FTC Disclosure – FTC Guardian

Why Your Quebec Small Business Must Comply with New FTC and GDPR Data Protection Regulations… Before It’s Too Late!

Allyn Cutts — Tue, 19 Jun 2018 00:12:45 +0000

Quebec Business Brief
By Chip Cooper, Esq | March 17, 2025 11:46 PM

Let's say, you’re the owner of a small online business in Montreal, Quebec, and you’re vaguely familiar with FTC regulations affecting ad claims, testimonials, and substantiation. But, are you up to date with the latest regulations that went into effect just last few month, that every Quebec small business that has a website must comply with?

Probably not, unless you visited an internet compliance attorney recently.

And, do you understand that the FTC is now focusing on data protection, even for small online businesses? Also, do you really understand how the European Union’s General Data Protection Regulation (GDPR) may regulate your online business, and subject you to massive fines?

Why You and Other Quebec Businesses Can’t Fly Under the Radar Any More

Just a few years ago, the FTC focused primarily on big businesses. Many small online businesses believed they could “fly under the radar”, so to speak. They believed they could operate without the level of scrutiny reserved for the big players.

In 2014, this changed.

In 2014, the FTC brought several enforcement actions that illustrate the shift to enforcement actions against small businesses. One target was Apply Knowledge, a small online business which the FTC alleged was involved in deceptive testimonials. The enforcement action also named Apply Knowledge’s officers as defendants.

The result: a $500,000 settlement. Both the business and its officers were jointly and severally liable. It was a big hit against the officers’ personal assets.

In 2017 with its Operation Tech Trap, the FTC demonstrated the power of one of its most effective, new enforcement tools. Begun in 1997, the FTC’s Consumer Sentinel database was reaching critical mass due to the massive number of consumer complaints in Quebec, many of which involved complaints against small online businesses.

Using Consumer Sentinel, the FTC coordinated over 40 law enforcement agencies at the federal and state levels, including the U.S. Department of Justice, with enforcement actions against small tech support companies that were allegedly involved in deceptive marketing practices.

The FTC Has Continued the Trend Regarding Small Online Businesses with Data Protection Regulation

Over the last few years, the FTC has brought over 500 enforcement actions involving privacy claims and over 50 enforcement actions involving data security claims. Although, most of these claims were against relatively big companies in Quebec.

It didn’t take long for the FTC to shift its focus to small business, including several businesses regarding data protection.

In 2017, the FTC hosted small business owners in a series of public roundtable discussions across the United States for purposes of discussing the most pressing challenges small businesses face in protecting the security of their computers and networks.

“The FTC has been a leader in guiding businesses of all sizes on how to protect the data in their care,” Acting Chairman Ohlhausen said. “Companies with only a few employees face unique challenges when it comes to cybersecurity. We’ll use what we learn in the roundtables to tailor our practical resource materials for small businesses.”

Not only did the FTC learn how to tailor resources for small business owners, it also clearly communicated via the FTC website precisely what the FTC requires small business to do. According to the FTC website:

“Many companies keep sensitive personal information about customers or employees in their files or on their network. Having a sound security plan in place to collect, only what you need, keep it safe, and dispose of it securely, can help you meet your legal obligations to protect that sensitive data”. (emphasis supplied).

Have you kept up to date with the latest fines the FTC has issued Facebook? Facebook was hit with $5-billion federal fine for privacy violations…

This is going to have a huge trickle down effect for ALL small businesses.

So, the FTC has now spoken directly to small business owners that data protection regulations apply to them as well as to the big players. And a fundamental element in a sound security plan is a Data Security Policy for your business.

The Europeans Enter the Fray Regarding Data Protection with GDPR, and Now California Has Just Passed a Similar Regulation

Effective on May 25, 2018, GDPR ushered in new legislation designed to give European Union (EU) residents (data subjects) significantly more control over their personal data. GDPR regulations bring tough, new requirements affecting personal data, consent, privacy, and security.

The catch is that GDPR affects U.S.-based companies of all sizes, even if the U.S. companies don’t have a presence in the EU. All that’s required for GDPR to regulate your business, is that your business processes personal data of EU data subjects.

Depending on circumstances, you could be regulated by GDPR as a data “controller” if you collect personal data directly from EU data subjects. GDPR may also apply to you as a data “processor” if you receive and process personal data indirectly from a controller, such as for example from your customers.

And you could also be regulated as both as a controller and a processor depending on how you collect and process personal data of EU data subjects.

The big concern regarding GDPR regulation for businesses in Quebec, of all sizes, are the consequences for non-compliance. Controllers and processors that are not GDPR compliant could be liable for administrative fines up to (i) 20 million Euros (approximately $25 million), or (ii) 4 percent of annual gross revenues, whichever is higher.

Processors are subject to liability to controllers for failure to comply with their contractual obligations to their controllers under the relevant controller-processor agreement, including liability to the controller for the actions or inactions of any sub-processor appointed by the processor.

In addition, individual EU data subjects will be able to take action and claim damages where they have suffered “material or immaterial damage” (i) by controller non-compliance, or (ii) by a processor’s failure to perform its obligations under a controller-processor agreement. In addition, data subjects may file legal claims for damages directly against processors that have breached any lawful instructions by the controller.

