Walmart Wins Partial Victory in FTC Lawsuit Over Scam Transfers

A U.S. judge has dismissed a central claim in a Federal Trade Commission (FTC) lawsuit against Walmart, accusing the retail giant of turning a blind eye to scam artists who used its money transfer services to defraud consumers out of hundreds of millions of dollars. The ruling is a partial victory for Walmart, as the FTC can still seek an injunction against violations of an FTC Act provision that prohibits "unfair methods of competition in commerce."

Walmart Prevails in Dismissal of Telemarketing Sales Rule Claim

Dismissal of Telemarketing Sales Rule Claim

In a decision on Wednesday, U.S. District Judge Manish Shah in Chicago rejected the FTC's claim that Walmart owes monetary damages for violating the federal Telemarketing Sales Rule. The rule prohibits deceptive and unfair acts in telemarketing, and bans money transfers to pay for goods and services offered through telemarketing. Judge Shah stated that the FTC did not provide enough specifics on how Walmart, the world's largest retailer, and its allegedly ill-trained employees, saw or consciously ignored warning signs that fraudsters were using its money transfer services to break the law.

FTC's Amended Complaint Rejected

The judge had initially dismissed the Telemarketing Sales Rule claim in March 2023, leading the FTC to amend its complaint with new details. However, Wednesday's dismissal was with prejudice, meaning the FTC cannot pursue the claim again. This ruling is a significant victory for Walmart, as it validates the company's stance that the FTC's case is a "misguided attempt to expand its enforcement authority."

Ongoing FTC Lawsuit

Despite the dismissal of the Telemarketing Sales Rule claim, the FTC can still seek an injunction against Walmart for violations of an FTC Act provision that prohibits "unfair methods of competition in commerce." The regulator declined to comment on the ruling, while Walmart welcomed the decision, stating that it will continue working to keep consumers safe from scammers.

Walmart's Role as Money Transfer Agent

Walmart acts as an agent for money transfers by companies such as MoneyGram, Ria, and Western Union. This service has made it a target for fraudsters, as money can be hard to trace once delivered. The FTC alleged that scammers used various schemes, including impersonating IRS agents, family members in need of money, and winners of lotteries or sweepstakes who owed fees to collect their winnings.

Ongoing Efforts to Combat Fraud

The dismissal of the Telemarketing Sales Rule claim does not mean the end of the FTC's lawsuit against Walmart. The regulator can still pursue an injunction to prevent further violations of the FTC Act. Walmart has stated that it will continue working to keep consumers safe from scammers, underscoring the company's commitment to addressing the issue of fraud within its money transfer services.