It’s a new year, and the FTC’s sporting a new chief technology officer. Ashkan Soltani is his name, and online privacy programming is his game. A bona fide tech-head, over the past 15 years Soltani has worked on several high-profile, large-scale, Internet-related projects.
- In 2012, Soltani consulted on the FTC’s mobile forensics lab.
- He served as lead researcher for the Wall Street Journal’s ground-breaking “What Do They Know” series.
- Soltani helped develop and sell “Mobilescope,” a privacy app intended to improve “transparency” in the smartphone marketplace.
- As a grad student, Ashkan Soltani helped bring the issue of “Flash Cookie Respawning” to the fore.
Soltani’s Goals: “More Geeks and Better Tools”
A direct report to Chairwoman Edith Ramirez, Soltani says he plans “to work on expanding the agency’s tech capacity, or in other words, bringing on more geeks and better tools.”
When introducing himself to the press and public, the FTC’s new CTO also verbally felled an oft-argued criticism regarding the commission’s technological prowess, commenting:
“They’ve always addressed new markets even from the history of regulating emissions and cigarettes. While the agency may have enhanced those capabilities recently, it’s mistaken to say the FTC is just getting into tech.”
So, what issues does Soltani want to tackle during his tenure at the Federal Trade Commission? In his words:
“Algorithmic transparency. The idea is for the FTC to have better insight into how companies such as e-commerce, travel and financial services firms feed web behavior, location, demographic and other data into algorithms that determine variable prices.”
He also wants to explore issues related to “big data personalization” and:
“Create tools that would let a researcher or anyone identify how different people might see a website or service.”
In interviews, Soltani has made it clear that he’s not “setting policy.” Instead, he wants to help “the Commission…understand the way that privacy issues come into play as technology moves forward.”
Is Ashkan Soltani good for the FTC or bad?
Par for any political appointee, a schtikle of controversy surrounds Soltani’s employment. Skeptics consider his past projects and worry he may be a radical online privacy wolf in a politically neutral sheep’s clothing. But Soltani promised:
“My role at the FTC is not to set policy — the Chairwoman and the bipartisan members of the Commission do that — but I do play a role in helping I think a person with a strong track record of researching and investigating consumer privacy issues is, frankly, exactly who would be most effective in this role.”
Promoting your business means bragging about your business, right? Absolutely. But, there’s a fine line between putting your best foot forward and misrepresenting the facts. We’ll cover the difference between false advertising and what the Federal Trade Commission (FTC) calls “puffery.”
What is Puffery?
So, what is puffery? Claims that can’t be universally proven.
Example: “We offer the best burgers in the world!”
The Federal Trade Commission does not censure businesses for making ambiguous statements like these because they’re obvious exaggerations.
In general, puffery is a subjective claim about a product or service designed to promote it in a more positive light. Basically, the FTC doesn’t punish businesses for making general, positive statements about their products and services.
FTC Puffery vs. False Advertising
It’s one thing to say that you offer the “best, finest, or greatest” in your business, but it’s another thing to make blatantly misleading claims. So, what is the line between puffery and outright deception? Typically, statements which are general, broad and depend on a person’s preference fall under the definition of puffery.
However, specific, physically verifiable statements qualify as fraud. For instance, suppose a startup claims to have raised $2 million, and you were persuaded to buy in because of the assurance. If it turned out that it didn’t have $2 million in the coffers, the FTC would be banging on the company’s door.
What is the Effect of Puffery?
The effect of FTC puffery depends on how the consumer thinks they know about a product or service. In a study published in the Journal of Consumer Research, Robert S. Wyer, Jr. and Alison Jing Xu studied consumers’ reactions to advertising claims. They discovered that ambiguous statements were interpreted in two different ways:
- People who thought they knew less than others about a product viewed puffery as useful information designed for folks knowledgeable on the subject.
- People who have a higher perceived level of knowledge see puffery as useless filler.
The study also showed claims are perceived differently based on the context and type of product.
Get In Touch With A Marketing Lawyer About Your Puffery Questions
It’s acceptable to flatter yourself, but it’s not okay to lie. If you’re ever in doubt, it’s best to have your materials reviewed by a marketing attorney who understands the nuances of FTC puffery issues.
Obamacare Spammers Agree To Settlement
Right before the Affordable Care Act launched, an email marketer launched a campaign that made it seem like people had to pick a new health care provider immediately or they’d be in violation of the law. The email included affiliate links to several insurance companies.
In the end, the email marketers settled with the FTC for $350,000 and a promise to never “misrepresent facts about any product or service, including health insurance.”
The Center for Digital Democracy Wants The FTC To Go After Big Business
The Center for Digital Democracy isn’t happy with the FTC. The non-profit believes the commission has been way too lenient when it comes to the U.S./E.U. online privacy safe harbor program. Specifically, the CDD thinks that data brokers and online marketers are “failing to keep its privacy promise to Europe.” The CDD’s main gripe:
“The commercial surveillance of EU consumers by U.S. companies, without consumer awareness or meaningful consent, contradicts the fundamental rights of EU citizens and European data protection laws, and also violates the intention of the Safe Harbor mechanism to adequately protect EU consumers’ personal information.”