And there’s another little-known consequence of non-compliance at this time: the negative public relations effect on your business. Many small businesses are reporting that their customers and prospects are asking if they’re GDPR compliant.

Due to the overwhelming amount of press coverage regarding GDPR and the massive amount of emails from businesses reporting GDPR-compliant privacy policies, your customers know that GDPR compliance is a sign that you’re taking data protection seriously, even if you’re not regulated by GDPR. Failure to embrace GDPR could lead to a critical decrease in trust and confidence in your business.

Bottomline…

Small businesses are at significant risk – both for enforcement actions with significant fines and with the negative public relations image associated with non-compliance – if they don’t understand and take action in response to the critical shift by the FTC and the EU regulators regarding enforcement of data protection regulations.

For small businesses that don’t have the budget for law firms to assist with data protection compliance, the best solution is access to a combination of relevant compliance training and the required compliance documents.

—

Chip Cooper, Esq. is a practicing e-commerce and compliance attorney with the Atlanta law firm of Jones & Haley, P.C. Mr. Cooper is also CEO of FTC Guardian, Inc. (www.ftcguardian.com), #1 in online training for FTC and GDPR compliance.

Here’s How To Make Sure You, Your Quebec Business and Website Are FTC & GDPR Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

FTC Guardian is a service that is 100% focused on helping to keep you get and stay FTC & GDPR compliant and fully protected. And right now, we are offering a free training to give you the knowledge, information, and guidance that you need to stay out of trouble with the Federal Trade Commission and the new GDPR guidelines.

Free Compliance Workshop: Join Chip Cooper, Esq., the #1 FTC Compliance & GDPR trainer in the World, for a one-of-kind, completely free online compliance workshop.

Workshops fill up quickly, so register now.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!

Disclaimer: This article is provided for informational purposes only. It’s not legal advice, and no attorney-client relationship is created. Neither the author nor FTC Guardian, Inc. is endorsed by the Federal Trade Commission.

FTC Compliance for Affiliates: Recent Developments

Allyn Cutts — Sun, 20 May 2018 16:12:41 +0000

FTC Compliance for Affiliates: Recent Developments

By Katy Atlas

In 2013, the FTC released its .com disclosure guidelines, the seminal piece of regulatory guidance for online marketers. The broad takeaway from these guidelines is that disclosures must be clear and conspicuous and explain any material connection between an advertiser and an endorser.

Recent Developments

In September 2017, the FTC released an additional Q&A titled “The FTC’s Endorsement Guides: What People Are Asking.” There is specific new guidance on product placements, social media contests, online review programs, and affiliate marketing.

Read the full article and learn more about Affiliate Compliance here.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

FTC Guardian is a service that is 100% focused on helping to keep you get and stay FTC compliant and fully protected. And right now, we are offering a free training to give you the knowledge, information, and guidance that you need to stay out of trouble with the Federal Trade Commission.

Free Compliance Workshop: Join Chip Cooper, Esq., the #1 FTC Compliance trainer in the World, for a one-of-kind, completely free online compliance workshop. Workshops fill up quickly, so register now.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!

StarKist doesn’t point out it pays AHA for logo on label

Allyn Cutts — Sat, 21 Apr 2018 23:01:06 +0000

StarKist doesn’t point out it pays AHA for logo on label

By Lisa Fickenscher

A consumer watchdog is weighing a probe into StarKist Tuna and its relationship with the American Heart Association, concerned that the pair have been misleading consumers for years.

The beef is that cans of StarKist tuna don’t disclose on their labels that the manufacturer has paid money to the AHA for the right to display the group’s “heart check” certification.

AHA certification does place limits on fat, salt and sugar for canned foods, among other criteria. But the AHA also quietly charges StarKist — and scores of other companies — an annual fee for the use of its mark, says TINA executive director Bonnie Patten.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!

Social Media Influencers Stump for More Seamless Product Placement

Allyn Cutts — Tue, 27 Feb 2018 11:43:25 +0000

Social Media Influencers Stump for More Seamless Product Placement

By Mikey Glazer

There’s a new social media beef brewing in Hollywood.

A cross-section of influencers, their reps, and brand middlemen called out the FTC’s compulsory disclosures for their lucrative “sponsored post” line of business as unfair and discriminatory because television shows, music videos, NBA stars and Kardashians get a pass for publishing the same content.

Though billed as a panel featuring actress/social media star Arden Rose, online video vet Larry Shapiro (FullScreen, Big Frame, Ensemble), Ruben Ochoa (Head of the Disruptiv Agency), and digital L.A.’s glue Drew Baldwin (Tubefilter, The Streamy Awards), these stakeholders in the social media industry on stage and allies in the crowd unanimously grilled panelist Thomas Dahdouh, Director of the Federal Trade Commission’s Western Division, who kept his cool under gang cross-examination similar to a witness testifying before Congress.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!

Tragic (Legal) Mistake 1: Your Failure To Substantiate Ad Claims Causes The FTC To Freeze Your Bank Accounts

Allyn Cutts — Mon, 18 May 2015 17:15:55 +0000

Your Failure To Substantiate Ad Claims Causes The FTC To Freeze Your Bank Accounts… Even Though You Were Truthful!

By Chip Cooper, Esq.

What Is False Advertising?

In short, false advertising consists of an ad claim that is either –

* literally false, or

* is likely to mislead, deceive, or confuse consumers.

