Other marketing materials developed by retailers allegedly at Progressive's direction included specific representations that consumers would only pay the retail price, cash price or same-as-cash price to purchase merchandise through Progressive or that there were no extra fees, charges or costs associated with Progressive's rent-to-own plans. One retailer's website related information about Progressive's offering and included the statement, "90 days same as cash with no credit check!"

The sign-up process was complex, and the FTC alleged that consumers were very unlikely to learn what the true price would end up being after participation in the rent-to-own plan. In fact, according to the FTC, except in California, consumers always ended up paying more than the stated retail price to purchase merchandise using Progressive's service. Sometimes the difference was substantial, according to the FTC.

The FTC also noted that there were thousands of complaints, which, according to the FTC, should have alerted Progressive to the probability that consumers were not understanding that they would pay more than the retail price if they participated in one of Progressive's plans.

The FTC charged Progressive with deceptive trade practices under Section 5(a) of the Federal Trade Commission Act because it represented — directly or through retailers, expressly or by implication — that consumers would pay the retail or cash price to purchase merchandise when in fact they often would pay substantially more.

Stipulated Settlement With a Large Monetary Component

Progressive ended up settling with the FTC. The settlement is notable because the FTC sought an injunction as well as monetary relief pursuant to Section 13(b). In the end, Progressive agreed to pay $175 million — a large amount for what was essentially a failure to disclose adequately the cost of the payment plan. This is also notable because it underscores an enforcement trend at the FTC toward an aggressive appetite for consumer redress and other monetary components of relief.

FTC Chairman Joseph Simons spoke at the Advertising Law & Public Policy Conference sponsored by the Association of National Advertisers in March 2019. In that speech, he chillingly said when talking about national advertisers (that is, not fly-by-night fraudsters):

While there may be many situations where a simple cease and desist order would be sufficient, the FTC will not hesitate to pursue monetary relief from national advertisers when appropriate.

Many in attendance that March morning wondered whether we would be seeing a significant uptick in major monetary equitable remedies. It did not take long for the FTC to dispel any doubts that in many — perhaps even most — cases, money will be on the table in order to settle charges.

Other Notable Aspects

Besides the dollar figure, the Progressive Leasing case is interesting for a number of other reasons. Progressive Leasing has no retail stores. It works through brick and mortar stores, and it appears from the complaint that it relied in some instances on how the retailers and their employees spoke with consumers about the payment plans.

One might wonder what sort of incentive a retailer would have to explain the full cost of the payment plan when in fact they were receiving only the retail price for the item sold. For them, it may have been the same as cash. The dynamic might underscore the difficulty of those service providers who provide pass-through services to consumers but rely heavily on the execution of retail salespeople.

Progressive was alleged to have received numerous complaints. Complaints are always part of the commission's compulsory investigative demand. The presence of complaints is not necessarily a smoking gun; however, the questions from the FTC staff will almost always be whether the company acted upon those complaints, indicating a lack of understanding, and whether it adjusted the advertising accordingly.

The Democrats on the commission wanted even more money, more accountability, and a more aggressive use of federal law beyond the FTC Act. Commissioners Rebecca Kelly Slaughter and Rohit Chopra dissented from the decision to approve the settlement.

In her dissenting opinion, Slaughter stated:

The conduct here, however, is so egregious and its cumulative impact on families so corrosive that I do not believe the complaint and order are sufficient. ... (1) [T]he monetary relief does not adequately remediate harm; (2) the lack of individual accountability diminishes the order's specific and general deterrence; and (3) the FTC's failure to charge the full range of law violations in its complaint is a failure to maximize general deterrence.

The Democrats on the commission have been pushing to name principals in many cases, including the Made in the USA cases in 2018–2019. In the Progressive case, Slaughter specifically wanted Progressive's CEO named in the order. Finally, Slaughter explained that the staff's failure to charge Progressive with violating the Restore Online Shoppers' Confidence Act was an abrogation of the commission's deterrence mission.

Commissioner Christine Wilson explained in a concurring statement that the monetary relief was based on sound economic analysis, and she suggested that Slaughter's displeasure stemmed from her dislike of Progressive's business model. Wilson also provided a clear statement as to when it is appropriate to name a company's CEO and when naming a CEO smacks of vindictiveness.

To seek injunctive relief with respect to a CEO, the commission must show that the individual "participated directly in the deceptive practices or had authority to control those practices." This broad standard effectively could enable the commission to hold individually liable the CEOs of most companies against which we initiate enforcement action.

But the commission traditionally has exercised its prosecutorial discretion and considered a variety of factors when deciding whether to name a CEO or principal, including whether individual liability is necessary to obtain effective relief. In some instances, for example, the CEO is the company — many FTC cases involve fraudulent or deceptive conduct by small, closely held companies that essentially serve as the alter egos of their CEO or principal.

In other instances, fraudsters open and shutter companies to stay one step ahead of law enforcement, or undertake unlawful practices using multiple companies that operate as a common enterprise. In these circumstances, I support naming the CEO or principal because doing so is necessary to obtain effective relief and protect consumers going forward.

In contrast, naming the CEO or principal of a large, established company will only rarely be necessary to obtain effective relief. The currently popular (and populist) notion of routinely imposing individual liability appears more consistent with personal vindictiveness and vilification of successful businesspeople than with an objective desire to obtain effective relief and instill effective deterrence.

Finally, Wilson explained that Congress designed ROSCA to ensure that consumers are not subject to misleading sales tactics in Internet purchases using negative option features, resulting in payments for goods and services they do not expect or want. Applying ROSCA to an in-store transaction involving a face-to-face conversation between a customer and a retail salesperson — merely because the paperwork is potentially completed via an electronic portal — would extend ROSCA to virtually any transaction in the modern age.

Why This Matters

Progressive Leasing is a case where the advertiser failed to clearly disclose the total price of the rent-to-own plans it sold. But the settlement says a lot more about the FTC's propensity to seek equitable monetary relief from national advertisers. It also illustrates the contrast in policy perspectives between the Republicans and the Democrats on the commission today.

This article was originally published by Law360.