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FTC Enforcement Action Alleges Merchants Are Consumers

Last month, the Federal Trade Commission filed a complaint and executed a stipulated order against First American Payment Systems and two companies that market First American’s payment processing services. The FTC alleged that First American and its marketers violated the Federal Trade Commission Act (“FTCA”) and the Restore Online Shoppers’ Confidence Act (“ROSCA”).

First American provides payment processing services to small businesses and sole proprietors to allow them to take credit and debit cards. The FTC alleged that First American tricked its merchants by (i) failing to disclose that First American’s services would automatically renew unless terminated, (ii) failing to disclose the services have an early termination fee and (iii) improperly debiting merchants’ bank accounts.

While the FTCA broadly regulates all commerce, the ROSCA prohibits certain sales practices for selling of goods or services to “consumers” over the internet. That the FTC alleged a violation of ROSCA’s consumer protections in regard to business-to-business transactions shows the FTC’s willingness to broaden the scope of consumer protection statutes. Read More