On June 29, the Federal Trade Commission (FTC) published its updated Guides Concerning the Use of Endorsements and Testimonials in Advertising (“Guides”), together with an FAQ document, FTC’s Endorsement Guides: What People Are Asking (“FAQ”). One day later, it announced its proposal for a new Trade Regulation Rule on the Use of Consumer Reviews and Testimonials (“Trade Regulation”). In the spirt of the FTC’s FAQ, we figured we would post a brief one of our own, highlighting some of the big changes (and non-changes).
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Over the last few years, perhaps prompted by the proliferation of subscriptions for consumer goods and services during the pandemic, several states have passed new automatic renewal laws (ARLs) that regulate continuing or renewing contracts. Other states have likewise amended existing ARLs to add detailed restrictions and requirements. Our most recent coverage of those efforts can be found in our Fall 2021 and Summer 2022 alerts.
With such activity at the state level, it was only a matter of time before federal regulators joined the fray. The Federal Trade Commission (FTC) recently did so by issuing a statement regarding its nearly 50-year-old Negative Option Rule. As announced by the FTC, the existing federal regulatory regime has “major gaps”: the Negative Option Rule regulates only “prenotification plans” (where sellers send products and charge for them unless consumers decline); the Telemarketing Sales Rule (TSR) regulates only telemarketing; and the Restore Online Shoppers’ Confidence Act (ROSCA) regulates only online purchases.
On May 11, 2023, the Minnesota Legislature agreed to a new law rendering void and unenforceable all future covenants not to compete, with limited exceptions for agreements entered into in connection with the sale or dissolution of a business. Following a final vote in the House and Senate, the law will be sent by Gov. Tim Walz for his signature. The law is written to take effect July 1, 2023, and to apply to contracts and agreements entered into on or after that date. With enactment, Minnesota will become the fourth state to impose a complete ban on employment-related noncompetes (joining California, Oklahoma and North Dakota).
The law prohibits any noncompete agreement with an employee or independent contractor that restricts the person from working for another business after termination of employment or independent contractor engagement regardless of a person’s income, with only two very limited carveouts for noncompetes agreed upon (1) during the sale of a business where the agreement prohibits the seller from carrying on a similar business within a reasonable geographical area for a reasonable period of time, or (2) in anticipation of the dissolution of a business where the dissolving partnership or entity agrees that all or any number of the partners, members, or shareholders will not carry on a similar business in a reasonable geographical area for a reasonable period of time. Subject to those limited exceptions, the law provides that any “covenant not to compete” contained in a contract is void and unenforceable. Importantly, a “covenant not to compete” does not include nondisclosure, confidentiality, trade secret, or non-solicitation agreements (including specifically those restricting the ability to use client or contact lists or restricting the solicitation of customers). Also, because “covenant not to compete” is defined in terms of prohibiting conduct “after termination of the employment,” the new law will not prohibit agreements that restrict an employee or independent contractor from working for another business while performing services for a business.