Tldr; The standoff between folks interested in monetizing user data and people who are sticklers for Internet privacy, continues.
Canada & the U.S. Are Teaming Up For A Cross-Border Marketing Investigation
Both the U.S. Federal Trade Commission and the Competition Bureau of Canada have their sights set on Aegis Mobile. Apparently, the Canadian Wireless Telecommunications Association (CWTA) hired Aegis to do some analysis and marketing work.
The cross-border collaboration caught the eye of the Competition Bureau of Canada, which launched an investigation into whether or not Aegis’ and CWTA’s advertising efforts were “false and misleading.” As part of the inquiry, the Competition Bureau, evoking the SAFE WEB Act, enlisted the FTC to seek and gather information about Aegis’ work with CTWA.
Aegis tried to quash the case, arguing that Aegis was a “common carrier” not subject to the SAFE WEB Act. But, the judge disagreed and the U.S.-Canadian FTC online marketing investigation will move forward.
FTC Green Lights New COPPA Safe Harbor Program
The Federal Trade Commission approved another “self-regulatory safe harbor oversight” alternative — the Internet Keep Safe Coalition (iKeepSafe).
Remember, if you have an app or a website that collects information from minors, then you must adhere to the Children’s Online Privacy Protection Act.
Including a line in your terms and conditions that kids under the age of 13 can’t use your website won’t ward off an FTC censure.
Big Data Assured That Congress Will Not Pass A Marketing Online Privacy Law Anytime Soon
This week, a bunch of data bigwigs gathered in Aspen and talked about, amongst other things, Congress’ current temperature regarding a universal online privacy law. Attendee and Experian’s senior vice president for government affairs, Tony Hadley, gave a speech in which he said that only a handful of congresspeople truly wants to regulate online marketing data.
In other words, things will remain the same for the foreseeable future.
Other FTC Internet-Related Tid Bytes
- The Federal Trade Commission announced a new workshop entitled “Big Data: A Tool for Inclusion or Exclusion?” The discussion will focus on digital data collection and its impact on “low income and under-served consumers.” http://www.ftc.gov/news-events/events-calendar/2014/09/big-data-tool-inclusion-or-exclusion
- Real Estate agents DO NOT want online real estate websites Trulia and Zillow to merge. It all has to do with advertising. http://nypost.com/2014/08/15/realtors-want-ftc-to-block-zillow-trulia-merger/
- The FTC got permission to open a study on “patent trolls”. http://washingtonexaminer.com/ftcs-patent-troll-study-gets-approval/article/feed/2158146
- Fandango finally reached a settlement with the FTC for being crappy at digital security for a really long time. http://www.engadget.com/2014/08/19/fandango-and-ftc-finalize-settlement/
- A weight loss product marketer that was fined by the FTC nearly a decade ago got caught, again. Remember: the FTC does not take kindly to recidivist marketing violators. They WILL take your house eventually. http://protectingyourpocket.blog.palmbeachpost.com/2014/08/20/fat-burner-firm-kept-making-false-claims-ftc-says/
FTC Guidelines and Internet Marketing 101
Here at Kelly / Warner Law, we field a lot of questions about Federal Trade Commission Guidelines pertaining to blogging and Internet marketing. The two most common queries:
Are bloggers and marketers required to disclose certain types of information on their websites?
If so, how must the disclaimers be presented?
In this article, we’ll discuss the latest FTC guidelines and disclosure requirements.
The FTC Acai Berry Scandal: A Lesson On Weight Loss False Advertising
A couple of years back, the FTC came down hard on Acai Berry advertisers. In online ads, many weight loss marketers used headlines like: “New Diet Pill Helps you Lose 50 pounds in 4 weeks” to describe the supposed miracle product. This alluring diddy also caught the FTC’s eye:
WARNING! AcaiPure Is Fast Weight Loss That Works. It Was Not Created For Those People Who Only Want To Lose A Few Measly Pounds. AcaiPure was created to help you achieve the incredible body you have always wanted …USE WITH CAUTION! Major weight loss in short periods of time may occur.
These headlines and blurbs caught the attention of the FTC because they make bold claims — claims that sound too good to be true. And when asked for evidence to support these claims, the marketers couldn’t hand-over satisfactory studies. (No, not all white papers and studies are created equal.) The commission deemed the headlines “false advertising” and a hulk-sized fine was levied.
False advertising isn’t the only thing at issue here. though. The FTC is also concerned about “re-bills.” In the Acai crackdown, the commission reasoned that not only did the advertisement lead customers to believe they would experience dramatic weight loss, but the advertisement also indicated that there was no financial risk. Yet, Acai Berry clients were billed for the product without their knowledge – sometimes thousands of dollars – for something they were led to believe was “Risk Free.”
