Why We Love The Federal Trade Commission (And You Should, Too!)

by Bill McClellan on Jan 11, 2017 2:00:00 PM Advocacy, FTC, Government Relations

Safety Dance.jpgIt’s been a “Yuge” year so far.

Last week I shared a “beautiful” cheat sheet to help Direct Response Marketers survive the Trump era and this week I’ve got something better.

What you might ask?

Well the only thing that can trump that would be the inside scoop straight from the FTC. That’s why I reached out to my friend and long-time FTC insider Lesley Fair.  She agreed to visit with ERA’s Government Affairs Committee to tell us “what’s really going on” so you can do a safety dance. 

Thankfully the FTC agreed to the visit as well. That’s why we love the Federal Trade Commission (and you should, too!).

2016 Top 10 For Electronic Retailers

Lesley’s fast paced presentation covered a lot of ground and was presented as a Top 10 for Electronic Retailers set to well-known musical hits through the years.  A YouTube video of the presentation can be found embedded at the end of this post so be sure to check it out.

Here is a high level look at what you will find inside:

Doctor, Doctor - Thompson Twins

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We started off with the Thompson Twins’ Doctor, Doctor and Health Claims. This hit covered the Supple Dietary Supplement. They claimed that the product proved pain relief without substantiation. The presentation also covered an FTC App case with the Aura Lab, Inc. complaint and reviewed the FTC’s announcement on Marketing Claims for Over-the-Counter Homeopathic Drugs.   

However, the FTC isn’t just interested in human health claims.  They strongly believe that your Pet should also enjoy equal protections and challenged Eukanuba dog food for not substantiating its life extension claims. 

 

Mother Nature’s Son – Beatles

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The Beatle’s Mother Nature’s Son next served as the backdrop to cover Green Claims. 

Green Claims where big in 2016 with Volkswagen Group of America's Clean Diesel campaign. It was “like really clean diesel” except for the clean part.  This $10 Billion mistake by the company didn’t include the $5 Billion recovered by the EPA and state of California to clean up the air.

Lesley also told us that “All Natural” claims are super popular with consumers.  She indicated that the FTC was keyed in on the problem that many “All Natural” products had chemicals in them. Some recent FTC cases in this area include: ABS Consumer Products (consent order), Beyond Costal (consent order), Erickson Marketing Group (consent order),Trans-India Products (consent order), California Naturel (Commission Opinion).

 

Safety Dance – Men Without Hats

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In 2016 the automotive sector saw the brunt of the FTC’s enforcement action on Safety Claims.  While we were in the clear last year, it’s not time for Direct Response Marketers to do the "safety dance" just yet. 

What happened was General Motors had a 172 Point Vehicle Inspection that mislead consumers by implying that the vehicles it covered where safe.  In reality, the inspection did not cover many unfixed safety recall issues that could cause injury to drivers. In a similar matter, Carmax’s 125+ point inspection of its used cars did not disclose that some of the vehicles might have had open safety recalls that might not have been fixed.

Last year safety claims focused in automotive but DRTV should keep an eye on this safety claims in the years ahead.  DRTV could be next.

 

A Matter of Trust – Billy Joel

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As a "matter of trust", endorsements & social media are also on the FTC’s mind.  Consumers have the right to trust the independence of endorsements unless there are clear and conspicuous disclosures of what that connection of the endorser with the product might be.

By way of example, HealthyTrim.com found itself explaining its underlying weight loss claims to the FTC. The FTC questioned its substantiation and thought it mislead consumers with a bogus doctor trusted seal on the products website.  Thats a big no-no. 

Warner Bros. also felt some FTC heat for paying FTC influencers to create videos of themselves playing Shadow of Mordor while hiding the disclosure from the thousands and thousands of viewers who were influenced by the game play. 

Finally, Lord & Taylor, LLC received an FTC consent order for offering fashion influencers clothes and thousands of dollars to go on Instagram and model dresses.  The company instructed the on hashtags to use and other marketing tips but did not disclose the material relationships. 

 

 Borderline – Madonna 

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 2016 was quite the year living on the "borderline" for Lord & Taylor. In addition to having FTC endorsement issues they also fell out of favor while trying to perfect a Native Advertising campaign.  Unfortunately, the online fashion magazine Nylon wrote this “O.M.G” story about this peach paisley spaghetti-strap sundress from Lord & Taylor.  The only problem? There was no real mention or disclosure that the article was paid for by Lord & Taylor.   

