FTC GRANTS $7 Million dollar lawsuit against Arise Virtual Solutions

The Federal Trade Commission is taking action against gig work company Arise Virtual Solutions for misleading consumers about the money they could make on Arise’s platform and marketing its business opportunity without complying with the FTC’s Business Opportunity Rule, including the requirement to truthfully disclose the basis for earnings claims to consumers.

Under the proposed settlement, Arise would be required to pay $7 million, which will be refunded to consumers harmed by its misconduct, and must be able to back up any earnings claims it makes in the future.

“Arise lured in workers with false promises about what they could earn while requiring them to pay out-of-pocket for essential equipment, training, and other expenses,” said FTC Chair Lina M. Khan. “Operating in the ‘gig’ economy is no license for evading the law, and the FTC will continue using all its tools to protect Americans from unlawful business practice.”

In its complaint against Arise, the FTC charges that the company regularly used misleading advertisements saying that consumers who signed up on their platform would have access to jobs that paid “up to $18/hour” doing remote customer service work for major companies. The company heavily promoted this business opportunity online, targeting stay-at-home mothers and others who might be looking for opportunities to support their families by working from home. Most of the gig workers Arise recruited were Black, and almost all of them were women.

According to the complaint, when Arise begin citing the $18/hour figure in 2020, its own internal documents showed that the average pay for jobs on its gig work platform was just $12/hour. In fact, from 2019 to 2022, 99.9% of the consumers who joined the Arise platform made less than $18/hour in hourly base pay. The overinflated earnings claims were effective in drawing consumers in; Arise’s market testing showed more consumers responded to these specific claims than those simply advertising “extra income.”

Arise continued running ads touting earnings of up to $18/hour even after receiving a Notice of Penalty Offenses from the FTC regarding false and unsubstantiated earnings claims in money-making opportunities in 2022.

In addition to the fact that consumers’ pay was nearly always below the levels Arise advertised, the complaint alleges that the company’s earnings claims did not factor in the substantial fees consumers faced when joining and using the Arise platform.

According to the complaint, consumers who join the Arise platform are required to make hundreds of dollars in equipment purchases like computers and headsets, including some equipment that is purchased from and financed by Arise. In addition, until July 2022, Arise charged consumers as much as $250 for training programs that were required before consumers could begin money-earning jobs, and only stopped charging for that training after learning of the FTC’s investigation.

Arise also has failed to provide the documents and disclosures required by the FTC’s Business Opportunity Rule. This is the first case where the Commission has charged a company in the gig economy with violating the Business Opportunity Rule, which requires that prospective workers receive key disclosures about earnings claims and other important information before they decide to invest their time and money in a business opportunity.

Beyond the startup costs, Arise also charges workers on its platform nearly $40 each month in mandatory fees, which further reduced consumers’ effective earnings. When consumers left the Arise platform after discovering that their pay was not sufficient or equal to what Arise promised, their expenses were not refunded.

In addition to the $7 million payment, Arise will be permanently prohibited from making any earnings claims to consumers without being able to substantiate those claims as part of the proposed settlement. In addition, Arise will be prohibited from making any false or misleading claims generally and will be required to provide the disclosures mandated by the Business Opportunity Rule.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. The FTC filed the complaint and final order in the U.S. District Court for the Southern District of Florida. Chair Lina M. Khan and Commissioners Melissa Holyoak and Andrew Ferguson issued statements.

Arise also faces concurrent litigation with the U.S. Department of Labor in the U.S. District Court for the Southern District of Florida over separate allegations that it misclassified its workers as independent contractors.

The FTC thanks the U.S. Department of Labor, the Better Business Bureau Serving Southeast Florida and the Caribbean and the Office of the District of Columbia Attorney General for their assistance with this matter.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The staff attorneys on this matter were James Davis, Nathan Nash, and Taylor Arana of the FTC’s Midwest Region.

The Federal Trade Commission works to promote competition and protect and educate consumers. The FTC will never demand money, make threats, tell you to transfer money, or promise you a prize. Learn more about consumer topics at consumer.ftc.gov, or report fraud, scams, and bad business practices at ReportFraud.ftc.gov. Follow the FTC on social media, read consumer alerts and the business blog, and sign up to get the latest FTC news and alerts.