The FTC has and will continue to clamp down on false advertising claims as a way to curb unfair and deceptive marketing. And remember, they have to keep busting people in order to keep existing. So, watch your back and make sure you have the proper disclosures. If you do, the FTC can’t come after you.
Blogging FTC Guidelines
The FTC isn’t only concerned with false advertising (blatant or otherwise). They’re also concerned with persons who endorse products and fail to disclose that he or she is a compensated endorser.
Bloggers and affiliate marketers who are receiving payment from websites engaged in false advertising should also beware. According to FTC Guidelines, bloggers must post a disclaimer or make a disclosure regarding a “sponsored communication.” There is no such thing as a one-size-fits-all “sponsored communication” disclaimer, however, the FTC does provide a few guidelines:
- Only “material connections” must be disclosed.
- Connections are material if the reviewer received some consideration for the review (e.g., cash, merchandise, etc.).
- Guidelines impose liability on: (1) advertisers, (2) advertising agencies, and (3) endorsers (including celebrity endorsers).
- The “results may vary” safe harbor is gone – advertisers are responsible for the claims made by endorsers.
Must I Have a disclosure or disclaimer on my Blog?
If you’re a paid blogger, affiliate marketer, or any entity receiving pay for advertising you must use disclaimers on your site.
“What kind of disclaimer is needed on your website or blog?”
The answer isn’t clear cut. Different strokes for different apps. That said, as long as the disclaimer is “clearly and conspicuously” placed according to the FTC Guidelines, then your site should be in the clear. Having a link in small type — which just so happens to be the same color as the background color of your page — won’t do because the disclaimer must be “clearly and conspicuously” placed.
There’ isn’t a list of “FTC approved” methods for disclosing certain information. The guidelines simply say that the disclaimer must be “clear and conspicuous” when disclosing the material relationships between endorsers and sellers – especially when such relationships aren’t otherwise clear to people visiting the website.
For bloggers, it’s important for the disclaimer to follow every blog post. Why? Because if the disclaimer is only in one spot, there is no guarantee that a reader will see it. A good method is having a link in your footer than appears on every page.
The FTC Guidelines govern advertising done on Twitter and other social media platforms, too. So, make sure to disclose material connections with every Tweet.
How you can comply with FTC Guidelines
The revised FTC Guidelines dictate that advertisements for services and products must not be misleading or false. Advertisers must disclose when the advertisement showcases atypical results. Furthermore, marketers using word of mouth or electronic media must disclose any material relationships between themselves and the advertisers they represent so consumers aren’t misled.
When online marketing guidelines are violated, the FTC will consider the “totality of the circumstances.” That means the FTC will take a look at:
- The advertised product,
- The advertisement claims, and
- Whether or not a “reasonable consumer” would be able to determine (from the disclaimer) if there is a material connection between the advertiser and the marketer.
Be careful out there, bloggers and online affiliate marketers. Even though the truth can hurt…the truth doesn’t hurt as bad as the FTC crashing down on you.
Is it illegal for online and affiliate marketers to create fake review websites?
The FTC can go Ramsay Snow on deceptive marketers (financially speaking, of course) — so no, it isn’t at all wise to operate fake review and consumer report websites. BUT, the issue isn’t black and white. Proper disclosures and a trickery-free user interface will most likely keep you in the legal clear.
Basically, the key to staying on the right side of online marketing law is honesty. If something is an advertisement, label it as such. If you have a business or personal relationship with a product or service you promote – disclose it.
List of review website affiliate marketing “techniques” that could get you in trouble with the law
Review websites are a popular form of affiliate marketing. But are they legal? Here’s a handy list.
- Paying a person or using a service to “get” reviews is against regulation.
- Writing a review for a product you’ve never used is against regulation.
- Creating a website that presents itself as an unbiased consumer review portal, when in reality its main purpose is to sell one brand, is against regulation.
- Failing to disclose a material relationship between a review website and parent company, or some other association that could bias the “reviews,” is against regulation.
I’m an affiliate marketer. What laws and government guidelines should I know?
Anybody involved in online marketing – whether they be an affiliate marketer or business owner with an online presence – should be intimately familiar with the Federal Trade Commission’s DOT COM DISCLOSURES. To read the blow-by-blow government guide on what is and is not acceptable when it comes to online advertisements and marketing campaigns, go here.
Warning: For the non-legal-geek, the DCD is crushingly boring. As such, you may just want to check out our summary here. We can’t promise it’s any less boring than the FTC’s version, but it’s a heck of a lot shorter.
The Dot Com Disclosures can be vague in areas. If you are unsure if one of your techniques could get you in trouble, contact an attorney who has helped online business owners with FTC cases in the past.
Also, all businesspeople should understand the Lanham Act, specifically what it says about false advertising and unfair competition. And lastly, it’s a good idea to follow the California State online privacy laws – as the Internet cares not for state boundaries, and if people in California can use and interact with your site, then your best bet is to adhere to California law.
Can I Make Up Testimonials and Reviews? After All, How Is Anybody Really Going To Know If They Are Fake Or Not!?
