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U.S. Supreme Court Agrees with HHS Payment Methodology for Disproportionate Share Hospitals

The fight about how Medicare compensates disproportionate share hospitals (“DSH”) is one of the longest-running reimbursement disputes of recent years, and it has generated copious work for judges around the country. In a 5-4 decision, the U.S. Supreme Court settled one piece of the conflict: the counting of “Medicare-entitled” patients in the Medicare fraction of the “disproportionate-patient percentage.” Becerra v. Empire Health Found., 597 U.S. ___ (2022) (slip op.). The Supreme Court concluded that the proper calculation, under the statute, counts “individuals ‘entitled to [Medicare] benefits[,]’ . . . regardless of whether they are receiving Medicare payments” for certain services. Id. (slip op., at 18) (emphasis added).

DSH payments are made to hospitals with a large low-income patient mix. “The mark-up reflects that low-income individuals are often more expensive to treat than higher income ones, even for the same medical conditions.” Id. (slip op., at 3). The federal government thus gives hospitals a financial boost for treating a “disproportionate share” of the indigent population.

The DHS payment depends on a hospital’s “disproportionate-patient percentage,” which is basically the sum of two fractions: the Medicare fraction, which reflects what portion of the Medicare patients were low-income; and the Medicaid fraction, which reflects what portion of the non-Medicare patients were on Medicaid. Historically, HHS calculated the Medicare fraction by including only patients actually receiving certain Medicare benefits for their care. In 2004, however, HHS changed course and issued a new rule. It counted, in the Medicare fraction, all patients who were eligible for Medicare benefits generally (essentially, over 65 or disabled), even if particular benefits were not actually being paid. For most providers, that change resulted in a pay cut.

The new rule sparked several lawsuits. Hospitals challenged HHS’s policy based on the authorizing statutory language. These hospitals essentially argued in favor of the old methodology. Appeals led to a circuit split, with the Sixth and D.C. Circuits agreeing with HHS, and the Ninth Circuit ruling that HHS had misread the statute.

The Supreme Court has now resolved the issue. The majority opinion, authored by Justice Kagan, sided with HHS. The majority concluded that, based on the statutory language, “individuals ‘entitled to [Medicare] benefits’ are all those qualifying for the program, regardless of whether they are receiving Medicare payments for part or all of a hospital stay.” Id. (slip op., at 18). The majority also explained that if “entitlement to benefits” bore the meaning suggested by the hospital, “Medicare beneficiaries would lose important rights and protections . . . [and a] patient could lose his ability to enroll in other Medicare programs whenever he lacked a right to [certain] payments for hospital care.” Id. (slip op., at 11).

Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Gorsuch and Alito. The dissent argued that those lacking certain Medicare coverage should be excluded from HHS’s formula, based on “the most fundamental principle of statutory interpretation: Read the statute.” Id. (Kavanaugh, J., dissenting) (slip op., at 2). According to the dissent, the majority’s ruling will also restrict hospitals’ ability to provide care to underprivileged communities. “HHS’s misreading of the statute has significant real-world effects: It financially harms hospitals that serve low-income patients, thereby hamstringing those hospitals’ ability to provide needed care to low-income communities.” Id. (slip op., at 4).

There was one point of agreement among the majority and dissenting justices: the complexity of the statutory language for DSH payments. Echoing the thoughts often held by healthcare advisors, Justice Kagan found the statutory formula to be “a mouthful” and “a lot to digest.” Id. (majority opinion) (slip op., at 4). And in his dissent, Justice Kavanaugh called the statute “mind-numbingly complex,” and resorted to an interpretation that he found “straightforward and commonsensical”: that patients cannot be “simultaneously entitled and disentitled” to Medicare benefits. Id. (Kavanaugh, J., dissenting) (slip op., at 1, 3).

Article By Jeffrey DeBeer and Keith Bradley of Squire Patton Boggs (US) LLP

For more Supreme Court and litigation legal news, click here to visit the National Law Review.