What’s an Ad Claim?

This is the way the FTC defines “ad claim”:

* a statement regarding the performance, features and/or benefits of a product or service,

* that is intended to persuade a consumer to respond favorably to a call to action (CTA).

The Call To Action (CAT) is what you want the prospect to do – sign up on your squeeze page, sign up for a webinar, provide information, take a survey, or purchase a product or service.

An ad claim is an explicit or implicit statement that a product or service has a feature or benefit. Implied claims are held to the same standard as explicit claims.
Tip: The key to evaluating an ad claim is the net impression conveyed by all elements of the claim, including the text and context of the ad, name of product or service, labels, and surrounding images.

That’s pretty basic stuff.

What’s an Earnings Claim?

The FTC also has a definition for a special type of ad claim known as an “earnings claim” which relates to products or services that show consumers how to make money or promise a financial benefit.

This is how the FTC defines “earnings claim”:

* An oral, written, or visual representation

* That states a specific level of potential sales, income, gross or net profit, or

* Facts which suggest a specific level of the above.

Examples of earnings claim include statements regarding future financial benefits when coupled with –

* A photo of a marketer standing by a new Mercedes automobile (facts that suggest a specific level of financial benefit, i.e. sufficient to purchase a similar automobile); and

* Screen shots of the marketer’s PayPal account showing a large number of sales transactions (facts that suggest a similar level of financial benefit).
Tip: The important thing to remember here is that ad claims are regulated by the FTC. If the ad claim does not follow FTC rules, it gives the FTC grounds to file a lawsuit for false advertising.

It’s important to distinguish and ad claim from “puffery”.

Why is this important? The short answer is that “puffery” is not considered to be an ad claim. So, “puffery” is not regulated by FTC rules, and therefore can’t be deceptive.
Tip: “Puffery” is always legal in all circumstances. And ad claims many not be. That’s it. That’s why it’s important to have a clear understanding of what amounts to “puffery”. Ad claims (if they amount to false advertising) can get you into big trouble with the FTC. Puffery can’t.

What Is Puffery?

“Puffery” is a legal term that for an exaggerated statement made for promotional purposes which states subjective rather objective views, and is so exaggerated that consumers are not likely to be mislead, deceived, or confused.

Two U.S Circuit Courts of Appeals have defined puffery as “exaggerated advertising, blustering and boasting upon which no reasonable buyer would rely.”

One of the keys for distinguishing puffery from and a regulated ad claim is whether the claim at issue –

* is quantifiable, and

* capable of being proven false using scientific methods.

An Example of Puffery

A great example of puffery involves the claim made by Papa John’s “Better Ingredients. Better Pizza.”

In the case of Pizza Hut, Inc. v Papa John’s Intern., Inc., the 5th Circuit Court of Appeals found that the claim was puffery, not an ad claim. The Court found the claim to be the epitomy of puffery – boasting and exaggeration. In addition, the Court pointed out that the statement was generic in that it did not –

* identify any specifics regarding “better”, and

* did not offer any comparison with a competitor’s product.

It’s also fair to conclude that the claim was not quantifiable, nor was it capable of being proven false using scientific methods.

What Is NAD?

NAD is an acronym that stands for the National Advertising Division of the Council of Better Business Bureaus.

NAD is a self-regulatory organization that reviews truth in advertising issues, specifically factual ad claims for accuracy.

NAD’s decisions regarding advertising issues assist advertisers in evaluating their ad claims. Compliance with NAD’s decisions in voluntary.

So, even though NAD decisions are voluntary, they should be given considerable weight in evaluation of ad claims, and ads that may be puffery.

Examples of NAD Decisions Re Puffery

Here is a collection of 4 NAD decisions that should provide some valuable insight regarding how to determine the difference between puffery and an regulated ad claim.

* Exaggeration/Boastful Statements – Issue is whether the statement can be proven true or false, or is it so vague that no one will treat it as factual –

o Puffery:

* “America’s Favorite Pizza”
* “America’s Best Loved Coffee”
* “The Earth’s Most Comfortable Shoes”

o Not Puffery (Regulated Ad Claim)

* “The Antioxidant Superpower”
* “Trusted By Moms”
* “Leading Brand”

* Comparative Ad That Identifies Competitors – Issue is whether the statement identifies competitors or certain aspects of the competitor’s products –

o Puffery:

* “Beech-Nut is a better choice”

o Not Puffery (Regulated Ad Claim)

* “Taste The Best at a Sensible Price” (when shown next to the competitor’s products)

* Comparative Ad That Identifies Measurable Results – Issue is whether the advertiser claims superiority of a specific attribute of product that a specific attribute of another product –

o Puffery

* “Better Ingredients. Better Pizza.” (when no specific ingredients are identified)

o Not Puffery (Regulated Ad Claim)

* “Tastes Most Like Butter Even Better”
* “The best Compact Coffee Solution”
* Discover The Better Taste of Progresso”

* Statement Placed Near Product Performance or Disease Prevention Claims – Issue is whether the exaggerated claim is located close to other quantifiable claims –

o Puffery

* “World’s Most Effective Energy Drinks” (placed on top of product website and not next to any performance claims of product)

o Not Puffery (Regulated Ad Claim)

* “Cheat Death”, “Live Preserver”, “The New Shape of Protection” (placed beside a statement describing the horrors of cancer)

(The foregoing analysis is based on an article by Gurnani, Abhishk K. and Talati, Ashish R., FDLI, “The World’s Most Trusted Article on Puffery”, American Bar Association, November/December, 2008.)
Tip: If you’re going to be aggressive with marketing statements, you should be careful to stay on the side of puffery. Don’t cross the line to regulated ad claims. If you do cross the line, you’ll be subject to the Prior Substantiation Rule.