We understand. It’s tempting. How is anybody going to find out if your testimonials are real or fake? For starters, if you use stock photography for the testimonial pictures, that’s a pretty good indicator of the reviews’ falsity. Also, the FTC can audit your site, and if you don’t have actual people to match up with the testimonials, you could find yourself looking down the barrel of a hefty FTC fine.
The Bottom Line When It Comes To Marketing With Fake Review Websites
If you don’t want to risk being sucker-punched by the FTC, follow the Dot Com Disclosures to the letter. If you are even the least bit unsure if your website passes legal muster, get in touch with an online marketing attorney to conduct an audit of your site and business. It’s a lot less than you may think, and it will probably save you money and headaches down the road.
To speak with an online affiliate marketing attorney, get in touch with Kelly / Warner Law today. We’re not just lawyers, we’re also affiliate marketers.
The Canadian Competition Bureau is an Independent law enforcement agency that monitors Canadian online marketing regulations. The Competition Bureau is responsible for the administration and enforcement of:
- Competition Act
- Consumer Packaging and Labeling Act
- Textile Labeling Act
- Precious Metals Marketing Act
What law governs Canadian online marketing regulations?
Canada’s Competition Act — commonly called C-34 — is the law governing business conduct in Canada including online marketing. C-34 covers both civil and criminal actions.
In general, what does C-34 say about false and misleading advertising online?
C-34 asserts that “any representation in any form, which is false or misleading in a material aspect, is prohibited.” It also states, “A representation is material if it could lead a person to a course of conduct that, on the basis the representation, he or she believes to be advantageous.”
What Canadian online marketing regulations does C-34 address?
The Competition Act addresses issues related to “commercial” websites and email. Though, depending on the circumstances, statements made in chat rooms, news groups and message boards can also fall under the act.
What actions does C-34 prohibit?
Among other things, C-34 prohibits:
- Deceptive telemarketing;
- Pyramid schemes;
- Advertising at bargain price a product not available in reasonable quantities;
- Selling a product at a price above the advertised price;
- Conducting contests, lotteries or games of chance or skill without making fair and adequate disclosure of, among other things, material facts that could affect winning potential.
Canada’s online marketing law also sets parameters for multilevel marketing plans.
What if I put a disclaimer about a product or service on another page of the website? Will that satisfy Canadian online marketing regulations?
C-34 addresses Internet user behavior. In doing so, the law requires that any disclosure information must appear in close proximity to the thing it is annotating. In the language of the Canadian government:
“Businesses should not assume that consumers read an entire website, just as they do not read every word on a printed page. Accordingly, information required to be communicated to consumers to ensure that a representation does not create a false or misleading impression should be presented in such a fashion to make it noticeable and likely to be read.”
Under Canadian online marketing regulations, who is responsible for an advertisement or website in violation of C-34?
According to Canadian law, “The person who has caused the [false or misleading] representation to be made” can be charged under C-34. While everyone involved in a marketing campaign may not be responsible for an ad violation, officials may consider the roles of:
- Ad agencies
- Selling Company
- Media outlets
Officials look at facts on a “case-by-case basis” when determining causation. Ultimately, courts pin the penalty on the entity that controlled the project. For example, if a company hires an advertising agency to create material, the contracting company has the ultimate say on “whether [or not] the campaign proceeds.” As such, the contracting company would be responsible. Hosts and ISPs would not be held responsible under similar circumstances.
What is the Canadian online marketing regulation “publisher’s defense” rule?
Section 74.07 of Canada’s Competition Act outlines the “publisher’s defense.” It states that anybody who “prints or publishes or otherwise disseminates a representation, including an advertisement, on behalf or another person in Canada” is not responsible for any marketing violations. But there is a hitch. In order to successfully evoke the publisher’s defense, an entity must have its client’s address to ensure that the publisher is not simply “acting as a conduit” for the business.
C-34 has a section called “Applying the Competition Act On-Line.” What are the main points?
- General impression and literal meaning are both considered when reviewing an ad for legal action.
- Asterisks are a universally well-known signal of a disclaimer and should be used when possible.
- “A disclaimer can only qualify a representation; it cannot give or retract a false or misleading representation.”
- Ideally, a disclaimer should appear on the same screen and close to the statement it references.
- Writing “see below for eligibility restrictions” is an acceptable way to alert consumers of a related disclaimer; “See below for details” is an unacceptable disclaimer alert.
- Consistency with hyperlinks is important.
- Pop-ups and links to other pages can be used, but each case is examined individually. Basically, don’t be tricky.
- “Hyperlinking a single word or phrase in an advertisement may not be adequate.”
- If you use “attention grabbing tools” for disclaimers you can’t use the same tools in the ad, so as not to distract.
- Disclaimers must not use similar colors as foregrounds and backgrounds.
- Consider how people view and navigate a page and put disclaimers in appropriate places. When fitting, businesses should make clicking through to a disclaimer compulsory.
