FTC Compliance in the Digital Era

The FTC is Increasingly Focusing Its Enforcement Efforts Online. Here’s What Companies Need to Know About Avoiding (and Defending Against) FTC Scrutiny in the Digital Era

Companies of all sizes and in all industries are subject to the U.S. Federal Trade Commission’s (FTC) oversight. While the FTC has traditionally focused its enforcement efforts in print, television, and radio advertising, in recent years it has shifted its focus to the digital realm.

As digital advertising and social media have transformed the ways that companies promote their products and interact with their customers, the FTC has been forced to adapt. Today, the FTC routinely targets companies for statutory and regulatory violations in the digital space, and its new rules and regulations are increasingly focusing on companies’ online marketing and data collection practices. From social media influencers and online promotions to collecting and sharing customers’ data, the FTC regulates many aspects of companies’ online operations—and this means companies that do business online need to make FTC compliance a priority.

Put our highly experienced team on your side

Dr. Nick Oberheiden

Founder

Attorney-at-Law

Lynette S. Byrd

Former DOJ Trial Attorney

Partner

Brian J. Kuester

Former U.S. Attorney

Hon. Kevin McCarthy

55th Speaker, U.S. House of Representatives (ret.)

Government Consultant

Mike Pompeo

Of Counsel

Former U.S. Secretary of State

John W. Sellers

Former Senior DOJ Trial Attorney

Linda Julin McNamara

Federal Appeals Attorney

Nicholas B. Johnson

Former Prosecutor

Roger Bach

Former Special Agent (DOJ)

Chris J. Quick

Former Special Agent (FBI & IRS-CI)

Michael S. Koslow

Former Supervisory Special Agent (DOD-OIG)

Ray Yuen

Former Supervisory Special Agent (FBI)

7 Keys to FTC Compliance in the Digital Era

What can (and should) your company be doing to prioritize FTC compliance? Here are seven keys to FTC compliance in the digital era:

1. Social Media Endorsements

Endorsements from social media influencers can be highly effective marketing tools, especially in today’s commercial environment. However, when using social media endorsements to promote their products, companies need to be careful. Even when influencers are not employees of the company (as is generally the case), companies can still face FTC enforcement action based on their influencers’ posts and videos.

As the FTC explains, “Your company is ultimately responsible for what others do on your behalf.” This means that in order to protect themselves, companies must have policies (and contractual protections) in place that mitigate their FTC-related risk arising out of third-party endorsements. Companies should also monitor their third-party endorsements online, and they should promptly address any endorsements that present risks for FTC enforcement.

2. Affiliate Marketing

Affiliate marketing presents similar concerns to working with social media influencers. Even when companies rely on affiliates to promote their products and services, companies are still responsible for maintaining FTC compliance. As the FTC states, “Delegating part of your promotional program to an outside entity doesn’t relieve you of responsibility under the FTC Act.” Even when companies have extremely large affiliate networks—and even when they work with third-party intermediaries to promote their products and services to affiliates—companies must take adequate steps to ensure that the contents of the online advertisements promoting their products and services comply with the law.

3. Native Advertising

Native advertising has grown in popularity recently; and, in response, the FTC has established guidelines specific to this form of online marketing. According to these guidelines:

“[A]dvertisers cannot use ‘deceptive door openers’ to induce consumers to view advertising content. Thus, advertisers are responsible for ensuring that native ads are identifiable as advertising before consumers arrive at the main advertising page. In addition, no matter how consumers arrive at advertising content, it must not mislead them about its commercial nature.”

While there is nothing inherently unlawful about native advertising—as made clear by the fact that the FTC has released guidelines for compliance—the FTC nonetheless often views this form of online advertising as a red flag for deception. As a result, when conducting native advertising campaigns (whether in-house or through a marketing agency), companies must be careful to ensure that their “door openers” are compliant and include all necessary disclosures.

4. Substantiation

With all types of digital advertisements, companies need to ensure that they have adequate substantiation to justify their promotional claims. If they lack substantiation, tweets and other social media posts composed in a matter of seconds can expose companies to long-term FTC scrutiny and the risk of substantial penalties.

Substantiation is required for all forms of direct and indirect claims in social media posts and other online advertisements. This includes scientific claims as well as customer satisfaction claims and comparisons to competitors.

5. Giveaways and Contests

Giveaways and contests are also becoming increasingly popular online marketing tools. The FTC has published a set of rules governing these “sweepstakes” as well; and, here too, companies need to prioritize compliance. The FTC’s lottery and sweepstakes guidelines establish several requirements for these types of promotions; and, once again, even when companies engage third-party sweepstakes companies to run their promotions, they remain ultimately responsible for their promotions’ terms and conditions.

6. Ratings, Reviews, and Testimonials

Ratings, reviews, and testimonials provide social verification that can lend instant credibility to a company that is marketing its products or services online. When promoting their ratings and reviews, companies must be careful to present an unbiased picture of consumer sentiment—as cherry-picking positive reviews or only posting five-star ratings can lead to allegations of deceptive advertising from the FTC.

The same is true with regard to testimonials. According to the FTC:

“Testimonials claiming specific results usually will be interpreted to mean that the endorser’s experience reflects what others can also expect. Statements like ‘Results not typical’ or ‘Individual results may vary’ won’t change that interpretation.”

As a result, the FTC advises that when companies selectively choose testimonials to feature on their websites and in search results, they have two main options. Companies that plan to use testimonials in their online advertising efforts must either:

• “Have adequate proof to back up the claim that the results shown in the ad are typical, or
• “Clearly and conspicuously disclose the generally expected performance in the circumstances shown in the ad.”

7. Consumer Data Security

Finally, while following the Commission’s advertising guidelines is a key aspect of FTC compliance, it is ultimately just one aspect of many. In the digital realm, companies must carefully address the FTC’s data security requirements as well. The FTC has been active in enforcing companies’ data security obligations recently, having pursued enforcement actions against multiple companies accused of failing to adequately safeguard consumers’ personal and financial data.

Managing FTC Compliance When Promoting Products and Services Online

At Oberheiden P.C., we help companies manage all aspects of FTC compliance. We also defend companies during FTC investigations and enforcement proceedings. Based on our experience, here are some tips for managing FTC compliance when promoting products and services online:

• Be Proactive About FTC Compliance – Companies need to be proactive about FTC compliance. Once a company publishes a deceptive advertisement or collects consumer data without adequate safeguards in place, the damage has already been done.
• Ensure Comprehensive FTC Compliance – There are numerous aspects to FTC compliance. To avoid unwanted scrutiny from the FTC, companies must work with their counsel to implement comprehensive FTC compliance programs.
• Take a Custom-Tailored Approach – When it comes to FTC compliance, what works for one company won’t necessarily work for another. Additionally, just because you see a company or influencer doing something online, this does not mean that the activity is compliant.
• Document Your Company’s Compliance Efforts – In many respects, documenting FTC compliance is just as important as compliance itself. In the event of an FTC investigation, being able to prove compliance can be the difference between avoiding and facing charges.
• Work with Experienced FTC Compliance Counsel – Managing FTC compliance in the digital era is not easy. To avoid costly mistakes, companies of all sizes need to work with experienced FTC compliance counsel.

FAQs: Avoiding Scrutiny from the FTC Related to Companies’ Digital Practices

Request an Appointment with an FTC Compliance Lawyer

We assist companies with managing all aspects of FTC compliance. We also defend companies during FTC investigations and enforcement proceedings. If you have questions about digital advertising compliance, we can help. Call 888-680-1745 or contact us online to arrange a complimentary consultation today.