Regulated Ad Claims – The Prior Substantiation Rule

The basic ides is that if you make a regulated and claim, then you must, prior to disseminating the ad, develop substantiation for the claim either by –

* scientific data, or

* results determined though consumer surveys.
Prior Substantiation Rule: This is the FTC’s statement of the “prior substantiation rule taken from an actual case:

“Before disseminating an advertisement, the advertiser must substantiate all claims – express and implied – that the ad conveys to reasonable consumers”.

As discussed above, the Prior Substantiation Rule does not apply to puffery.

Back in 1984, the FTC issued a statement regarding its policy for prior substantiation of ad claims:

* “First, we reaffirm our commitment to the underlying legal requirement of advertising substantiation that advertisers and ad agencies have a reasonable basis for advertising claims before they are disseminated.”

* “The Commission intends to continue vigorous enforcement of this existing legal requirement that advertisers substantiate express and implied claims, however conveyed, that make objective assertions about the item or service advertised.”

* “Objective claims for products or services represent explicitly or by implication that the advertiser has a reasonable basis supporting these claims.”

* “These representations of substantiation are material to consumers. That is, consumers would be less likely to rely on claims for products and services if they knew the advertiser did not have a reasonable basis for believing them to be true.”

* “Therefore, a firm's failure to possess and rely upon a reasonable basis for objective claims constitutes an unfair and deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act.”

You should understand that the FTC often makes inquiries to advertisers in cases where the FTC wants to see prior substantiation. This inquiry may be made prior to filing a lawsuit.

The FTC may either initiate a –
* a compulsory inquiry by subpoena or civil investigative, or

* an informal information request seeking voluntary cooperation such as with the issuance of an “access letter”.

After an investigation, if the FTC determines that there is “reason to believe” that the ad in question amounts to false advertising, the FTC may sue you – either by filing an administrative complaint or a complaint in a U.S. District Court. In both cases, the FTC has the burden of proving its false advertising allegations.

How To Substantiate Your Ad Claims

A detailed discussion of ad claim substantiation is beyond the scope of this book. However, the general principles discussed below should point you in the right direction.

Remember, both direct (absolute and express) claims and implied claims are required to be substantiated.

An example of an implied claim would be a claim using a comparative approach, such as “Better Than All The Rest” (implying that the product is better than the remainder of the specific products in the category).

Substantiation of these claims means the verification, confirmation, and evidence or proof that an ad claim is true. Consumers need to have confidence that an advertiser has a reasonable basis for making a claim.

Here are some examples of direct claims and the related challenges regarding substantiation and back-up:

* If you claim “Best Value”, understand that it’s a bold promise – essentially, you’re promising that your offer is worth more than the asking price – if you're going to make this claim, you'd better have the proof on your product/service description page.

* If you claim “We’re No. 1”, you need to be very specific regarding how you determine no. 1 – no. 1 at what? – in gross sales, in sales growth for a specific period, in the number of widgets sold?

* If you claim the “Latest And Greatest”, “Next Generation” or words to that effect, you should substantiate how the claim is true – explain specifically how you justify the claim in relation to other competitive products on the market.

* If you claim “User Friendly” or “Easy-To-Use”, you need to be specific regarding substantiation of specifically how much time a certain task routinely takes, exactly which steps are automated, etc.

For claims that advertise a level of substantiation – “Tests Prove” or “Studies Show” – you need at least the advertised level of substantiation.

For scientific claims – such as for weight loss or dietary supplements – the FTC requires “competent and reliable scientific evidence” including –

* Tests, analyses, research, studies, or other
evidence based on the expertise of professionals in
the relevant area,

* That have been conducted and evaluated in an objective manner by persons qualified to do so, and

* Using procedures generally accepted in the profession to yield accurate and reliable results

The following is not “competent” scientific evidence and/or does not constitute adequate substantiation:

* Anecdotal evidence alone from customers (for example, non-factual evidence based on the experiences of a few people, for example, a person tells how his breath feels fresher after using a certain brand of toothpaste); however, anectdotal evidence when coupled with a few well-controlled studies may be sufficient);

* Newspaper, magazine, or Wikipedia articles;

* Sales materials from the manufacturer;

* Low rate of product returns or money-back guarantee;

* Testimonials.

Testimonials Are Considered To Be Ad Claims

Testimonials are essentially the other side of the ad claim coin –

* Ad claims are made by you, the marketer about your products or services;

* Testimonials are made by others for you and your products and services.

The FTC has made it clear that testimonials and expert endorsements must be substantiated –

* as though they were made by the marketer itself, or

* be properly disclaimed.

A testimonial or endorsement must represent –

* the experience that is representative of a typical customer can expect with the product or service, or

* be properly disclaimed.

o There is no exception for personal opinion of a person giving a testimonial.

o The testimonial must give the honest opinions, findings, beliefs, or experience of the testimonials.

o Any material connection between the testimonialist and the marketer must be disclosed (as discussed in the next chapter).