 

Love Letter Nick Cave and the Bad Seeds – Consumer Reviews

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Love letters are often the opposite of consumer reviews.  However, Congress gave consumers a little love in dealing with bad seeds when they passed the Consumer Review Fairness Act of 2016. This law effectively makes it illegal for businesses to punish consumers for posting negative reviews. So be sure to check that out and know that retaliation against consumers will soon be an enforcement matter for regulators. 

 

Safe and Sound – Capital Cities

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Ashely Madison, the leading married dating service for discreet encounters was hacked. In addition, the company made a number of affirmative statements about the security of their website that caught the government's eye. The FTC also challenged as unfair the choices the company made that put customer's personal information at risk. Also cited, Ashely Madison had a Trusted Security Award displayed on the website that was just a graphic and didn’t really exist or mean anything. That's one of the reasons we expect that regualtors will continue to go after data security issues at an increasing rate.

The ASUSTEK Computer Inc. consent order was also covered in the presentation.  ASUS - "In Search of Incredible – safety and security".  In fact the search goes on with ASUS's incredible miss on its safety and security practices.  Their product had a series of holes that allowed hackers to get access not only to the computer but to the actual documents on the computer.  When the hackers broke in they left a note for their victims. The message from the hacker read: "This is an automated message being sent out to everyone affected. Your ASUS router and your documents can be accessed by anyone in the world with an internet connection".  Needless to say the FTC was not amused.  

To learn more about best practices and how to avoid the hackers Lesley pointed us to the FTC's Start with Security Guide for business.

 

Every Breath You Take – The Police

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"Every breath you take," should be focused on Consumer Privacy if the Inmobi order is any guide. The company, advertises itself as the largest independent Mobile Ad network. Unfortunately, size and judgment do not go hand in hand as discovered in United States v. Inmobi PTE LTP.  The government was successful in proving that the company overrode their customers do not follow my geolocation on smartphones for commercial advantage.

Listening to the presentation it was clear that the FTC is focusing more resource to combat these privacy issues. They are looking forward oncutting edge issues like drones and smart TVs. You can learn more about their plans reading the FTC's Internet of Things Privacy & Security in a Connected World and Careful Connections – Building Security in the Internet of Things.

 

My Generation - The Who

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Talking about lead generation and who's problem is it?  Well here the concern is with the flow of eads through publishers and aggregators.  It's a messy thing created by my generation. The FTC held a workshop last year and has brought a number of cases recently.  As lead generation becomes a more popular direct response technique we all need to be vigilant to ensure clean leads.  

 

Change the World- Eric Clapton

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The FTC knows that Effective Remedies often change the world.  In FTC V. AMG Services, Inc. the question was if Online Pay Day Lending with an affiliation with a Native American tribal entity would be covered by the FTC Act.  The judge found in the FTC's favor over this fundamental issue of jurisdiction. Tribal affiliations do not change the force and effect of Federal Statute.  The fine? A $1 Billion judgement from the District Judge.  The case took a long time but Lesley also made the point that long drawn out defenses do not scare the FTC in any way at all. In fact they love them and are not bothered by case length one bit.  

In the Herbalife International of America, Inc. stipulated order the FTC also sought to change the world.  The multi-level marketing case gave $200 Million back to distributors for false earnings representations. Of note was the fact that if the incentive is on bringing in recruits rather than selling products. Companies should be very careful of their practices and ensure that those claims are also in order.  I got the impression that the FTC hadn't finished with its work in the multi-level marketing vertical so I plan to keep an eye on developments there.  

Last but not least, the DeVry Education Group $100 million case covered the for-profit education sector.  It's an interesting case covering truth in advertising. Basically DeVry advertised that 90% of their graduates had careers in their field within six months of graduation. The kicker? Many of those same graduates already had those careers before and where participating in continuing education. Tricky and deceptive in the eyes of the FTC.  

To learn more and know what is expected you can visit business.ftc.gov to help improve your business practices. 

Here is the total presentation for your team.  It's totally worth the time and something I recommend everyone watch so, enjoy! 

 


Bill McClellan.jpgBill McClellan joined ERA in January 2003 as director of government affairs. Prior to joining the association, Bill worked as a lobbyist at the Georgia Automobile Dealers Association, covering the state legislature and Georgia's congressional delegation. Before working for the GADA, Bill managed political campaigns at both the congressional and state constitutional levels

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The statements, opinions, and advertisements expressed on the ERA Blog and other online entities owned by the Electronic Retailing Association are those of individual authors and companies and do not necessarily reflect the views of the Electronic Retailing Association.