Eleven Hundred Letters Telling Companies What the Law Already Said

A legal instrument from 1975, deployed in 2021 to put earnings claims on notice

In October 2021, the Federal Trade Commission sent notices to more than 1,100 companies — gig platforms, coaching operations, multilevel marketing companies and business-opportunity sellers — informing them that they were now formally on notice that making deceptive earnings claims could expose them to civil penalties of up to $43,792 per violation. The letters did not announce new law. They invoked a mechanism that had existed since 1975.

The instrument is called a Notice of Penalty Offenses. Under Section 5(m)(1)(B) of the FTC Act, once the Commission has issued a cease-and-desist order finding a specific practice to be unfair or deceptive, it can notify third parties that the practice is unlawful. Those third parties, having received the notice, can no longer claim ignorance. Any subsequent violation carries civil penalties — a legal consequence unavailable to the Commission in ordinary Section 5 cases, which can only produce injunctions and restitution, not fines, on a first offence.

The October 2021 notice covered a defined set of practices: claiming that consumers would earn specific amounts of money, implying that income is typical when it is not, advertising business opportunities without a genuine evidentiary basis for the earnings figures used, and making misleading claims about the effort or time required to achieve represented results. The Commission anchored the notice in prior administrative proceedings — cases already adjudicated — where those practices had already been found deceptive. The notice document itself lists the source orders.

The Commission did not allege that every recipient was already violating the law. The legal significance was prospective: a company that received the letter and subsequently made an unsubstantiated earnings claim could face per-violation civil penalties, rather than merely an injunction. Chair Lina Khan and Samuel Levine, who led the Bureau of Consumer Protection at the time, had argued publicly that injunctions alone had become insufficient deterrents, because without civil penalties, the cost of violating the law could be lower than the cost of complying with it. The notice mechanism restored that cost.

Recipients included major gig-economy platforms, direct-sales companies, and operators of the kind of online business-coaching programmes the Commission had pursued in enforcement actions against MOBE and Digital Altitude. Sending the notice to more than 1,100 entities simultaneously was an attempt to shift the legal landscape across an entire category of commercial practice in a single administrative step, without opening individual investigations into each recipient.

Whether the notices produce subsequent penalty litigation depends on the Commission bringing follow-on cases against recipients who continue the flagged practices — an outcome that, as of the date of this record, remains contingent on the FTC's enforcement priorities in any given year.