DHS Announces Temporary Protected Status for Ukraine and Redesignates TPS for South Sudan

Ukraine

The Department of Homeland Security (DHS) announced that Ukraine has been designated for “Temporary Protected Status” (TPS) for 18 months due to the invasion by Russia and ongoing conflict.

To qualify, Ukrainian nationals must have continuously resided in the United States as of March 1, 2022, and must apply to the U.S. Citizenship and Immigration Services within 180 days (until August 28, 2022). TPS applicants may also apply for Employment Authorization Documents (EADs) allowing them to work lawfully in the United States.

The TPS designation for Ukraine will remain in effect through September 1, 2023, at which time DHS will determine whether to redesignate or extend the current designation. Redesignation may extend TPS eligibility to Ukrainian nationals who arrived in the United States after March 1, 2022.

South Sudan

DHS also redesignated and extended TPS for South Sudan until November 3, 2023. South Sudanese TPS beneficiaries must re-register by May 3, 2022. EADs set to expire are automatically extended until November 3, 2022, but applications for new EADs must be filed as soon as possible. South Sudanese nationals and aliens having no nationality who last habitually resided in South Sudan may submit initial registration applications under the redesignation for TPS for South Sudan and apply for EADs.

Article By Ian P. Band of Hunton Andrews Kurth

For more articles on Ukraine, visit the NLR Immigration section.

FBI and DHS Warn of Russian Cyberattacks Against Critical Infrastructure

U.S. officials this week warned government agencies, cybersecurity personnel, and operators of critical infrastructure that Russia might launch cyber-attacks against Ukrainian and U.S. networks at the same time it launches its military offensive against Ukraine.

The FBI and the Department of Homeland Security (DHS) warned law enforcement, military personnel, and operators of critical infrastructure to be vigilant in searching for Russian activity on their networks and to report any suspicious activity, as they are seeing an increase in Russian scanning of U.S. networks. U.S. officials are also seeing increased disinformation and misinformation generated by Russia about Ukraine.

The FBI and DHS urged timely patching of systems and reporting of any Russian activity on networks, so U.S. officials can assess the threat, assist with a response, and prevent further activity.

For more information on cyber incident reporting, click here.

Even though a war may be starting halfway across the world, Russia’s cyber capabilities are global. Russia has the capability to bring us all into its war by attacking U.S. government agencies and companies. We are all an important part of preventing attacks and assisting others from becoming a victim of Russia’s attacks. Closely watch your network for any suspicious activity and report it, no matter how small you think it is.

Article By Linn F. Freedman of Robinson & Cole LLP

For more cybersecurity legal news, click here to visit the National Law Review.

USCIS Announces Policy Changes for H-4, L-2, and E-1/E-2/E-3 Dependent EAD Workers

Since the publication of our November 12, 2021 alert, U.S. Citizenship and Immigration Services (USCIS) issued policy guidance following the November 10, 2021 settlement agreement and updated the I-9 Handbook providing for automatic extensions of Employment Authorization Document (EAD) cards for H-4, L-2, and E-1 Dependent, E-2 Dependent, or E-3 Dependent visa holders. The USCIS policy guidance can be found here.

As described in our previous alert, the Department of Homeland Security (DHS) entered into a settlement agreement following a lawsuit brought by H-4 and L-2 spouses suffering from long-delayed adjudication for the processing of applications for Employment Authorization Document (EAD) cards. Effective November 12, 2021, USCIS allows for automatic extensions of employment authorization, in certain circumstances, while an EAD renewal application has been filed and is pending with USCIS for H-4, L-2, and now E-1/E-2/E-3 dependent (“E dependent”) spouses. In addition, USCIS has now changed its statutory interpretation and will soon afford employment authorization incident to status for L-2 spouses, E-1 Treaty Trader dependent spouses, E-2 Investor dependent spouses, and E-3 specialty occupation professionals from Australia dependent spouses. Once this policy takes effect, L-2 and E dependent spouses will no longer need to apply for an EAD card in order to be authorized to work.