How To Make Sure Your Testimonials Are “Properly Disclaimed”

A clear and conspicuous disclaimer is required for testimonials that do not reflect experience that is representative of what a typical customer can expect.

An example of a proper disclaimer for a weight loss claim would be: “On Average, Users Reported Positive Effect

After 12 Weeks of Use”.

Vague, non-specific disclaimers won’t work any more, such as –

* “Results Not Typical”, or

* “Your Results May Vary”.

Three quick and easy ways to get into trouble with deceptive testimonials –

* The testimonialist may not have experienced the reported result;

* The result may be attributable to other factors, such as (i) diet or exercise for weight loss, or (ii) prior experience with making money products;

* If a testimonial claims results that are not typical without a proper disclaimer.

* If the testimonialist falsely states or implies that he/she actually used the product or service.

Beware of Earnings Disclaimers!

Earnings disclaimers are commonly used to qualify earnings claims. Most earnings disclaimers may be boiled down the these elements –

* No promise you will make money;

* No promise you will not lose money;

* Internet businesses are risky; and

* Seek professional advice before purchasing any money-making scheme.

The problem with the way many Earnings Disclaimers – and a serious trap for the unwary – is that they’re offered to contradict earnings claims.

The FTC has made it very clear:

“[Disclaimers] should be presented clearly and conspicuously so that consumers can actually notice and understand it…. [A]dvertisers [cannot] use fine print to contradict other statements in an ad or to clear up misimpressions that the ad would leave otherwise.”

The NAD also weighed in:

“While disclosures may be used in advertising to reduce the potential for consumer confusion, they cannot be used to change the express meaning of a claim or to render truthful and otherwise misleading advertising claim.

And the 3rd Circuit Court of Appeals added this:

“One cannot escape liability for a literally false claim by pointing to a later disclaimer.”

Tip: Be very careful to not fall into the trap of believing that you can promise the moon with earnings claims, and it will all be legal if you simply post an Earnings Disclaimer to your website. Your Earnings Disclaimer will not be effective to “sanitize” or cure an otherwise deceptive ad claim. And the FTC may also claim that your attempt to render a deceptive ad claim to be truthful with the Earnings Disclaimer is, itself, a deceptive marketing practice.

What To Do If You Use Experts As Endorsers

* You must provide the qualifications that support the expert’s standing to be represented as an expert in the specific field of the endorsement.

* The expert must have a reasonable basis to provide the opinion expressed in the endorsement.

* The expert must actually use his/her expertise in evaluating the features or characteristics of product or service.

* The features or characteristics featured in the endorsement must be relevant to an ordinary consumer’s use of, or experience with, the product or service and which are also available to the ordinary consumer.

Ad Claims Come In All Shapes, Sizes, and Places

Don’t be lulled into sleep by thinking that ad claims only appear on your website’s sales pages.

Ad claims may appear in all shapes, sizes, and places. No matter what form the ad takes, the advertiser still must substantiate all ad claims before substantiation.

Ad claims may appear in other forms and places, such as:

* Website pages other than sales pages;

* Social media pages;

* Blogs;

* YouTube videos and other videos; and

* Contests (for example, an Oracle ad stating that its Exadata server is “5X Faster Than IBM… Or You Win $10,000,000”).

Also, be very careful with these hazards –

* Website reviews posted by customers;

* Social media pages;

* Guarantees;

* “Free” trials where customers have to cancel within a stated time period or their credit cards will be charged.
Tip: If you’re not really sure about how to substantiate ad claims, the best approach is to clearly understand puffery, and then to always stay on the side of puffery without crossing the line to regulated ad claims.

Conclusion

The rules for substantiation are very complex.

For this reason, a good way to start with compliance is to ensure that you have a clear understanding of –

* puffery and how puffery is different from an ad claim, and

* the fact that ad claims are not just on your sales page; they may be other website pages, social media pages, blogs, videos.

Then you can stay clearly on the side of puffery until you determine that you need to cross the line to making an ad claim. At that time, you can review the substantiation rules and proceed with the ad claim and substantiation.

The worst of all situations would be to unintentionally make ad claims. Because if you make ad claims unintentionally, you certainly wouldn’t be substantiating them.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!

Tragic (Legal) Mistake 2: Your Testimonials Gets You Sued By The FTC For Big Bucks

Allyn Cutts — Mon, 18 May 2015 14:28:43 +0000

Tragic (Legal) Mistake 2: Your Testimonials Gets You Sued By The FTC For Big Bucks

By Chip Cooper, Esq.

Your Failure To Follow The FTC Disclosure Rules For Testimonials On Your Website, Blog, and Social Media Platforms Gets You Sued By The FTC For Big Bucks

(You Failed To Disclose, Or Your Disclosure Wasn’t Conspicuous!)

Part 1 deals with the FTC’s rules regarding the disclosure of “material relationships” between advertisers and testimonialists and endorsers. The idea is that if the person giving the testimonial or endorsement is receiving some kind of benefit, then this should be disclosed to that consumers may be on notice that there is the possibility of bias. These rules first appeared in 2009.

Part 2 deals with the FTC rules regarding how these disclosures should be made. These rues first appeared in 2013.