What disclosures are required according to Canadian online marketing regulations?
Canada’s competition law does not outline each and every disclosure that needs to be made. In some ways the Canadian government expects folks to practice common sense. But C-34 does highlight two types of disclosures that MUST be made:
- Section 55 addresses Multi-level Marketing – Multilevel marketing plans must include disclosures regarding earning potentials.
- Section 74.06 Contests – Entities must disclose “facts which materially affect the chance of winning.” Additionally, “Notice of a contest should not require an extra step, such as sending an email or placing a phone call.” According to the law, clicking on a hyperlink is not considered an “extra step.” “
Do businesses based in other countries have to adhere to Canadian online marketing regulations?
If a website can be accessed in Canada and/or Canadians can purchase the goods on a given website, then said website must adhere to Canadian law. C-34 states: “The [Competition] Bureau will assert Canadian jurisdiction over foreign entities to the fullest extent authorized by law whenever necessary to protect the Canadian market from false or misleading representations and deceptive marketing practices.”
“Since the Internet can’t decipher nation-state borders, must I adhere to Internet law standards in other countries?” It’s an oft-asked question and the answer is “yes”. To tweak a cliche: When in the UK, do as the British. And since national boundaries are non-existent online, your website is, technically, “in the UK,” which means you should take time to review UK online marketing compliance standards. To help you out, below is a list of frequently asked UK online marketing compliance questions — and answers.
What agency monitors UK online marketing compliance?
UK online marketing compliance standards are monitored by a self-regulatory organization called the Advertising Standards Authority (ASA). The group’s stated duty is to “Regulate the content of advertisements, sales promotions and direct marketing in the UK” by investigating “complaints made about ads, sales promotion or direct marketing.” Guy Parker has been the ASA’s chief executive since 2009.
Is the UK ASA a government agency?
No. The ASA cannot interpret or enforce legislation, but the group’s “Code of Advertising Practice” is reflective of UK legislation. However, the ASA is funded by an “advertising tax.”
If a claim is made in an advertisement, what level of proof is necessary to verify the claim’s accuracy?
Like in the United States, claims made in UK advertisements must be accurate and verifiable. UK online marketing compliance rules state that “before distributing or submitting a marketing communication for publication, marketers must hold documentary evidence to prove all claims, whether direct or implied, that are capable of objective substantiation.”
Is “puffery” or exaggeration allowed under UK online marketing compliance rules?
Puffery and exaggeration are unacceptable according to UK online marketing compliance standards. Official rules state: “No marketing communication should mislead, or be likely to mislead, by inaccuracy, ambiguity, exaggeration, omission or otherwise.”
Does the ASA have authority over online marketing compliance in the United Kingdom?
Since 2011, the ASA has held domain over the following UK online marketing compliance issues:
- Advertisements on websites;
- Paid-for ads on the Internet, including pop-ups, banners and sponsored links;
- Online sales promotion that appears in “British Web Space”;
- Email marketing.
Does the ASA have authority over marketing claims made in personal e-mail messages?
Private electronic correspondences do not fall under the purview of the UK Advertising Standards Authority. Though, some confusion exists as to whether or not the ASA can take action on SMS messages. It’s best to consult an attorney who can review your exact campaign and determine if it crosses a legal line.
Do any other agencies monitor aspects of UK online marketing compliance?
Yes, several. Most online advertisers, however, should concern themselves mainly with the Institute of Sales Promotion and the ASA. The Institute of Sales Promotion follows the same rules as the ASA and alerts the ASA when it believes a breach of sales promotion law has occurred. Examples of sales promotions include:
- By One Get One Free;
- 25% Extra For Free;
- Loyalty Rewards;
- Lotto, scratch cards, prize drawings.
If I want to make a UK online marketing compliance complaint to the ASA, will my identity be kept confidential?
When the ASA receives a grievance, it is required to keep the complainants’ personally identifiable information (PII) private, unless specifically given permission by the claimant. If, however, the complainant is a competitor of, or has a vested interest in, the subject of the complaint, the claimant must agree to be named. This is done to cut down on petty complaints.
What does the ASA do after it receives a complaint?
When the ASA receives a complaint, it immediately informs the entity being investigated. Then, industry experts investigate the claims and ask for substantiation of any questionable assertions in the marketing material. For example, if you are promoting a weight loss product and promise potential customers that they are “Guaranteed To Lose 20 Pounds in 3 Days!” then you’ll have to provide scientific proof to the ASA that your product consistently results in users losing 20 pounds in 3 days.
When the agency completes its investigation, a summary of findings and recommendations is compiled and sent to the advertiser and complainant. A copy of the report is then submitted to the ASA adjudication council, who votes on the issue and posts its decision online.
What if I do not agree with the ASA’s decision? Are appeals possible?
Appeals are possible. A formal request for one must be made within 21 days of the adjudication and can only be requested by the advertiser or complainant. Moreover, appeals can only be sought when:
- New evidence is available;
- One of the parties can elucidate a substantial flaw in ASA adjudication or investigation process during their case.