Automatic Extension of EADs for H-4, L-2, and E Dependent Spouses

USCIS has officially issued guidance and updated the I-9 Handbook to provide for automatic extensions of EADs for H-4 and L-2 spouses. In this new policy alert, USCIS is granting these benefits to spouses of E-1 Treaty Traders, E-2 Treaty Investors, and E-3 specialty occupation professionals from Australia in the respective E dependent classification as well.

H-4, L-2, and E dependent spouses will qualify for automatic extension of their valid EAD for 180 days beyond the date of the EAD expiration if the nonimmigrant spouse:

Properly files a Form I-765 EAD renewal application to USCIS before the current EAD expires; and
Continues to maintain H-4, L-2, or E dependent status beyond the expiration of the existing EAD as evidenced on Form I-94.

The validity of the expired EAD will be extended until the earliest of:

180 days following the EAD expiration;
The expiration of the H-4 / L-2 / E dependent nonimmigrant’s I-94 record; or
When a final decision is made on the EAD extension application by USCIS.

For I-9 purposes, an H-4, L-2, or E dependent employee may present: a facially expired EAD indicating Category C26, A18, or A17; Form I-797, Notice of Action for Form I-765 with Class requested indicating (c)(26), (a)(18), or (a)(17) and showing that the I-765 EAD renewal application was filed before the EAD expired; and an unexpired I-94, showing valid H-4, L-2, or E dependent nonimmigrant status.

L-2 and E-1/E-2/E-3 Dependent Spouses Will Be Granted Work Authorization Pursuant to Status

USCIS’ new policy guidance provides that both L-2 and E dependent spouses will be employment authorized incident to status, meaning that a separate Form I-765 EAD application will not need to be filed to obtain work authorization, and that the L-2 or E dependent spouse is authorized to work upon being admitted to the United States. USCIS, in cooperation with CBP, will change Form I-94 to indicate the individual is an L-2 spouse so that the I-94 can be used for I-9 purposes. DHS will, within 120 days, take steps to modify Form I-94. However, please note that until USCIS can implement changes to the I-94 to distinguish L-2 and E dependent spouses currently in the U.S. from L-2 and E dependent children, E and L spouses will still need to rely upon an EAD as evidence of employment authorization to present to employers for completion of Form I-9.

Obtaining an Extended I-94

As it is required for H-4, L-2, and E-3 spouses to have a valid I-94 for the automatic extension of the EAD, we are outlining two possible ways that a person applying for an H-4 or L-2 EAD extension can obtain an extended I-94:

File the H-1B or L-1 extension using premium processing and wait for the H-1B or L-1 approval. The H-4 or L-2 spouse then departs the U.S. and obtains a new visa and returns with an extended I-94. Once the spouse returns, he or she will file the EAD extension upon return to the U.S.
File the H-4 or L-2 and EAD extensions with the principal’s H-1B or L-1 extension. After the H-1B or L-1 is approved, the spouse departs the U.S. and obtains a new visa and returns with an extended I-94. The Form I-539, request for extension of status, will be abandoned, but Form I-765 will not and will continue to be processed by USCIS.

Regarding E dependent spouses, anyone entering the U.S. with an E visa is admitted for two years, so he or she may already have an extended I-94 card. If an E dependent spouse has an expiring I-94, he or she can follow one of the above steps to extend their I-94.

Article By Angel Feng, Shannon N. Parker, and John F. Quill of Mintz.

For more immigration law news, read more at the National Law Review.

Homeland Security Withdraws Proposed Rules Affecting International Students

The U.S. Department of Homeland Security announced the withdrawal of proposed new rules that would have limited the time that individuals entering the U.S., including international students, could remain in the country, absent the issuance of a new visa. The proposed rules, which were published on September 25, 2020, had been the subject of significant concern by many higher education leaders due to their potential impact upon international student retention.

