Recent Federal Trade Commission Changes and Proposals May Impact Certain Businesses

An independent agency of the U.S. government, the Federal Trade Commission (FTC) is tasked with protecting consumers through the elimination and prevention of what regulators perceive to be “anti-competitive” business activities.  Inherent to the agency’s mission are the concepts of fairness and the discouragement of deceptive acts or practices.

Although consumer interests are at the forefront of everything the FTC sets out to do, any actions it takes invariably affect business owners of all sizes and kinds as well.  Don’t think that just because you are an independent contractor, small or home-based entrepreneur, business opportunity owner, someone looking to start a turnkey business, or even a franchisee that the FTC’s rules, guidelines and proposals won’t somehow impact you, your company or the individuals and companies you do business with―oftentimes they will.

The fact is that actions taken and proposed by the FTC can have far-reaching consequences, which is why it’s never a bad idea to know a little something about what it’s been up to as of late, what impact any changes or proposed changes might have on your business, and how to stay informed.  That said, let’s take a look at four key areas where the FTC has been active over the last eighteen months or so and how that activity may impact your business:

#1:  Guides Governing Endorsements/Testimonials Finalized Late 2009

Up until these changes were made, advertisers could describe unusual results in a testimonial so long as they used the phrase, “results not typical.”  Not anymore.  Advertisers that rely on consumers to convey experiences with a product or service and therefore imply a “typical” outcome, when there is no such thing, must now clearly disclose the results that consumers can generally expect.  In addition, any “material connections” in the form of payments, free products or even reciprocal services between an advertiser and an endorser of that advertiser’s product/services must be fully disclosed.  Furthermore, the guides now apply to bloggers, research companies, celebrities and other “word-of-mouth” marketers in ways they never have previously.

Boiling it all down…  For consumers, the new guides represent greater transparency and truth in advertising.  For brands, social media marketers and bloggers, the veil has been lifted―everything in the way of reciprocity regarding endorsements must now be made common knowledge.  And for marketers, they need to be more creative in how they implement their marketing activities from here on out.  The really good news in all of this is that even the FTC now acknowledges the potential power and impact of the newest forms of targeted consumer marketing―social media and blogging.  So, for all those of you who are still trying to do everything the old-fashioned way and for whom social media and the other “more technical” marketing vehicles remain an unknown commodity, take note.

#2:  Debt Relief Telemarketing Sales Rules Changed Late 2010

As of October 2010, any for-profit business offering debt relief services or any individual or business that works with or for a company of this kind is beholden to a whole new set of rules when it comes to interstate telemarketing of any kind.  By amending its TSR (Telemarketing Sales Rule), the FTC hopes to “curb deceptive and abusive practices associated with debt relief services.”  The new rules now cover inbound as well as outbound calls made by debt relief service providers and can be additionally summarized as follows:  1) Charging upfront fees is now illegal; 2) Certain information must be disclosed before you may sign people up for your services; and 3) Making false or unsubstantiated claims about your services is prohibited.  Disclosures made to potential customers must include costs, estimated time to complete service, savings needed to settle, consequences of missed payments and disclosure of consumers’ rights.  The rules apply to any and all businesses that work in the unsecured debt services relief field, including medical debt.  In addition, truth in advertising with regard to consumer testimonials is now paramount in this arena as well.  Any assertions made regarding debt relief services as described in the new TSR must be backed up with objective proof.  Finally, the FTC’s new TSR encourages debt relief companies and affiliated service/product providers to incorporate best practices as a matter of course.

#3:  Proposed “Green Guides” Revisions Discourage Misleading Environmental Claims

Just last month marked the deadline for public comment regarding the FTC’s proposed revisions to its “Green Guides,” designed to assist marketers in their efforts to avoid making misleading environmental claims about their products and services.  Since that time, the online debate about what the implications of these “Green Guides” changes might mean has been vigorous on both sides.  Organizations like the Washington Legal Foundation (WLF) and the Public Relations Society of America (PRSA) are on record as part of what is now estimated to be roughly 300 public comments on the subject.

According to the WLF, “the FTC’s proposed ban on all unqualified general environmental claims is a disservice to consumers and an infringement of First Amendment rights protecting commercial speech.”  More importantly, it views the new proposed guidelines as a potential deterrent for “manufacturers whose product truly contains an environmentally-friendly attribute from conveying such information due to the expense of adding disclaimers that qualify their environmental claim.”  Alternatively, Tom Eppes, Chairman of PRSA’s Board of Ethics and Professional Standards, supports the FTC’s proposals on this matter and notes that, “Green claims are pervasive (and sometimes spurious), and it’s become far too difficult to determine who is telling the whole truth and nothing but the truth.”  He goes on to explain that these misleading eco-statements have become so common that they’ve earned their own dubious moniker:  “Greenwashing.”  Regardless of where you may stand on the issues, anyone who owns or works for what they deem to be or promote as a “green friendly” business would do well to keep up with what the FTC is proposing on this front for 2011.

#4:  Debate about “Do Not Track” and Its Effects on Online Commerce Heats Up

Jon Leibowitz is the current chairman of the Federal Trade Commission, whose assertion is that the FTC’s recently proposed “Do Not Track” rules to enhance personal privacy are perfectly compatible with online commerce, which will only continue to grow.  In a blog dated January 3, 2011, Leibowitz describes how a “host of invisible data catchers” report consumers’ online marketing activities in an effort to establish an “astonishingly complete profile” of cyber behavior for marketing purposes.  “Once you enter cyberspace, your private information―often without your consent or even knowledge―becomes a commodity out of your control,” he states.  He goes on to explain how the proposed rules will not stop advertisers from collecting consumer information, but rather require them to convince consumers that opting out would not be beneficial and assure them that their personal information will be handled respectfully.  Leibowitz closes his arguments with the assertion that, “‘Do Not Track’ will allow the Internet to continue to thrive while protecting our basic right to privacy when we travel in cyberspace.”

Senior Vice President and General Counsel of the Interactive Advertising Bureau, Michael Zaneis perhaps unsurprisingly has a whole different outlook on what the impact of the FTC’s proposed rules in this area might be.  His claim is that, “Upon further inspection, this looks less like a viable “Do Not Track” mechanism and more like a censorship tool,” pure and simple.  He believes that the internet as we know it currently actually educates and informs consumers such that they are empowered and goes on to assure us that there is no “Big Brother” watching our every move online.  Furthermore, he finds the FTC’s implication of “cyberstalking” both “patently false and dangerous.”  Zaneis drives home the potential fallout of online advertising restrictions by citing the fact that his “industry is responsible for $300 billion of economic activity in the United States and directly employs more than 1.2 million Americans.”  In conclusion, he asserts the industry’s desire and ability to police itself when it comes to consumer privacy.  “We’ve had a self-regulatory program ( in place for more than a decade, and we are currently updating that program to ensure it keeps pace with new technologies and evolving consumer expectations,” he says.  Once again, this is another hot topic that may have an impact on many of you and one you need to know more about as it unfolds over the course of the coming year.