On April 1, the Federal Trade Commission’s (“Commission”) new Trade Regulation Rule (“Rule”) to combat those that impersonate government entities went into effect. The Rule enables the Commission to directly pursue federal action against scammers who may face civil liability to return money stolen from consumers. This Rule is not simply advisory, but rather the Rule has the force and effect of law. If one violates the Rule, one necessarily violates the Federal Trade Commission Act.

With impersonation scams costing consumers over $1.1 billion in 2023 and business and government impersonations making up nearly half of all frauds reported to the Commission in 2023;[1] the Rule intends to deter and combat a billion-dollar market amidst growing challenges presented by improvements in technologies and AI.

According to data from the Commission, the top five forms of impersonation scams in 2023 were:

  • Copycat account security alerts;
  • Phony subscription renewals;
  • Fake giveaways, discounts or money to claim;
  • Bogus problems with the law;
  • Made-up package delivery problems.

The Rule mandates that it is “an unfair or deceptive act or practice” to: 1) “materially and falsely pose as” a government entity, government officer, business, or business officer “directly or by implication”; or 2) “materially misrepresent…affiliation with, including endorsement or sponsorship by” a government entity, government officer, business, or business officer “directly or by implication.”  The Rule provides the Commission with the authority to pursue action against scammers that, among other things, use government seals or business logos; spoof government and business emails and web addresses; or falsely imply government or business affiliation in order to scam consumers.

The Rule is particularly important in light of the Supreme Court’s April 2021 ruling in AMG Capital Management LLC v. FTC,[2] which significantly limited the Commission’s ability to require defendants to return money to injured consumers through equitable monetary relief under Section 13(b) of the FTC Act for violations of Section 5 of the FTC Act. In a February 15, 2024 statement joined by Commissioners Rebecca Slaughter and Alvaro Bedoya, Chair Lina Khan stated that the Rule, “while not a substitute for a legislative fix—can help ensure that lawbreakers do not profit from their lawbreaking and that wronged consumers can be made whole.”[3] The Rule is also noteworthy as it is the first brand-new trade regulation Rule under Section 18 of the FTC Act to be finalized since 1980.

The FTC is accepting public comments on a supplemental notice of proposed rulemaking (“SNPRM”) that would potentially expand the scope of the Rule to include the impersonation of individuals, such as through the use of video deepfakes or AI voice cloning. Expanding the Rule’s scope to cover impersonations of individuals would provide remedies for relationship-based scams like those in which the scammers impersonate the consumer’s relative or devise false romantic relationships with the consumer.

Through the SNPRM, the Commission is also seeking comments on whether the Rule should extend enforcement to cover “any actor who provides the means and instrumentalities to commit an impersonation scam.” This means that if the Rule is extended, companies, including AI platforms, that know or have reason to know that their products or services are being used to harm consumers for impersonation purposes may face liability for civil penalties.[4] The proposal signals the Commission’s concerns not only with the scammers engaging in AI platforms; but also with companies that create the tools that make them possible.

The period for submitting supplemental comments ends on April 30, 2024.

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[1] https://www.ftc.gov/news-events/data-visualizations/data-spotlight/2024/04/impersonation-scams-not-what-they-used-be.

[2] For further information regarding the import of the AMG decision, please see our firm’s Supreme Court update discussing the decision available at https://www.wiggin.com/publication/supreme-court-update-jones-v-mississippi-no-18-1259-amg-capital-management-llc-v-ftc-no-19-508-carr-v-saul-no-19-1442/.

[3] https://www.ftc.gov/system/files/ftc_gov/pdf/r207000impersonationrulelmkstmt.pdf

[4] https://www.regulations.gov/document/FTC-2023-0030-0031.