FTC Rules and Guidelines in a Digital Era
Experienced FTC Defense and Compliance Team
If you are under investigation by the FTC or suspect an investigation is coming, it is time to hire an experienced FTC compliance and defense attorney right away.
The FTC has the authority to regulate social media platforms and posts where they contain unfair or deceptive advertising, promotions, testimonials, endorsements, etc.
This agency has wasted no time investigating persons and entities suspected of utilizing unfair business practices, anticompetitive tactics, or even fraud—especially now in the midst of the novel coronavirus where entities across the nation are increasingly relying on social media and online advertising.
This puts persons and entities utilizing social media and online advertising at an increased risk of an FTC investigation. Hiring an FTC attorney to prepare your personalized defense strategy or advise you on FTC compliance is your best defense.
At Oberheiden, P.C., our team of FTC defense and compliance attorneys assists persons and entities throughout all stages of an FTC investigation.
We also help our clients implement and maintain effective compliance programs that aim to identify, prevent, and correct internal instances of misconduct, deceit, and fraud within the company. We can do the same for you.
The costs of an FTC investigation can be substantial and may entail substantial fines and penalties, disgorgement orders, injunctions, and irreversible reputational harm. Our team can help you navigate the FTC subpoena process and negotiate with the FTC on your behalf.
Do not wait for a protracted litigation to begin. Contact an experienced attorney today.
Put Oberheiden, P.C. on your side to protect your company’s future, success, and reputation.
What is the FTC and What Does It Regulate?
The Federal Trade Commission (“FTC”) is an independent U.S. governmental agency that is responsible for enforcing consumer protection laws in the United States; preventing fraud and deceptive and unfair business practices; and prohibiting anticompetitive behavior. Its mission is first and foremost to protect consumers and promote competition.
The most powerful and litigated statute under the FTC’s authority is the Federal Trade Commission Act (“FTC Act”). The FTC Act gives the FTC the power to prevent and investigate unfair or deceptive practices that are likely to injure consumers or hinder competition.
The FTC is authorized to investigate the conduct or practices of any person or entity that affects commerce. To carry out this authority, the FTC issues subpoenas to parties who are allegedly harming consumer interests or interfering with healthy competition.
The FTC subpoena requires the recipient to produce documents and/or testimony relating to the matter that the FTC is investigating.
Among some of its most common investigations and enforcement proceedings involve (1) claims and statements in advertising that are allegedly unsupported by sufficient evidence, documentation, or other substantiation; (2) advertisements that are allegedly not truthful or allegedly deceptive or unfair to the reasonable person; or (3) businesses that allegedly broadly promote a claim that a product or service will do something or treat something.
FTC Guides on Endorsements and Testimonials in Advertising
In February 2020, the FTC published a proposed rule for public comment on its Guides regarding the use of endorsements and testimonials in advertising. These Guides were substantially revised in 2009. The FTC periodically seeks review of its regulations and guides.
These guides are designed to help businesses conform their endorsement and testimonial advertising to the requirements of the FTC Act—Section 5—by interpreting the laws administered by the FTC.
While these Guides are only advisory, the FTC can take any authorized action under the Act in cases where an endorsement or testimonial is inconsistent with the Guides. In such cases, the FTC has the burden of showing that the act in question is unfair or deceptive.
Regarding endorsements, the Guides emphasize that endorsements must reflect the honest opinions, findings, beliefs, or experiences of the endorser and not contain any statements or representations that would be deceptive or that could not be substantiated.
Any endorsement on a central attribute of a product is to be interpreted as representing that the endorser’s experience is representative of what the consumer will typically achieve. Further, if there is not adequate substantiation that the endorser’s experience is representative, there must be a clear and conspicuous disclaimer.
In addition, advertisements with endorsements by consumers should use actual consumers or disclose that the persons are not actual consumers.
Digitalization and Social Media Issues
An important sub-issue that is becoming increasingly relevant is the ability and necessity of the FTC to regulate the digital sphere—social media content.
For instance, important questions regarding social media include whether the advertisers or endorsers are disclosing any unexpected material connections on social media.
If so, then the FTC asks whether there needs to be disclosures based on the type of material connection and whether the disclosures are sufficiently clear to the consumer.
There may also be a difference between what the consumer understands regarding disclosures depending on the type of platform used. For instance, using a paid post versus a free product to disclose material connections may need differing degrees of disclosures.
Once the FTC is able to identify that a material connection is not adequately disclosed to the consumer, it must find the root of the problem. This lack of sufficient disclosures could be due to the placement, visibility, or even audibility of the disclosure—its conspicuousness.
The proposed rule for public comment on the Guides asks the public whether the FTC needs to provide more detail on which disclosures of material connections are sufficient and whether this depends on differing social media formats.
It is therefore critical to be vigilant of any FTC rule changes or supplements that may affect the operations of your business. Hiring an FTC attorney will secure you the advice you need on these issues.
Other Important Issues Discussed in the Guides
The Guides also discuss additional relevant issues such as compliance costs, consumer expectations, incentives, and more information on disclosures.
Examples of additional information discussed or inquired in the Guides include the following: (1) whether the Guides are imposing an unnecessary burden or cost to consumers or small businesses; (2) how have consumer perceptions regarding endorsements changed over the past several years; and (3) what disclosures need to be made by advertisers or operators of websites regarding the creation, collection, processing, or publication of reviews and ratings in order to prevent them from being unfair or deceptive.
There is also a general preconceived notion that influencers who promote products on social media are only doing so because they are paid or given an incentive, regardless of disclosures used. The FTC is seeking to answer whether this assertion is contradicted or whether there are additional variables that change this answer such as age of the audience, product involved, the influencer, substance of the endorsement, etc.
The FTC is also determined to find out whether the use of incentives by marketers to consumers in exchange for reviews (any review) poses a risk of bias in the results.
Therefore, it is important to stay up to date on all recent FTC rules and guidelines because they are constantly being revised.
If you need legal counsel on impending FTC rules or are worried about a current or suspected FTC investigation, you need the advice of an experienced FTC defense team.
Need Advice with FTC Defense and Compliance?
If you need assistance with FTC defense or implementing an FTC compliance program, you need the advice of an experienced FTC team of attorneys.
Federal authorities are increasingly turning their attention on persons and entities violating FTC rules and guidelines when using social media advertising. This risk is especially heightened during the novel coronavirus.
The FTC focuses its attention on investigating those suspected of engaging in unfair or deceptive business practices or those allegedly engaging in anticompetitive behavior.
Our attorneys can guide you through the stages of an FTC investigation, negotiate with the agency to secure the most favorable result on your behalf, and advise you on FTC compliance.
Do not wait any longer to get the legal advice you need. Call or contact us today for a free consultation to protect the future and reputation of your business and livelihood.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.