Under the current rules, international students approved for an F or J category entry visa are allowed to remain in the country for an unspecified period, so long as they continue to be enrolled in coursework leading to their degree or research activity. This so-called “duration of status” policy would have been replaced by fixed terms of up to four years, under the proposed changes.

The new rules would have required a reapplication and renewal of the visa status of the student at the expiration of the term for studies to be continued. Further, in the case of countries whose students have higher visa overstay rates, the proposed rule would have limited initial student visa terms to two years.

In a letter voicing opposition to the proposed changes, the American Council on Education (“ACE”) argued that the imposition of limitations on visa duration for international students would significantly impede the educational process. As the ACE letter noted, the average time for an international student to complete a B.A. degree is slightly more than 4.5 years, and almost six years to complete a Master’s/Ph.D. program. It further concluded that the proposed rules would be “largely unworkable for the majority of students.”

The announcement of the withdrawal of the proposed rules represents a positive step for colleges and universities seeking to attract international students. It reinforces the existing student visa regime and produces a more stable environment for applicants. Yet, the announcement of the withdrawal of the proposed rules came with the acknowledgement that other changes may be necessary “to protect the integrity of programs that admit nonimmigrants in the F, J and I classifications.” Accordingly, a new Notice of Proposed Rulemaking related to the rules regarding these specific visa categories could be forthcoming.

ARTICLE BY Mark E. Hanshaw of Steptoe & Johnson PLLC

For more articles on international students, visit the NLRPublic Education & Services section.

Form I-9 Requirement COVID-19 Flexibility Extended until August 31

U.S. Immigration and Customs Enforcement (ICE) has announced an extension of its interim policy that allows employers to inspect the Form I-9 requirement virtually through August 31, 2021. This flexibility was first issued by ICE in March 2020, due to the pandemic, and has been extended multiple times since.

COVID-19 Flexibility Extended

Form I-9 flexibility policy was set to expire on May 31, 2021. The policy applies only to employers and workplaces that are operating remotely. If the workplace is functioning even partially at the work location, the employer must implement an in-person verification process. Employers who meet the criteria for remote operation must diligently create cases for their new hires within three business days from the date of hire.

The announcement had no new information apart from that regarding the extension but encouraged employers to monitor the USCIS website for any latest guidance.

Form I-9 Requirement

Form I-9 is a mandatory form that employers must complete and maintain with its records, confirming the employment authorization of individuals hired for employment in the United States. Employers must verify the documents of the new hire within three days of hire, and both employee and employer must complete the form. The list of acceptable documents can be found on the last page of the form.

The Department of Homeland Security (DHS) inspects, either randomly or on tips or complaints, the records the employers maintain. The purpose of the audit is to ensure that the employers are following legal hiring practices. When an employee receives a Notice of Inspection (NOI) from the DHS about an upcoming audit, it is best to hire an attorney and have staff from Human Resources handle the audit. If the DHS finds discrepancies in the records, they issue a warning notice and provide time to correct the violations. If the violations are not rectified, the DHS issues a Notice of Intent to Fine; often the amount of the fine is huge.

ARTICLE BY Raymond G. Lahoud of Norris McLaughlin P.A.

For more articles on form I-9, visit the NLRImmigration section.

172 Immigrants Arrested in Sanctuary Cities by ICE in Six Days

The Department of Homeland Security (DHS) and United States Immigration Customs and Enforcement (ICE) concluded a targeted enforcement operation, which lasted for a week. The operation resulted in 170+ at-large illegal immigrants arrested throughout the United States in states with sanctuary policies.