Part 1
FTC Guides For Testimonials And Endorsements (2009)

On October 5, 2009, the FTC issued its revised Guides for the Use of Endorsements and Testimonials in advertising. The revised Guides focus on rules clarifying the use of endorsements in online advertising.

The Guides specify rules for marketers on the Internet, and they apply to two categories of marketers (these are the terms used by the FTC):

* “advertisers” – online marketers that recruit affiliates, resellers, and bloggers to promote the advertiser-suppliers’ products and services, and

* “endorsers” – affiliates, resellers, and bloggers that promote products and services for advertiser-suppliers.

Since the term “advertiser” alone is not a very descriptive term, this discussion will utilize the term “advertiser-supplier” to indicate that advertiser-suppliers are marketers who supply products or services.

In a nutshell, the Guides are aimed at protection of online consumers. The FTC wants to regulate online marketers to see if they're trading testimonials and favorable reviews for some kind of financial reward or other benefit.

The Guides clearly establish the principle that both advertiser-suppliers and their endorsers may be held liable for unsubstantiated, false, and deceptive marketing statements.

Advertiser-Suppliers: When Do The FTC Disclosure Rules Apply?

The threshold question for online marketers is “when do the FTC disclosure rules apply to my marketing practices”?

If all you do is market directly from your website with no involvement by intermediaries such as affiliates, resellers, or bloggers, the FTC disclosure rules do not apply.

However, if you recruit intermediaries – such as affiliates, resellers, or bloggers – to pitch your products or services, and this even includes people whom you compensate or provide free promotional materials or benefits for writing testimonials that you post on your site, then the FTC disclosure rules apply, and you’d be classified as an advertiser-supplier.

Intermediaries would also include viral marketing programs with incentives and network marketing programs where endorsers periodically review your products or services, and they receive a free product or service about which they write a review. If you utilize these viral and network marketing programs, you’ll also be classified as an advertiser-supplier.

If the FTC disclosure rules do apply, you may be held liable for the actions of your endorser.

This is the way the FTC put it:

“It is foreseeable that an endorser may exaggerate the benefits of a free product or fail to disclose a material relationship where one exists. In employing this means of marketing, the advertiser-supplier has assumed the risk that an endorser may fail to disclose a material connection or misrepresent a product, and the potential liability that accompanies that risk” (emphasis supplied).

If you’re an advertiser-supplier, this potential liability should be a wake-up call.

Endorsers: When Do Disclosure Rules Apply?

Again, the threshold question “when do the FTC disclosure rules apply to me”?

If all you do on your website is publish creative content about your areas of interest or your own products or services, you're not regulated by the FTC disclosure rules.

However, if you’re an intermediary (such as an affiliate, reseller, or blogger) for another online marketer, and you pitch someone else’s products or services, in exchange for payment of money, you’re clearly an endorser.

When you normally think of an endorser, you probably think of a celebrity or some other form of endorser, such as the pitch person on late night infomercials.

However, we all act as spokespersons frequently. We talk to our friends, and we post comments on social media, and in many cases these communications are acting as recommending a product or service. As such, we’re also spokespersons.

Organizations can also take the role of a spokesperson. Corporations, colleges and universities, and professional organizations all share information about products or services, and in such cases they are acting as spokespersons.

There’s a grey area in situations where you’re not paid money, but you may receive some sort of benefit. Under certain circumstances, where the applicable facts indicate “sponsorship”, you’ll be regulated as an endorser.

The FTC disclosure rules drill down into this grey area by providing 3 scenarios where a consumer reviews a product or service:

* no endorsement – a consumer purchases a product with his/her own money, and posts a review or opinion on a blog (result: FTC disclosure rules do not apply because there is no relationship at all with the advertiser-supplier; no worries);

* no endorsement – same scenario, except that a coupon for a free trial of the product is generated by the store's computer, based on his/her purchases (result: FTC disclosure rules do not apply because there is no relationship with the advertiser-supplier indicating “sponsorship”; no worries); and

* endorsement – the consumer is part of a network marketing program where he/she periodically reviews products and receives a free product for
which he/she writes reviews (result: FTC disclosure rules do apply because there is a relationship with the advertiser-supplier based on the stream of free products indicating “sponsorship”; there are legitimate worries about how to comply with the FTC disclosure rules).

A good example would be a dentist who recommends a particular brand of toothpaste and provides a complimentary sample for you. If the toothpaste manufacturer or its representative provided the samples to the dentist for free, this would put the dentist in the category of an endorser who has received a benefit.

How do you determine whether a statement is a testimonial? According to the FTC, the determination must be made solely from the perspective of the consumer. If the consumer would view the statement as influenced by the advertiser-supplier, it’s covered by the FTC disclosure rules.

Tip: you should always look at the question of whether to disclose through the eyes of the consumer. If the consumer might be influenced by a relationship, then it’s material and it should be disclosed.

What Do The FTC Disclosure Rules Require Advertiser-Suppliers And Endorsers To Do?

If you’re an advertiser-supplier that sponsors endorsers, the FTC disclosure rules require you to:

* provide guidance and training to your endorsers to help them understand their legal obligations regarding advertising statements about your products or services; primarily, that their claims are truthful, not misleading, and substantiated, and

* monitor your endorsers and take steps to remedy advertising statements, practices, or procedures that are unlawful. In essence, advertiser-suppliers should implement policies and procedures to ensure that their endorsers comply with the FTC disclosure rules.