In the case of an appeal, an independent reviewer often enters the fray. The independent reviewer has final say on whether or not an appeal is accepted.
What actual power does the UK Advertising Standards Authority hold?
Though the ASA is not a part of the government, it does wield certain powers like:
- Bad publicity;
- Copy Control – The ASA can order a brand to have all ads reviewed by CAP (the Copy Advice Team) before publishing;
- CAP Compliance Team Intervention – The CAP compliance team administers ASA mandates. The government department performs various tasks to keep the system moving along smoothly. The CAP compliance team will call media owners and instruct them not to accept certain ads.
- Direct line to Broadcasting Licensing Authorities and the Office of Fair Trading – The Office of Fair Trading has the power to fine businesses and bring lawsuits. The department works closely with the ASA and comes down hard on repeat offenders if the ASA gives the signal. The Office of Fair Trading derives its authority under the 1998 Control of Misleading Advertising Regulations Act.
What are some notable UK marketing compliance cases?
- A 2004 ad for the Apple Power Mac G5 used the phrase “the world’s fastest personal computer.” Since it is a claim that can be proved empirically, the ASA launched an investigation.
- In 2008, the ASA banned an Apple iPhone ad that promised the phone could “access all of the Internet.” Since iPhone did not support Flash — and a host of other major plugins – the ASA forbade Apple from using the terminology.
- The ASA made the Israeli Tourism Board remove ads that contained a map of the country that included the West Bank, Gaza Strip and Golan Heights.
- L’Oreal was forced to stop running ads that included Penelope Cruz, Julia Roberts and Christy Turlington under the premise that the three women were not representative of actual results. Additionally, the ASA decided the ads contained misleading before and after pics.
- Brennan was banned from running an ad for the JB7 music player because the copy supposedly “glorified illegal downloading.” In its report, the ASA reasoned that Brennan “repeatedly made reference to the benefits of the product being able to copy music but did not make it clear that it was illegal to do so without permission of the copyright owner.” Another time Brennan was sanctioned for not making clear that a docking station didn’t come with the device.
- A local furniture store in Northampton couldn’t use the catch phrase, “Sofa King Low” because the line would likely cause “serious widespread offense.”
Do online marketers in the United States have to worry about the UK Advertising Standards Authority?
Yes! If your ads are accessible in “British web space” it’s under the purview of the ASA.
If you need to speak with a U.S. lawyer well-versed in UK online marketing compliance standards, contact us today.
Multi Level marketing companies are Making Headlines, Again
Recently, a well-signed letter requesting a formal inquiry into multi level marketing companies like Herbalife, Amway and Avon landed in the lap of the Federal Trade Commission. The signatories urged commissioners to explore the allegedly predatory nature of MLM companies and review ongoing accusations that MLM programs are elaborate pyramid schemes.
Not only did the letter outline grievances, but it also included some suggestions for increased regulation of multi level marketing companies. Specifically, the MLM detractors suggested that the FTC create rules which require MLM companies to disclose past earnings in addition to attrition rates of salespeople.
How Does Multi Level Marketing Work?
Multi level marketing is when salespeople are paid based on their own product sales, in addition to the sales of any new salesperson recruited through their “line”. While some people swear by multi level marketing, other folks feel MLM schemes are a dangerous cauldron of false hope.
MLM’s Loudest Detractor
Hedge fund manager – and Herbalife heckler – Bill Ackman has long aired his distrust of MLM companies, claiming many are simply giant pyramid schemes. In fact, he put his money where his mouth is and bet $1 billion against Herbalife. Ackman once ranted, “The MLM industry has proved incapable of regulating itself, is rife with fraudulent and deceptive earnings claims and has caused — and will continue to cause — untold financial harm and misery to the poorest and most vulnerable of the consumers whom the commission was formed to protect.” (NOTE: Ackman’s since scaled back his hedge because of strong figures posted by Herbalife in subsequent quarters.)
What Should You Do to Prepare For Possible MLM Crackdown?
OK, so what should you do if you operate a multi level marketing company – or one that has considerable similarities to an MLM setup? If you have an attorney, give them a call and ask for a review. The couple of hundred dollars it will cost to make sure you’re operating on the right side of the law is worth it. Just think: you’ll have to lay out a lot more if you get busted by the FTC.
Don’t Panic, Nothing May Come Of This
The most important thing to remember about this letter, though, is just that – it’s only a letter. That said, multi level marketing rules already exist – so make sure you’re following those. As for further crackdowns, we’ll be keeping an eye out.
Attention affiliate marketers: it’s safe to head back to Illinois. The state’s Supreme Court overturned the controversial “Amazon tax”. The court decided the law that birthed the online sales tax was superseded by the federal Internet Tax Freedom Act, and was therefore unconstitutional.
So, let’s take a minute to review the Internet Tax Freedom Act and the Amazon tax. Then we’ll discuss the logic road the Illinois justices traveled to reach their decision – a decision that is sure to delight the affiliate marketing community.