About the Immigrants Arrested

ICE officers from the field offices of New York; Seattle; Denver; Philadelphia; Baltimore; and Washington, D.C., conducted the enforcement actions from October 3 through October 9. The arrests were targeted on aliens who have criminal convictions and were arrested but released by state or local law enforcement agencies despite having immigration detainers placed on the immigrants. In a press release, ICE announced that out of the 170+ arrested, more than 80% of the aliens arrested had criminal convictions or pending criminal charges at the time of the arrest.

The immigrants arrested include 54 in New York; 35 in Seattle; 34 in Denver; 26 in Philadelphia; 12 in Baltimore; and 11 in Washington, D.C. Just at the end of September, ICE announced the arrest of 128 aliens in California from where the operation was conducted from September 28 to October 2, as part of immigration enforcement actions. The news released by ICE also had data of the arrested aliens in the fiscal year 2019: ICE arrested more than 1,900 convictions and charges for homicide, 1,800 for kidnapping, 12,000 sex offenses, 5, 000 sexual assaults, 45,000 assaults, 67,000 crimes involving drugs, 10,000 weapons offenses, and 74,000 DUIs.

Acting DHS Secretary Chad F. Wolf said, “Last fiscal year, 86 percent of people arrested by ICE had criminal convictions or pending charges. ICE focuses its resources on those who pose the greatest threat to public safety. The men and women of ICE put their lives on the line every day to keep these individuals off the streets,” He further stated that, “The Department will continue to carry out lawful enforcement actions in order to keep our communities safe, regardless of whether or not we have cooperation from state and local officials. Politics will not come before safety when enforcing the law and keeping our citizens safe.”

Though the arrests made by ICE hints that it primarily targets immigrants with a criminal record, the press release by ICE stated that it does not exempt classes or categories of removable aliens from potential enforcement.

About Sanctuary States

Sanctuary states are states with immigrant-friendly laws, that restrict cooperation with federal immigration authorities. The non-cooperation by the state or local law enforcement agencies acts as an impediment in ICE’s ability to arrest criminal aliens in such communities. It further stated that all those in violation of immigration laws can be subject to arrest, detention, and subsequently removable based on a removal order. Additionally, ICE stated that cooperation with local law enforcement is essential to maintaining public safety.

ARTICLE BY Raymond G. Lahoud of Norris McLaughlin P.A.

For more articles on ICE, visit the National Law Review Immigration section.

DHS Expands Use of Biometric Data in Immigration

Last week, the Department of Homeland Security (“DHS”) announced plans to expand the use of biometric data in determining family relationships for immigration purposes. A proposed rule with the new protocols for biometrics use is expected to be published soon. This rule is also said to allow more uses of new technology as they become available.

The Use of Biometric Data in Immigration

The proposed rule will give the DHS the authority to require biometrics use for every application, petition, or related immigration matter. The current practice by the United States Citizenship and Immigration Services (USCIS) requires biometrics only for applications that require background checks. This new rule is intended to give the DHS broad authority to use biometrics technology. The DHS can use voiceprints, iris scans, palm prints, and facial photos, as well as additional technologies developed in the future.

“As those technologies become available and can be incorporated as appropriate, it gives the agency the flexibility to utilize them. And then it also would give the agency the authority down the road, as new technologies become available and are reliable, secure, etc., to pivot to using those, as well,” said one USCIS official. And while children under age 14 are now generally exempt from the collection of biometric data, the proposed rule will also remove the age restriction.

DNA can be collected by the agency to verify a genetic relationship where establishing a genetic or familial relationship is a prima facie requirement of receiving an immigration benefit. Though the raw DNA will not be stored by the DHS, the test results will be saved in the immigrant’s Alien file, also known as the “A-file.” The A-file is the official file that the DHS maintains with all of the immigrant’s immigration and naturalization records. Any such information collected may be shared with law enforcement, but there is no procedural change in other agencies gaining access to the A-files.

Reactions From Immigration Leaders

The additional collection of biometric data will not result in an increase in existing filing fees, as the cost is covered under new filing fees set to go effect October 2, 2020. The DHS has emphasized that the biometrics rule is to be given top priority; nevertheless, it will undergo the standard review process.

