FTC Lead Generation Workshop: More Questions than Answers

by Marc Roth on Nov 15, 2015 3:00:00 PM Advocacy

On Friday, Oct. 30, 2015, the Federal Trade Commission (FTC) hosted a full-day public workshop to explore consumer protection issues raised by online lead generators, with a special focus on the education and lending industries. Aptly titled “Follow the Lead,” the program brought together various stakeholders in the lead generation arena, including publishers, advertisers, consumer advocates, lead verification firms, and regulators. With some exceptions, the general consensus was that third-party lead generators can provide an efficient and cost-effective method to develop qualified prospects, but that the integrity and growth of this medium may be stymied by unscrupulous companies that seek to deceive consumers in the process of developing (and using) leads, which raises serious concerns for all stakeholders.

The primary concern among participants was the lack of transparency in the lead gen process, particularly where leads are generated through various layers of affiliates and sub-contractors. Advertisers that turn to lead generators for their expansive network of publishers may start out knowing where their ad will placed and what their ad will look like. But once the ad hits the ecosystem, the originally approved ad can change in form and content and show up on sites that may not be entirely consistent with the advertiser’s goals, or worse, could embarrass and tarnish the advertiser’s brand.

Several panelists expressed greater concern with the number of parties that have access to a lead, what they do with and how long they keep a lead, and the accuracy of the information in a consumer’s profile. These issues present more grave issues for the FTC and consumer advocates (as well as consumers themselves) because these actions are not transparent to consumers and could result in greater harm than a merely deceptive ad.

The workshop concluded with several stakeholders discussing current and proposed industry self-regulation programs and technology-based compliance solutions available to the marketplace. While all of these efforts are laudable, commented one advocate, the fact remains that the third-party lead generation business is inherently flawed and subject to fraud, and until a perfect solution is developed to prevent deceptive ads and provide full and clear transparency into data collection, storage and use practices, consumers will continue to be harmed.

From a legal perspective, the lead generation business raises many important issues to consider. Companies that buy leads need to know where the lead came from, under what context was the lead generated, and what rights they have to contact the consumer. Failing to address and understand these issues can put a company at risk of contacting a consumer who did not understand what he or she was signing up for, or worse, not obtaining the appropriate level of consent if the consumer provided a mobile number to be called. Those who have dealt with the Telephone Consumer Protection Act can appreciate this warning, where statutory damages of up to $1,500 may be claimed for a single unauthorized call or text message.

Similarly, sellers of leads may have liability under various laws such as the Telemarketing Sales Rule, when they “known or should have known” that their customers would use their lists in violation of law. The FTC offered examples of several cases it brought against lead generators and list brokers who should have been tipped off to their client’s misuse of consumer information when reviewing phone scripts and learning of consumer complaints.

While the workshop may have “generated” more questions than answers, the overall message was clear: everyone in the lead generation ecosystem needs to be aware of and take responsibility for their actions and at all times place the consumer’s interests above all else.

Photo by cooldesign/FreeDigitalPhotos.net

Marc Roth is a partner at Manatt, Phelps & Phillips, LLP.

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