Internet Tax Freedom Act
Lawmakers singed the Internet Tax Freedom Act into law on October 21, 1998. It’s meant to preserve the educational, commercial and informational potential of the Internet by banning Web taxes. Specifically, the ITFA prohibits “Internet-only” levies like bit, email and bandwidth taxes. It does not, however, exempt states from establishing an online sales tax.
Officials have updated the Internet Tax Freedom Act three times – mostly for small definition changes and provision extensions. The last amendment extended the law till Nov. 1, 2014, at which time politicians will decide whether or not to keep it as is or change it.
Proponents of the ITFA argue the law is necessary for innovation, as burdening Internet development with taxes will hurt the potential benefits of the Web. Opponents of the ITFA say that all it does is unnecessarily cut a potentially valuable revenue stream for states.
Illinois Repealed The Amazon Tax
In 2011, Illinois passed the Main Street Fairness Act, which imposed an online sales tax for Internet retailers, with annual Illinois-generated revenues of over $10,000, regardless of whether or not the retailer had a physical presence in the state. Dubbed the “Amazon tax,” Illinois’ Main Street Fairness Act did not go over well, and large online retailers like Amazon and Overstock severed ties with Illinois affiliates to avoid the cost.
In fact, the new tax was so unpopular that the Los Angeles-based Performance Marketing Association sued the Illinois Department of Revenue, arguing the Amazon tax was unconstitutional and discriminated against “Internet-based performance marketers.” According to PMA’s research, after the MSFA passed, 1/3 of the state’s 9,000 affiliate marketers, who generated over $700 million in advertising revenue in 2010, left Illinois in 2011, and the other 2/3 either downsized or went belly up.
In a six-to-one ruling, the Illinois Supreme Court sided with the PMA, and by extension Illinois’ affiliates. Ultimately, the state’s highest court reasoned that the Internet Tax Freedom Act superseded the Main Street Fairness Act. Even though the ITFA does allow for online sales’ taxes, the bench decided that affiliate links were equivalent to radio and newspaper promotional codes, and since out-of-state retailers didn’t have to pay a tax on those sales, placing a tax burden on Internet affiliates would be “discriminatory.” The one dissenting judge argued that the MSFA “does not impose any new taxes or increase any existing taxes.”
The Future of Online Taxes
On November 1, 2014 the Internet Tax Freedom Act will expire. Some states, like Arizona, are already making moves to prepare for a possible change in law. It will be interesting to see what happens with the ITFA in 2014. Politicians eager to close the deficit gap may see Internet taxes as a juicy revenue pork chop just waiting to be devoured.
What happens when you cross the advertising “puffery” line? Skechers shoe company recently found out. They had to fork over a cool $40 million thanks to a class-action lawsuit over some claims made in their ads.
A $40 million class-action settlement against Skechers shoes should serve as a cautionary tale to all online marketers. The warning: Don’t Make Incredible Claims if You Don’t Have the Proof! Not only could ignoring this warning result in a scuffle with the FTC, but customers – with visions of greenbacks dancing in their heads — could entangle you in a costly false advertising lawsuit.
Judge Thomas B. Russell, of the Kentucky Federal Court, affirmed a false advertising class-action against Skechers. A passel of lawyers, two primary plaintiffs and about 520,000 claimants cumulatively earned $40M – all because Skechers’ ads arguably crossed the truthiness line. In an effort to get people to plunk down cash for their sneakers, Skechers promised consumers their shoes would boost weight loss and sculpt stronger muscles. After some back and forth, Skechers denied allegations but settled to avoid costly, protracted litigation.
Be sure not to cross the Puffery line
We live in an advertising panopticon. At every turn, we’re bombarded with pleas to try this, buy that, and visit there. So, in order to stick out, advertisers strive to speak to our vulnerabilities and joys, in the hopes an emotional connection with a products’ promise will compel spending.
But you can’t say anything you want in advertisements. You can’t lie about your product or your competitors’ products, and you can’t use language that blatantly misleads the public. But you can exaggerate a bit, and, say, call the pizza made at your pizzeria, “The World’s Greatest Pizza!” This is called puffery.
To put it simply, puffery is effusive, unquantifiable, self-serving flattery. The jerk in the office who always brags about his latest gadget or girlfriend? He uses puffery. Legally speaking, the line between puffery and false advertising is thin, It’s also dependent on what type of product you marketing. For example, DSHEA rules govern dietary supplements, whereas people in the data broker business should make sure they’re familiar with the Fair Credit Reporting Act and its effect on allowable assertions in marketing material.
Where The Skechers Class-Action Lawsuit Money Goes
How did the $40 million award get divided? The lawyers who brought the case split $5 million; the two lead plaintiffs walked away with $2,500 and the approximately 520,000 eligible claimants are entitled to refunds for the following products:
- Shape-ups – $80
- Resistance Runners – $84
- Podded sole shoes – $54
- Tone Ups – $40
If any of the claimant money is left over, the FTC gets the remaining funds.
