Curious What the FTC has Been Up to?

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A change in administration inevitably raises questions about the priorities and direction of federal agencies. At the recent National Advertising Division (NAD) Annual Conference, Lesley Fair, a senior attorney with the Federal Trade Commission’s (FTC) Bureau of Consumer Protection, reminded attendees that the FTC has been very busy this year. During her speech, Fair discussed the FTC’s key enforcement priorities that affect advertisers and marketers. The priorities fall into four general buckets:

  • Advertising substantiation
  • Use of social media, endorsements, and consumer reviews
  • Matters involving privacy and data security
  • Allegations of financial deception

With respect to advertising substantiation, Fair reminded the audience that the FTC will carefully scrutinize advertisers’ product claims, including those made for health apps that run on smartphones, to ensure they are adequately substantiated. She pointed to the Commission’s January 2017 settlement with Breathometer Inc. and Charles Michael Yim, and the December 2016 settlement with Aura Labs Inc. and Ryan Archdeacon as examples of recent enforcement actions that show the FTC will evaluate substantiation with an especially critical eye when advertisers make health and safety-related claims.

She also highlighted the FTC’s focus on proper substantiation for “green,” “organic,” and “Made in the U.S.A.” claims. The September 2017 Moonlight Slumber settlement – which involved allegations that the marketer lacked adequate substantiation for claims that its baby mattresses were made from “organic” materials – was the FTC’s first case challenging “organic” product claims. The takeaway from the Moonlight Slumber settlement, she said, is that if you make “organic” claims, make sure the product is actually made from organic materials.

It is important to remember that while the United States Department of Agriculture regulates organic claims for agricultural products, the FTC has jurisdiction over such claims for non-agricultural products.

In addition to its interest in advertising substantiation, the FTC has been – and likely will remain – an active watchdog when it comes to advertisers’ use of social media, endorsements, and consumer reviews. Fair pointed to the FTC’s recent settlements with ICP Construction, Benjamin Moore & Company Inc., Moonlight Slumber LLC, and Son Le and Bao Le, as reminders that when advertisers use logos or seals suggesting that an independent third party has endorsed or reviewed the advertised product, that independent third party must in fact exist.

Marketers must be mindful of how they engage with consumer reviews, including negative reviews about their products. For example, in FTC v. World Patent Marketing Inc., a U.S. District Court granted the FTC’s request for preliminary injunction to prohibit the defendants from, among other things, threatening anyone who complained about the company or its products, including asking consumers to withdraw negative comments.

Fair pointed out that the court’s decision is consistent with the spirit of the Consumer Review Fairness Act of 2016, which makes certain contract clauses void if they prohibit, or restrict, an individual from engaging in a review of a seller’s goods, services, or conduct.

The third area of interest that Fair called out in her remarks were matters involving privacy and data security. She pointed to recent FTC settlements with Uber Technologies Inc., Ruby Life Inc., and ADL Media Inc. (the parent company of Ashley Madison) when making the point that advertisers, and their lawyers, can no longer stick their heads in the sand when it comes to understanding their legal obligations pertaining to privacy and data security.

Finally, Fair reiterated the FTC’s focus on cases involving consumer financial deception. She pointed to recent enforcement actions against numerous companies that set up “scam” ads that resemble pop-up security alerts from Microsoft, Apple, and other companies that dupe consumers into spending money on unnecessary repairs and anti-virus software. She also mentioned that the FTC remains interested in potentially fraudulent business practices in the online education industry. Fair said that the FTC is investigating activities that deceive students into enrolling in online education platforms by using misleading claims about students’ likelihood of finding jobs in their field of study and the income level they could achieve upon graduation.

Fair’s overview of recent FTC enforcement actions echo recent comments by the FTC’s Acting Chairman Maureen Ohlhausen. Taken together, they suggest that – despite the change in administrations – the Commission’s key enforcement priorities remain consistent with those of the past several years, and that advertisers and marketers should their marketing practices are consistent with existing FTC rules and guidelines.