What changed in this filing

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Item 1A. Risk Factors

2022-11-07 compared with 2022-08-09 · 36 added, 1 removed, 6 unchanged (86% of the section changed)

1 unchanged sentence

Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our 2021 Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results.

There have been no material changes to the Risk Factors previously disclosed in our 2021 Form 10-K.

Except as set for the below, there have been no material changes to the Risk Factors previously disclosed in our 2021 Form 10-K.

The outcome of litigation, inquiries, investigations, examinations or other legal proceedings in which we are involved, in which we may become involved, or in which our clients or competitors are involved could distract management, increase our expenses or subject us to significant monetary damages or restrictions on our ability to do business.

Due to the complex regulatory scheme in which we operate and the heightened scrutiny on our business, legal proceedings arise periodically in the normal course of our business.

These may include individual consumer cases, class action lawsuits and inquiries, investigations, examinations, regulatory proceedings or other actions brought by federal (e.g., the Federal Trade Commission ("FTC") or state (e.g., state attorneys general) authorities.

We are currently subject to various pending governmental and regulatory investigations and we could be subject to more in the future.

Any negative outcomes from regulatory actions or litigation or claims, including monetary penalties or damages or injunctive provisions regulating or restricting how can we conduct our business could have a material adverse effect on our business, financial condition, results of operations and reputation.

For example, on October 26, 2018, the Company received a subpoena from the New York Attorney General’s Office (“NY AG”) regarding compliance with New York Executive Law §

63(12) and New York General Business Law §

349 , as they relate to the collection, use, or disclosure of information from or about consumers or individuals, as such information was submitted to the Federal Communication Commission (“FCC”) in connection with the FCC’s rulemaking proceeding captioned “Restoring Internet Freedom,”

WC Docket No.

The Company also received subpoenas from the United States Department of Justice (“DOJ”) on December 13, 2018, and the Office of the Attorney General of the District of Columbia ("DC AG") on March 12, 2020, regarding the same issue.

On May 6, 2021, the Company and the NY AG executed an Assurance of Discontinuance (the “AOD”) to resolve this matter which imposed injunctive provisions on the Company’s practices with regard to political advocacy campaigns, most of which the Company had already implemented, and imposed a $3.7 million penalty.

Additionally, on January 28, 2020, we received a Civil Investigative Demand (“CID”) from the FTC regarding compliance with the FTC Act and the TSR, as they relate to the advertising, marketing, promotion, offering for sale, or sale of rewards and other products, the transmission of commercial text messages, and/or consumer privacy or data security.

We have been fully cooperating with the FTC and completed our initial discovery submissions to the FTC in 2020.

On October 18, 2022, the FTC sent the Company a draft complaint and proposed consent order seeking injunctive relief and a civil monetary penalty and invited settlement negotiations. 

A substantial majority of the injunctive provisions contained in the consent order are consistent with the Company’s current business practices.

The FTC and the Company have commenced settlement negotiations.

The Company believes that a loss from these matters is probable but it is not yet possible to reasonably estimate the magnitude of such loss. 

An unfavorable outcome of this matter could have a material adverse effect on the Company’s business, results of operations and/or financial position.

On October 6, 2020, the Company received notice from the Pennsylvania Office of the Attorney General (“PA AG”) that it was reviewing the Company’s business practices for compliance under the Unfair Trade Practices and Consumer Protection Law, 73 P.S.

201-1 et seq.

the Telemarketer Registration Act, 73 P.S.

, and the Telemarketing Sales Rule, 16 C.F.R.

The Company has been responsive and is fully cooperating with the PA OAG. On July 27, 2022, the PA AG sent the Company a draft Assurance of Voluntary Compliance (“AVC”).

The Company responded with a revised AVC but the PA AG indicated an unwillingness to negotiate the terms of the AVC, and on November 2, 2022, the Commonwealth of Pennsylvania filed a complaint for permanent injunction, civil penalties in the amount of $1,000 for each violation of the PA Consumer Protection Law and disgorgement of profits plus other monetary relief, and other equitable relief against Fluent, LLC and four of its subsidiaries in the United States District Court for the Western District of Pennsylvania.

The Company believes its current practices are in compliance with the PA Consumer Protection Law and is currently evaluating this complaint.

At this time, it is not possible to predict the ultimate outcome of this matter or the significance, if any, to the Company’s business, results of operations or financial position .

See Item 3, Legal Proceedings for more information on each of these matters.

Regardless of whether any current or future claims in which we are involved have merit, or whether we are ultimately held liable or subject to payment of penalties or consumer redress, such investigations and claims have been and may continue to be expensive to defend, may divert management’s time away from our operations and may result in changes to our business practices that adversely affect our results of operations.

The scope and outcome of these proceedings is often difficult to assess or quantify.

Plaintiffs in lawsuits may seek recovery of large amounts, and the cost to defend such litigation may be significant.

There may also be adverse publicity and uncertainty associated with investigations, litigation and orders (whether pertaining to us, our clients or our competitors) that could diminish consumers' view of our services and/or result in material discovery expenses.

In addition, a court-ordered injunction or an administrative cease-and-desist order or settlement may require us to modify our business practices or prohibit conduct that would otherwise be legal and in which our competitors may engage.

Many of the complex and technical statutes to which we are subject, including state and federal financial privacy requirements, may provide for civil and criminal penalties and may permit consumers to bring individual or class action lawsuits against us and obtain statutorily prescribed damages.

Additionally, our clients might face similar proceedings, actions or inquiries which could affect their businesses and, in turn, our ability to do business with those clients.

Such events are inherently uncertain and adverse outcomes could result in significant monetary damages, penalties or injunctive relief against us, any of which could have a material adverse effect on our business, results of operations and/or financial position.

Unregistered Sales of Equity Securities and Use of Proceeds.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors