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir R. 47.5.4.
. As relevant here, § 5 prohibits "unfair or deceptive acts or practices in or affecting commerce.” 15 U.S.C. § 45(a)(1). The FTC brought suit under § 13(b). See 15 U.S.C. § 53(b).
. Exposition Press, Inc. v. FTC, 295 F.2d 869, 873 (2d Cir.1961) (quoting Carter Prods., Inc. v. FTC, 186 F.2d 821, 824 (7th Cir.1951)); see also Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir.1975) ("[Section 5] is violated if it induces the first contact through deception, even if the buyer later becomes fully informed before entering the contract.”).
. Removatron Intern. Corp. v. FTC, 884 F.2d 1489, 1496-97 (1st Cir.1989); see also FTC v. Medical Billers Network, Inc., 543 F.Supp.2d 283, 304 (S.D.N.Y.2008) ("[E]ach representation must stand on its own merit, even if other representations contain accurate, non-deceptive information.”); FTC v. Gill, 71 F.Supp.2d 1030, 1044 (C.D.Cal.1999) (same).
. Had the FTC persuaded us that the district court applied an incorrect legal standard, we would have been obliged to review the evidence de novo. See, e.g., Fuji Photo Film Co., Inc. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591 (5th Cir. 1985).
. See, e.g., Beneficial Corp. v. FTC, 542 F.2d 611, 617 (3d Cir.1976) ("Whether particular advertising has a tendency to deceive or mislead is obviously an impressionistic determination more closely akin to a finding of fact than to a conclusion of law.”); Giant Food, Inc. v. FTC 322 F.2d 977, 982 n. 12 (D.C.Cir.1963) ("The meaning of advertisements or other representations to the public, and their tendency or capacity to mislead or deceive, are questions of fact....”).
. For example, even accepting that a reasonable consumer exposed to the Companies’ radio ads would have understood that the advertised debt reduction and timing excluded dropouts, the ads may have nonetheless been deceptive because they failed to disclose the likelihood of dropping out (and affirmatively fostered the misimpression that participation would be painless). See FTC v. Stefanchik, 559 F.3d 924, 928 (9th Cir.2009) (noting that a material omission may violate § 5). Though the district court recognized this possibility during closing arguments, its concerns were apparently assuaged by the fact that die Companies disclosed the many of the risks of participation in their sales calls and enrollment agreements.
. Whereas the radio ads merely failed to disclose the Companies’ high dropout rate, see supra note 6, two of the Companies’ websites affirmatively misrepresented it, claiming that "the majority of our clients complete the programs in 18-36 months.” (emphasis added.) This language clearly and unambiguously conveys that a majority of consumers who enroll in the programs (i.e., "clients”) successfully complete the programs within 18 to 36 months; however, the evidence establishes that at most 24% of enrolled clients competed the programs.
Concurrence Opinion
concurring:
I concur in my colleagues’ rationale that the district court’s findings of fact are not clearly erroneous but I am not so sure the district court misapplied the law, had FTC properly raised that issue. I concur in the judgment.