This proposed rule quickly drew severe criticism from pro-immigration activists. Andrea Flores from the American Civil Liberties Union called it an “unprecedented” collection of personal information from immigrants and U.S. citizens. She said, “collecting a massive database of genetic blueprints won’t make us safer – it will simply make it easier for the government to surveil and target our communities and to bring us closer to a dystopian nightmare.”

DHS Acting Deputy Secretary Ken Cuccinelli welcomed the rule, stating that “leveraging readily available technology to verify the identity of an individual we are screening is responsible governing.” He added that “the collection of biometric information also guards against identity theft and thwarts fraudsters who are not who they claim to be.”

ARTICLE BY Raymond G. Lahoud of Norris McLaughlin P.A.

For more articles on DHS, visit the National Law Review Immigration section.

DHS Rules Effective August 2020 Will Push Asylum Seekers Further into Poverty and Marginalization

In late June 2020, the Department of Homeland Security (DHS) announced two regulatory changes intended to deprive asylum applicants of the ability to work lawfully in the United States while they await the adjudication of their asylum applications. By increasing the obstacles asylum seekers overcome to obtain an Employment Authorization Document, commonly known as a “work permit,” the new rules endanger the health and safety of asylum seekers and their families.

The first rule change, effective August 21, 2020, eliminates the requirement that USCIS must process employment authorization applications within 30 days of receiving the application. This rule change allows USCIS to adjudicate work permit applications for an indeterminate period of time, which will inevitably result in delays. The government claims this move will deter immigrants from filing “frivolous, fraudulent, or otherwise non-meritorious [asylum] claims.” But the rule change is more likely to force asylum seekers further into poverty and informal economies, thereby making it more difficult for them to meet their basic needs.

The second rule change, effective August 25, 2020, severely restricts eligibility for work permits while simultaneously increasing the waiting time for work permits. This too will have dire consequences for asylum seekers struggling to survive while their asylum applications remain pending. The new measures mandate the government to:

substantially delay the issuance of work permits by more than doubling the waiting period to apply from 150 days to 365 days;
bar asylum seekers from receiving a work permit if they attempt to enter the United States without inspection on or after August 25, 2020, unless they qualify for very limited exceptions;
deny employment authorization for asylum seekers who file their asylum application after the one-year filing deadline, unless granted an exception;
prohibit employment authorization for applicants who have been convicted of certain crimes or who are “believed” to have committed a serious non-political crime outside the United States;
deny employment authorization applications if the underlying asylum application has experienced “unresolved applicant-caused delays,” such as a request to amend or supplement the asylum application or if the application is being transferred to a different asylum office due to a change in the applicant’s address;
automatically terminate an asylum seeker’s work permit without provision for renewal if an immigration judge denies the asylum case and the applicant does not appeal to the Board of Immigration Appeals (BIA) within 30 days, or if the applicant does appeal but the BIA denies the appeal; and
limit the employment authorization validity period to a maximum of two years.

The effects of these new directives will be devastating. Currently, the inability to work lawfully for at least six months after seeking asylum often leaves applicants homeless, hungry, and without access to health care. Because federal law does not provide support such as income, housing, or food assistance to asylum applicants, dramatically increasing the waiting period for a work permit will exacerbate the conditions of poverty in which many asylum applicants find themselves. Without employment authorization, asylum seekers cannot obtain health insurance under the Affordable Care Act, and often cannot apply for a driver’s license or benefit from public assistance programs that offer safe housing and access to food. Federal law permits states to provide state-funded benefits to asylum seekers, but only about half of the states have extended benefits to that population. Even when states do provide some public benefits to asylum applicants, it is often only for children, the elderly, or asylum seekers with specific health conditions.

