Split Ninth Circuit Upholds $50M FTC Victory Against Online Publisher

Advertising Law

On September 11, 2020, in a 2-1 decision, the U.S. Court of Appeals, Ninth Circuit, upheld the Federal Trade Commission’s (FTC) $50 million victory in its lawsuit alleging that an India-based online publisher, OMICS Group, deceptively advertised the quality of its scientific conferences and online journals. In a partial dissent, one of the judges said that the size of the award was not supported by the evidence.

The court stated that there was “ample” and “overwhelming” evidence of OMICS’s deception regarding its journals’ peer review practices, publishing fees, impact factors (a common rating metric for journals in the academic publishing industry) and editorial board membership. The court also stated that OMICS made false claims regarding the attendees and organizers of its academic conferences when marketing these events.

The court found that the “general denials” by the company and its CEO were not sufficient to counter that evidence. Therefore, the district judge did not abuse her discretion by granting summary judgment in favor of the FTC on the claims and awarding $50 million in monetary relief.

The court determined that “OMICS’s misrepresentations were material and their net impression was likely to, and did in fact, deceive ordinary consumers.”

The lawsuit was filed by the FTC in August 2016 against OMICS, its subsidiaries and the CEO, accusing them of:

  • Misleading consumers into believing that articles published by the company online underwent industry-standard peer review before publication, when the defendants neither conducted nor followed the scholarly journal industry’s standard review practices and often provided no edits to submitted materials;
  • Misleading consumers into believing the articles were published in the prestigious database PubMed Central when they were not, and that the company’s ads misleadingly stated that the articles had high “impact factors,” meaning they are cited frequently; and
  • Failing to adequately disclose that authors pay a publishing fee and falsely advertising the conferences, misleading consumers into paying thousands of dollars in registration fees to attend. The FTC alleged that the defendants falsely advertised the attendance and participation of prominent academics and researchers at conferences without their permission or actual affiliation. 

The court also ruled that the district court properly concluded that the CEO “is personally liable for OMICS’s violations because he had authority over OMICS and either had knowledge of the companies’ misrepresentations or was recklessly indifferent to their truth or falsity.”

With respect to the size of the award, the court stated that the FTC “provided a reasonable approximation of Defendants’ unjust gains in light of Defendants’ overall and pervasive fraudulent business practices.” The court said that the FTC presented evidence that the majority of the conferences were misrepresented in the marketing materials. The court held that the defendants failed to meet their burden to show that the FTC “overstated the amount of their unjust gains by including all conference-related revenue.” The court determined that conferences were “part of a single scheme of deceptive business practices,” even though the conferences were individual, discrete events. Because the marketing was “widely disseminated,” the court determined that the FTC was entitled to a rebuttable presumption that “all conference consumers were deceived.”

In a partial dissent, U.S. Circuit Court Judge Danielle J. Hunsaker disagreed with the majority on the size of the FTC’s award. Judge Hunsaker said that she did not believe the FTC met its initial burden to reasonably approximate the defendants’ unjust gains attributable to their conference activities and, therefore, would remand for the district court to conduct further proceedings on this limited issue.

Judge Hunsaker wrote that “Given that the FTC’s own evidence indicates that only approximately 60% of the conferences were deceptively marketed and the conference revenues were reported separately for part of the charging period, the FTC did not reasonably approximate unjust gains when it included 100% of conference revenues.”

Why It Matters: A key issue in the case was the size of the award. The disagreement between the majority and the dissent involved whether 100% of the conference revenues should have been awarded when the FTC’s evidence showed that only 60% of the conferences were deceptively marketed and the conference revenues were reported separately. The majority found that the defendants had the burden to show that the FTC overstated the amount of their unjust gains and that their “general denials of any wrongdoing—in the absence of affirmative evidence showing a lack of deception in some conference marketing or that the FTC overcalculated conference-related revenues—failed to meet this burden.”

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