Laws Online Marketers Should Review To Ensure Compliance
If you want to make sure your online advertising efforts are compliant, review the Dot Com Disclosures. It’s the Federal Trade Commission’s Internet advertising bible. The document explains in detail what you can and cannot do when advertising online or via mobile devices and social media. Reading the Dot Com Disclosures – cover to cover – is essential for all online marketers. It covers questions like:
- How do advertisements need to be labeled?
- What types of ads need disclosures and what do those disclosures have to say?
- How must advertisements on social media sites, like Twitter and Facebook, be marked?
- Is it possible to hide disclosures?
- Will using lots of legalese in my advertising disclosures help me or hurt me?
If you advertise online and need a marketing compliance lawyer, get in touch. Kelly Warner is a full-service law firm with a dedicated digital advertising legal team. If you are ready to talk, you can either give us a ring at 1-866-570-8585 or find us on skype at aaronklaw. If email is your thing, shoot us a message at firstname.lastname@example.org or use this form. Talk to you soon.
Attention Mobile Marketers: A new Android app called PrivacyStar alerts the Federal Trade Commission of questionable “text-vertising” campaigns. Yep, you read that right: the small but powerful program allows users to file a formal FTC complaint with the tap of a finger. So, if texting is one of your current mobile marketing methods, be aware that users can now easily alert officials if they think your advertising texts are unsolicited SPAM.
Bottom line: it’s a good time to review your mobile marketing process to make sure it doesn’t cross the legal line.
Fighting text spam got easier by leaps and bounds on Wednesday when Android app PrivacyStar added a free-to-use feature, which will help users file formal complaints with the Federal Trade Commission directly from their smartphones.
What Mobile Marketers Should Do To Evade The Federal Trade Commission’s Wrath:
- Read and follow all the rules outlined in the Dot Com Disclosures.
- Enlist an Internet law attorney to do an audit of your marketing plan to double check that you’re operating on the right side of the law.
- Read about recent FTC investigations to ensure you’re not engaging in the same activities that are landing others in the legal hot seat.
The Golden Rule For Mobile Marketing
These days, devices are a dime a dozen. They come in all shapes and sizes, colors and weights. The proliferation of hand-held computers and smartphones has also led to the proliferation of mobile marketing. But as we all know from personal experience, users don’t dig advertisements that pop-up, beep, shout and slow down a system; users especially dislike incessant mobile ads and SPAM. So, here’s the golden rule every mobile marketer should consider:
Try Not To Annoy, Don’t Trick People Into Signing Up and Don’t Lie!
If you follow these three simple rules, your advertising plan is probably on the right side of mobile marketing law. If you want to make sure, contact the online marketing lawyers at Kelly / Warner Law — we’ll do a comprehensive audit of your mobile marketing plan to make sure the FTC doesn’t come a-knocking.
The country of Libya lost a cybersquatting lawsuit against Ahmad Miski. In November 2006, the Embassy of Libya filed a lawsuit with the United States District Court against Ahmad Miski for online trademark violations. Their position was that Miski violated the Anti-Cybersquatting Consumer Protection Act when he created a series of domain names, including embassyoflibya.org, libyaembassy.org, libyaembassy.com and libyanembassy.com.
Miski owns an Arab-American Chamber of Commerce that helps people get documents certified – a service not offered by the Arab Embassy. Miski employs a common Internet marketing tactic; he registers domain names and redirects users to his website called arabchamber.com – a practice, he says, that significantly increased his website’s Internet search rankings.
According to the Anti-Cybersquatting Consumer Protection Act, the trademark owner has to prove they posses a lawful trademark. In this case, the Embassy of Libya had to prove that the defendant unlawfully used a name with the intent to profit. Although they had no registered trademark, the Libyan Embassy used the Lanham Act to dispute the matter. The Lanham Act states that some unregistered trademarks are protected by the Anti-Cybersquatting Consumer Protection Act.
After the bench trial, the verdict was in favor of Ahmad Miski. The court decided the Libyan Embassy had no trademark rights when it came to the domain names in question. Libya was unable to prove that the Lanham Act should protect their trademark. Since people think of a physical location when they hear about the Embassy of Libya, it is not considered a brand or product. Plus, their consular services are different from Miski’s certification services. In the end, the court ruled that none of Miski’s domain names violated the Anti-Cybersquatting Consumer Protection Act.
As Miski’s lawyer explained, his choice of domain names did not infringe on anyone’s rights. Miski only uses the descriptive domain names as an effective marketing tool. It is an embassy’s job to legalize documents. While Miski is unable to legalize documents, he uses third party businesses to have documents legalized by embassies across the Arab world. For that reason, the plaintiff is not a direct competitor of the defendant.
Full bench trials are rare in cybersquatting court cases; however, the lawsuit did make it to trial. The district court judge ruled in favor of the defendant. Since the Libyan Embassy failed to prove that it has trademark rights, Ahmad Miski gets to retain control of his domain names.