Given these consequences, pro bono attorneys representing asylum seekers who are eligible to apply for a new work permit or to renew an existing work permit now should consider filing employment authorization applications before August 21, when the first of these rules goes into effect.

ARTICLE BY Erin M. Meyer and Angela Gichinga at Proskauer Rose LLP.

For more on the topic, see the National Law Review Immigration Law section.

FTC Reports to Congress on Social Media Bots and Deceptive Advertising

The Federal Trade Commission recently sent a report to Congress on the use of social media bots in online advertising (the “Report”). The Report summarizes the market for bots, discusses how the use of bots in online advertising might constitute a deceptive practice, and outlines the Commission’s past enforcement work and authority in this area, including cases involving automated programs on social media that mimic the activity of real people.

According to one oft-cited estimate, over 37% of all Internet traffic is not human and is instead the work of bots designed for either good or bad purposes. Legitimate uses for bots vary: crawler bots collect data for search engine optimization or market analysis; monitoring bots analyze website and system health; aggregator bots gather information and news from different sources; and chatbots simulate human conversation to provide automated customer support.

Social media bots are simply bots that run on social media platforms, where they are common and have a wide variety of uses, just as with bots operating elsewhere. Often shortened to “social bots,” they are generally described in terms of their ability to emulate and influence humans.

The Department of Homeland Security describes them as programs that “can be used on social media platforms to do various useful and malicious tasks while simulating human behavior.” These programs use artificial intelligence and big data analytics to imitate legitimate activities.

According to the Report, “good” social media bots – which generally do not pretend to be real people – may provide notice of breaking news, alert people to local emergencies, or encourage civic engagement (such as volunteer opportunities). Malicious ones, the Report states, may be used for harassment or hate speech, or to distribute malware. In addition, bot creators may be hijacking legitimate accounts or using real people’s personal information.

The Report states that a recent experiment by the NATO Strategic Communications Centre of Excellence concluded that more than 90% of social media bots are used for commercial purposes, some of which may be benign – like chatbots that facilitate company-to-customer relations – while others are illicit, such as when influencers use them to boost their supposed popularity (which correlates with how much money they can command from advertisers) or when online publishers use them to increase the number of clicks an ad receives (which allows them to earn more commissions from advertisers).

Such misuses generate significant ad revenue.

“Bad” social media bots can also be used to distribute commercial spam containing promotional links and facilitate the spread of fake or deceptive online product reviews.

At present, it is cheap and easy to manipulate social media. Bots have remained attractive for these reasons and because they are still hard for platforms to detect, are available at different levels of functionality and sophistication, and are financially rewarding to buyers and sellers.

Using social bots to generate likes, comments, or subscribers would generally contradict the terms of service of many social media platforms. Major social media companies have made commitments to better protect their platforms and networks from manipulation, including the misuse of automated bots. Those companies have since reported on their actions to remove or disable billions of inauthentic accounts.

The online advertising industry has also taken steps to curb bot and influencer fraud, given the substantial harm it causes to legitimate advertisers.

According to the Report, the computing community is designing sophisticated social bot detection methods. Nonetheless, malicious use of social media bots remains a serious issue.

In terms of FTC action and authority involving social media bots, the FTC recently announced an enforcement action against a company that sold fake followers, subscribers, views and likes to people trying to artificially inflate their social media presence.

According to the FTC’s complaint, the corporate defendant operated websites on which people bought these fake indicators of influence for their social media accounts. The corporate defendant allegedly filled over 58,000 orders for fake Twitter followers from buyers who included actors, athletes, motivational speakers, law firm partners and investment professionals. The company allegedly sold over 4,000 bogus subscribers to operators of YouTube channels and over 32,000 fake views for people who posted individual videos – such as musicians trying to inflate their songs’ popularity.

