Nine Things Every Online Business Should Know About The FTC

9 FTC marketing regulations ever SME should know#1: What Is The FTC, Exactly? A Government Agency or An Independent Commission That Works Closely With The Government?

The Federal Trade Commission is an independent agency of the United States government. Independent agencies operate separately from the other branches of government and aren’t headed by a Cabinet secretary. They’re also independent of Presidential control, though the incumbent selects members and must pick a near-equal amount of Democrats and Republicans. And yes, the commission does wield the “power of federal law” via the Federal Trade Commission Act.

What is the FTC’s main responsibility? Keeping an eye out for “unfair and deceptive” business activity — including marketing. Essentially, they’re the nation’s “consumer watchdog” agency.  For more details about the FTC, mosey on over here.

#2: The  2009 “Self-Regulatory Principles For online Behavioral Advertising”

In 2009, the FTC released a set of guidelines concerning “proper” advertising tactics. “Self-Regulatory Principles for Online Behavioral Advertising,” is a 55 page report that covers the four principles of acceptable online marketing:

  • Transparency & Consumer Control: Businesses are expected to let consumers know when and how they’re participating in target marketing and provide an opt-out mechanism.
  • Reasonable Security and Limited Data Retention: Companies that choose to collect personal data should only keep data for as long as necessary and only as it pertains to a specific transaction. Also, the FTC advises that “reasonable measures” should be taken to ensure data security. (Yeah, no; the FTC is not known for being precise. That’s why it’s a good idea to get a lawyer if you’re in trouble with the FTC, for he or she will know the exact case law to pull to challenge vague rules.)
  • Material Changes to Privacy Policies: Without consumers’ express consent, behavioral data cannot be used in a substantially different way than what is stated in the privacy policy.
  • Sensitive Data: Companies can’t use sensitive information about a consumer’s financial status, health status, or information pertaining to children for target marketing purposes.

# 3: Cookies & Consumer Privacy Controls

Cookies help online advertisers track consumer behavior in ways far beyond the capability of traditional advertising. A few morsels of text can tell you thousands of different things about a user’s web habits.

Personal data related to the online activity of children, financial data, or health status are subject to federal online privacy laws.

Not long after the unveiling of the FTC privacy guidelines in 2009, Yahoo! and Google created a method for users to opt out of having behavioral advertising appear on their web browser. In 2014, however, Yahoo! announced that they would no longer honor “browser do not track” signals. The future of online privacy is very much up in the air.

#4: Disclaimers Are A Must

To limit liability, it isn’t enough to throw a general disclaimer on your website. The product or service being advertised must be marketed in a way to demonstrate use under ordinary circumstances. Moreover, if you have an e-commerce site, payment and refund details  must be laid out in full.

#5: Material Compensation = Paid Endorser = Mandatory Disclosure

Anyone materially compensated to blog, tweet, or endorse a product must disclose the fact that he or she is paid. The disclosure statement must be put in a prominent place on the website. Read more here.

#6: Special Rules For Online Jewelry Sales

Online Jewelry Sellers must adhere to the 2008 FTC Guides for the Jewelry, Precious Metals, and Pewter Industries. If you sell gems online — fake or real — make sure you “polish up” on the rules.

#7: Multi-Level Marketing (MLM) Lowdown

Even though the guidelines the FTC issued in 2009 do not expressly address affiliate marketing, the FTC is against matrix or multi-level marketing schemes. These kinds of schemes also sell products and services through website networks. Matrix or multi-level marketing schemes are treated by the FTC like pyramid schemes — i.e., they’re illegal.

#8: Dot Com Disclosures

The Bible of all things online marketing is the Federal Trade Commission’s Dot Com Disclosures. Grab a coffee and cozy up with the DCD here (we tried to make our Dot Com Disclosure summary a bit less boring than the FTC’s).

#9: Internet Businesses Need Internet Attorneys

An experienced online marketing lawyer can help keep the FTC at bay. Get in touch today to get on track.

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