* Also, you should disclose “material connections” you have with persons who provide endorsements and testimonials for you. “Material connections” involve the payment of money or providing free promotional materials or benefits for the endorsements or testimonials.

* If you make a statement that refers to findings by a research organization, any “material connection” with the research organization must be disclosed.

* Remember that testimonials are considered to be ad claims, so the rules discussed in Mistake 1 apply. level of success was significantly greater than typical, provided that a “results not typical” disclaimer accompanied the endorsement. Beginning in December, 2009, the “results not typical” disclaimer won’t be effective any more. Now, you need a statement regarding the generally expected results.

If you’re an endorser that is sponsored by an advertiser-supplier, the FTC disclosure rules require you to:

* disclose “material connections” involving the receipt of money or free promotional materials or benefits for promoting your advertiser-suppliers’ products or services,

* if you write an endorsement for a product or service, you must be a bona fide user who is writing based on actual experience at the time the endorsement is given (for example, writing a review of a book you haven’t read or a product that you haven’t tried out is a no-no), and

* disclose typical results that should reasonably be expected from a product or service (“results not typical” disclaimers won't work anymore).

What Do Endorsers Have To Say To Comply?

There are no precise rules. The best recommendation is to use common sense, and to clearly and succinctly disclose the relationship and benefit.

Basically, disclose if you got a complimentary product, or that you are an affiliate who may be paid a commission. For example –

* “Apple gave me this new iPad to try out.”

* “I received a complimentary flight by Delta Air Lines.”

Another example: for a paid celebrity endorser, a photo of the celebrity with the caption “Compensated Endorser”.

You could even create a simple icon with the caption: “Disclosure – I get free stuff to review on my blog.”

Use your imagination, be clever. But get the idea across that you’re receiving compensation or other benefit.

The Reverb Communications Case: If You’re Tempted To Use Fake Endorsements, Don’t Do It!

The FTC’s first case enforcing the FTC disclosure rules was against Reverb Communications which was settled in 2010.

At that time, Reverb Communications was a public relations firm representing major clients in the video game industry, including clients such as MTV Games and Harmonix, as well as smaller firms that sell mobile game apps via the iTunes store. According to the FTC, Reverb’s fee often includes a percentage of the sale of its clients’ gaming apps.

The iTunes store provides users the ability to post reviews of gaming applications that are available for purchase. These reviews include a rating system (based on a possible rating of one to fire stars) and written text.

According to the FTC, during a period of approximately one year Reverb employees posted reviews in the iTunes store favorable to games of Reverb’s clients. The reviews were posted in a manner that would convey the impression that disinterested consumers had posted them.

In addition to giving five-star ratings to Reverb’s clients’ games, Reverb’s employees posted written endorsements such as:

“Amazing new game”,
“ONE of the BEST”, and
“Really cool game”.

The FTC brought suit claiming that Reverb Communications engaged in deceptive advertising by having its employees pose as ordinary consumers posting reviews, while failing to disclose that the reviews were from paid employees working on behalf of their clients. Reverb agreed to settle the case.

The basic lesson of the Reverb Communications case is clear – don’t use employees or contractors to post fake endorsements under any circumstances.

The FTC stated in its press release announcing the Reverb Communications settlement: “Companies, including public relations firms involved in online marketing need to abide by long-held principles of truth in advertising. Advertisers should not pass themselves off as ordinary consumers touting a product…”.

The FTC settlement with Reverb requires Reverb to remove the previously posted deceptive endorsements and to refrain from using employees to post fake reviews for its clients in the future.

Part 2
How to Provide The Required FTC Disclosures (2013)

The foregoing discussion focused on the general rules for when the FTC disclosure rules apply. The follow-up question is how to make the required disclosures, with confidence. That’s what’s discussed in Part 2.

In 2000, the FTC released the original .com Disclosures. The purpose was to provide guidelines regarding marketing and advertising on the Internet so that consumers could be protected.

In 2013, the FTC issued revised .com Disclosures. It’s purpose was the same, except the FTC attempted to keep up with changes in technology since the original .com Disclosures.

The FTC’s .com Disclosures Apply To Anyone Engaged in Digital Advertising And Marketing

This means that big companies as well as solo entrepreneurs who operate a single ecommerce website are engaged in digital advertising and marketing, and therefore are subject to the guidelines of the .com Disclosures.

It’s important to note that the .com Disclosures are not definitive law, meaning that they are guidelines. So, compliance is voluntary; however, if you engage in practices contrary to the .com Disclosures, particularly if consumers have sent complaints to the FTC or if there is a pattern of noncompliance, you may very well get the dreaded knock on your door from the FTC.

The .com Disclosures address many issues regarding disclosure placement that reflect the current Internet landscape –

Social media, generally;
Specific constraints of certain social media, for example the character limitations of Twitter;
Automation of engagement on social media;
Mobile apps, and particularly the space limitations of mobile device screens;
Hashtags (#); and
Linked disclosures on a website;
Just to name a few.

The bottom line is that the responsibility of the advertiser to ensure that –

* all providers, including their own website, social media platforms, blogs, or video platforms, are capable of including the appropriate disclosures, and

* in fact, do provide the appropriate disclosures.

