Look Again, Look Forward: State Attorneys Normal Enforcement – Half Two
Last month, as part of BakerHostetler’s “Look Back, Look Ahead: Advertising and Marketing Law in 2021 & 2022” webinar series, partners Craig A. Hoffman and Victoria Weatherford presented on recent trends and predictions on state attorney general enforcement. The following summarizes our 10 predictions for state attorneys general enforcement in 2022.
Prediction No. 1: Upcoming Attorney General Elections Will Induce High-Profile Investigations
In 2022, 30 states and one US territory will hold elections for attorney general. We expect the large number of elections to increase the public profile of state attorneys general in 2022, and expect state AGs seeking reelection to use their offices as a pulpit from which to increase their visibility in the press and the media. We expect to see an increase in state AGs using the media to showcase “wins” as a way to jump-start campaign efforts. Likewise, there is an expectation that attorneys general — especially those up for election this year — will embark on more high-profile enforcement and litigation against well-known companies and take on more “hot button” issues. Companies facing state attorney general scrutiny in 2022 will want to carefully consider the potential public relations repercussions and opportunities for collaboration with state AGs to craft the public narrative in any resolution or settlement.
Prediction No. 2: More Federal-State Partnerships
Both FTC Chair Lina Khan and CFPB Chair Rohit Chopra recently emphasized in public comments the importance of state attorneys general in enforcing federal consumer protection and consumer financial laws and their intent to share more resources with state attorneys general in 2022. Khan and Chopra also stated their intent to partner more with state AGs; we expect this partnership to occur with both Democrat-led AG offices and bipartisan coalitions of state AG offices.
Chopra, at the end of 2021, also encouraged direct enforcement by state AGs of the federal Consumer Financial Protection Act (CFPA), which would permit state AGs to collect civil penalties from $5,000 to $1 million per day for certain violations. We expect state AGs to act on the green light provided by Chopra to file new CFPA enforcement actions in 2022. Recent history suggests that the state attorneys general will use federal consumer financial laws to pursue deceptive marketing and advertising claims against companies that provide banking services, student aid services, and mortgages and reverse mortgages, among other services.
Prediction No. 3: Republican-Led Attorneys General Go It Alone
Republican-led attorneys general will lead new robust enforcement both as independent states and with partisan and bipartisan coalitions. These attorneys general will continue to challenge the Biden administration, emphasizing what they perceive as its overreach in combating COVID-19 and its underreach in combating illegal immigration.
The state of Texas, for example, has already filed multiple high-profile enforcement cases in 2022. Notably, in January, Texas independently sued Google for allegedly false and misleading endorsements of its Pixel phone. Texas filed this first-in-the-nation suit before any federal or multistate attorneys general coalition could initiate a similar action. Texas also led a bipartisan coalition of state AGs in another lawsuit against Google related to alleged “dark patterns” and misleading features to induce consumers to permit location tracking. Both lawsuits are pending and, as they unfold, will illuminate how Republican-led state AG offices approach enforcement in 2022.
Prediction No. 4: Connecting Consumer Marketing to Antitrust
Khan and the head of the Department of Justice’s Antitrust Division recently discussed the connection between consumer marketing violations and antitrust harms. Khan expressed her view that false and misleading advertising leads to improper market consolidation and antitrust issues, and vice versa. Khan’s novel views of marketing harms may foreshadow how federal and state attorneys general will work together in 2022 to pursue novel types of consumer marketing law and antitrust violations.
With or without federal collaboration, states have direct federal antitrust law enforcement authority as well as state antitrust law enforcement authority. We expect that new iterations of antitrust and marketing harm will likely begin with enforcement against larger market participants and companies with a history of antitrust scrutiny.
Prediction No. 5: Focus on Technology and Platforms
We expect to see state attorneys general across the country focus on allegedly deceptive uses of technology. Not only do we expect to see investigations and enforcement against well-known technology companies, but we expect to see state AGs look beyond search and social media to target smaller and lesser-known companies as well.
We expect that online platforms that facilitate third-party sales will also see increased state AG enforcement related to allegedly false or misleading sales that are facilitated through those platforms. Several state attorneys general highlighted consumer protection concerns in a recent letter to the CFPB in which they insisted on stronger consumer safeguards for electronic payment applications.
Prediction No. 6: Use of Artificial Intelligence and Algorithms Showcase Dark Patterns
Numerous state attorneys general across the country have expressed concern with and advocated for investigative scrutiny of businesses that use artificial intelligence and algorithms to inform their marketing and advertising practices to consumers.
Without sweeping federal laws on this topic, we expect to see states pass legislation in the coming years that restricts the use of such algorithms — creating yet another patchwork of regulation for companies to comply with. We may also see state AGs bring more direct CFPA enforcement actions related to consumer financial products that allegedly offer different financial terms to consumers based exclusively on credit risks.
Likely areas for potential state attorneys general investigation and enforcement include the insurance, banking, and consumer goods and services industries.
Prediction No. 7: Robocalls and Auto Renewals
State attorneys general have prosecuted Telephone Consumer Protection Act (TCPA) claims for many years now. Indeed, state AGs held a 2021 Robocall Virtual Summit, and this business practice is reported to be the No. 1 consumer complaint to state AG offices. Given strong public support for enforcement, we expect to continue to see aggressive enforcement of the TCPA in 2022 and beyond.
A similar yet new trend may receive more investigation and enforcement attention in 2022: automatic subscription renewals (ie, negative option marketing). Indeed, Delaware and Colorado recently passed laws that forbid companies from auto-renewing subscriptions without consumers’ consent. Expect to see more states pass similar laws in the future.
Prediction No. 8: Online account takeovers will continue
Unauthorized access to a customer’s online account — or ATOs — is often driven by credential stuffing (a botnet using credentials stolen from other companies to test them against a company’s account login page). Access to the account is then sometimes monetized.
The New York Office of the Attorney General (NY OAG) in 2021 investigated 17 companies after credentials for online accounts of customers of those companies were identified as available through online forums. The NY OAG, acknowledging that ATOs are prevalent and unavoidable, issued its Business Guide for Credential Stuffing Attacks in January 2022, which identified four areas of safeguards to protect customers.
Prediction No. 9: Data Breach Enforcement
This is a relatively safe prediction: Security incidents will continue to be disclosed, and state and federal regulators will continue to enforce them.
Prediction No. 10: Continued Privacy Patchwork
Expect to see more states enact privacy laws, each combining some mix of provisions based on its unique state approach, other state laws and international laws like Europe’s General Data Protection Regulation. Practitioners will continue to lament the challenges of complying with laws that are not easy to harmonize and talk about how a comprehensive federal law would fix that (while also saying that they have been saying the same thing for years).
As states have the opportunity to observe the successes and shortfalls of other states’ privacy laws, we expect to see new state privacy laws expand beyond the commonly implemented “notice and consent” regime. Indeed, some state enforcers already have criticized this legal framework of privacy rights as inadequate. We expect to see states discuss new possible privacy paradigms, such as laws to cover the collection and use of data to address the perceived negative consequences of artificial intelligence and algorithms.