The corporate defendant also allegedly also sold over 800 orders of fake LinkedIn followers to marketing and public relations firms, financial services and investment companies, and others in the business world. The FTC’s complaint states that followers, subscribers and other indicators of social media influence “are important metrics that businesses and individuals use in making hiring, investing, purchasing, listening, and viewing decisions.” Put more simply, when considering whether to buy something or use a service, a consumer might look at a person’s or company’s social media.

According to the FTC, a bigger following might impact how the consumer views their legitimacy or the quality of that product or service. As the complaint also explains, faking these metrics “could induce consumers to make less preferred choices” and “undermine the influencer economy and consumer trust in the information that influencers provide.”

The FTC further states that when a business uses social media bots to mislead the public in this way, it could also harm honest competitors.

The Commission alleged that the corporate defendant violated the FTC Act by providing its customers with the “means and instrumentalities” to commit deceptive acts or practices. That is, the company’s sale and distribution of fake indicators allowed those customers “to exaggerate and misrepresent their social media influence,” thereby enabling them to deceive potential clients, investors, partners, employees, viewers, and music buyers, among others. The corporate defendant was therefor charged with violating the FTC Act even though it did not itself make misrepresentations directly to consumers.

The settlement banned the corporate defendant and its owner from selling or assisting others in selling social media influence. It also prohibits them from misrepresenting or assisting others to misrepresent, the social media influence of any person or entity or in any review or endorsement. The order imposes a $2.5 million judgment against its owner – the amount he was allegedly paid by the corporate defendant or its parent company.

The aforementioned case is not the first time the FTC has taken action against the commercial misuse of bots or inauthentic online accounts. Indeed, such actions, while previously involving matters outside the social media context, have been taking place for more than a decade.

For example, the Commission has brought three cases – against Match.com, Ashley Madison, and JDI Dating – involving the use of bots or fake profiles on dating websites. In all three cases, the FTC alleged in part that the companies or third parties were misrepresenting that communications were from real people when in fact they came from fake profiles.

Further, in 2009, the FTC took action against am alleged rogue Internet service provider that hosted malicious botnets.

All of this enforcement activity demonstrates the ability of the FTC Act to adapt to changing business and consumer behavior as well as to new forms of advertising.

Although technology and business models continue to change, the principles underlying FTC enforcement priorities and cases remain constant. One such principle lies in the agency’s deception authority.

Under the FTC Act, a claim is deceptive if it is likely to mislead consumers acting reasonably in the circumstances, to their detriment. A practice is unfair if it causes or is likely to cause substantial consumer injury that consumers cannot reasonably avoid and which is not outweighed by benefits to consumers or competition.

The Commission’s legal authority to counteract the spread of “bad” social media bots is thus powered but also constrained by the FTC Act, pursuant to which the FTC would need to show in any given case that the use of such bots constitute a deceptive or unfair practice in or affecting commerce.

The FTC will continue its monitoring of enforcement opportunities in matters involving advertising on social media as well as the commercial activity of bots on those platforms.

Commissioner Rohit Chopra issued a statement regarding the “viral dissemination of disinformation on social media platforms.” And the “serious harms posed to society.” “Social media platforms have become a vehicle to sow social divisions within our country through sophisticated disinformation campaigns. Much of this spread of intentionally false information relies on bots and fake accounts,” Chopra states.

Commissioner Chopra states that “bots and fake accounts contribute to increased engagement by users, and they can also inflate metrics that influence how advertisers spend across various channels.” “[T]he ad-driven business model on which most platforms rely is based on building detailed dossiers of users. Platforms may claim that it is difficult to detect bots, but they simultaneously sell advertisers on their ability to precisely target advertising based on extensive data on the lives, behaviors, and tastes of their users … Bots can also benefit platforms by inflating the price of digital advertising. The price that platforms command for ads is tied closely to user engagement, often measured by the number of impressions.”

Click here to read the Report.

ARTICLE BY Richard B. Newman of Hinch Newman LLP.

For more on social media, see the National Law Review Communications, Media & Internet law section.

Tag: DHS