.com Disclosures General Rules And Principles

The .com Disclosures provide the following general rules

stating that all disclosures should be –

* Proximate to the information so the consumer does not have to hunt for it;

* Of at least the same size as the message;

* In the same format as the message;

* Accessible on all platforms used; and

* Understandable by the consumer.

The .com Disclosures provide the following 5 general rules.

1. The same consumer protection laws that apply to commercial activities in other media apply online, including activities in the mobile marketplace. The FTC Act’s prohibition on “unfair or deceptive acts or practices” encompasses online advertising, marketing, and sales.

In addition, many Commission rules and guides are –

* not limited to any particular medium used to disseminate claims or advertising, and

* therefore, apply to the wide spectrum of online activities.

2. When practical, advertisers should incorporate relevant limitations and qualifying information –

* into the underlying claim,

* rather than having a separate disclosure qualifying the claim.

3. Required disclosures must be clear and conspicuous.”

In evaluating whether a disclosure is likely to be clear and conspicuous, advertisers should consider –

* its placement in the ad, and

* its proximity to the relevant claim.”

The closer the disclosure is to the claim to which it relates, the better.”

Additional considerations include:

* the prominence of the disclosure;

* whether it is unavoidable;

* whether other parts of the ad distract attention from the disclosure;

* whether the disclosure needs to be repeated at different places on a website;

* whether disclosures in audio messages are presented in an adequate volume and cadence; whether visual disclosures appear for a sufficient duration; and

* whether the language of the disclosure is understandable to the intended audience.

4. To make a disclosure clear and conspicuous, advertisers should:

* Place the disclosure as close as possible to the triggering claim.

* Take account of the various devices and platforms consumers may use to view advertising and any corresponding disclosure. If an ad is viewable on a particular device or platform, any necessary disclosures should be sufficient to prevent the ad from being misleading when viewed on that device or platform.

* When a space-constrained ad requires a disclosure, incorporate the disclosure into the ad whenever possible. However, when it is not possible to make a disclosure in a space-constrained ad, it may, under some circumstances, be acceptable to make the disclosure clearly and conspicuously on the page to which the ad links the disclosure clearly and conspicuously on the page to which the ad links.

* When using a hyperlink to lead to a disclosure –

o make the link obvious;

o label the hyperlink appropriately to convey the importance, nature, and relevance of the information it leads to;

o use hyperlink styles consistently, so consumers know when a link is available;

o place the hyperlink as close as possible to the relevant information it qualifies
and make it noticeable;

o take consumers directly to the disclosure on the click-through page;

o assess the effectiveness of the hyperlink by monitoring click-through rates and other information about consumer use and make changes accordingly.

* Preferably, design advertisements so that “scrolling” is not necessary in order to find a disclosure. When scrolling is necessary, use text or visual cues to encourage consumers to scroll to view the disclosure.

* Keep abreast of empirical research about where consumers do and do not look on a screen.

* Recognize and respond to any technological limitations or unique characteristics of a communication method when making disclosures.

* Display disclosures before consumers make a decision to buy – e.g. before they “Add To Cart”. Also, recognize that disclosures may have to be repeated before purchase to ensure that they are adequately presented to consumers.

* Repeat disclosures, as needed, on lengthy websites and in connection with repeated claims. Disclosures may also have to be repeated if consumers have multiple routes through a website.

* If a product or service promoted online is intended to be (or can be) purchased from “brick and mortar” stores or from online retailers other than the advertiser itself, then any disclosure necessary to prevent deception or unfair injury should be presented in the ad itself – that is, before consumers head to a store or some other online retailer.

* Necessary disclosures should not be relegated to “terms of use” and similar contractual agreements.

* Prominently display disclosures so they are noticeable to consumers, and evaluate the size, color and graphic treatment of the disclosure in relation to other parts of the webpage.

* Review the entire ad to assess whether the disclosure is effective in light of other elements – text, graphics, hyperlinks, or sound – that might distract consumers’ attention from the disclosure.

* Use audio disclosures when making audio claims, and present them in a volume and cadence so that consumers can hear and understand them.

* Display visual disclosures for a duration sufficient for consumers to notice, read and understand them.

* Use plain language and syntax so that consumers understand the disclosures.

5. If a disclosure is necessary to prevent an advertisement from being deceptive, unfair, or otherwise violative of a Commission rule,

* and it is not possible to make the disclosure clearly and conspicuously,

* then that ad should not be disseminated.

* This means that if a particular platform does not provide an opportunity to make clear and conspicuous disclosures, then that platform should not be used to disseminate advertisements that require disclosures.

Download the .com Disclosures

Probably the most informative aspect of the .com Disclosures are the examples provided.

The only way to review these examples is to download the .com Disclosures for yourself. To download, search on any search engine for “FTC .com Disclosures 2013”. The file is in .pdf format.

Conclusion

The disclosure rules appear to be complex.

However, they’re not as complex as they may seem if you –

have a clear understanding of the difference between an advertiser-supplier and an endorser;
have a clear understanding of the role you are playing in a given situation (you may be an advertiser-supplier in some situations and an endorser in others); and
develop a few simple ways to make the required disclosures.

A basic understanding and awareness is really they key.

You can always look at the rules and guidelines as you develop your approach to compliance.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

Go here to register for our next FREE training and make your business is FTC compliant today!