One theme came up again and again in the Federal Trade Commission’s 2016 Annual Highlights as they discussed consumer protection: the fight against deceptive marketing.
The FTC summarized the work they did in 2016 to protect consumers from false, deceptive, or unsubstantiated claims. They touched upon important enforcement cases across health care, technology, consumer products and services, and fraud that are setting the tone for regulation and enforcement for 2017.
Here are the major cases the FTC highlighted that marketers need to know about to avoid making similar mistakes and mitigate risk in their own companies.
Consumer Products and Services
Major brands shelled out money in settlements with the FTC, including the FTC’s largest false advertising settlement in its history.
- Volkswagen Group of America: Their deceptive “clean diesel” claims struck a wrong chord with the FTC, resulting in a $10 billion settlement order that will compensate owners of VW and Audi 2.0 liter diesel cars.
- Lord & Taylor: Deceptive endorsements of fashion influencers on Instagram have resulted in a consent order prohibiting the department store from misrepresenting paid commercial advertising and misrepresenting paid endorsers as ordinary consumers, and requires the company to establish a monitoring and review program for the company’s endorsements campaigns.
Several companies violated the Telemarketing Sales Rule by making illegal robocalls to consumers on the national Do-Not-Call (DNC) Registry.
- Consumer Education Group: Telemarketers and lead generators from the Consumer Education Group must pay a $100,000 civil penalty for making millions of illegal telemarketing calls to consumers on the national DNC Registry as part of a campaign to generate sales leads for third-parties.
- KFJ Marketing: This company faced a federal court action for making illegal robocalls promising consumers energy savings in order to generate leads for solar panel installation companies. Jessica Rich, former Director of the FTC’s Bureau of Consumer Protection, wants companies to remember this: “Breaking the law isn’t a great way for a company to introduce itself to potential customers.
The FTC has been keen on ensuring that any and all health claims made by marketers are backed by clinical evidence. In these two cases, marketers failed to provide clinical evidence to back their claims.
- LearningRx “brain training” programs: The developers and marketers of these brain training programs agreed to pay $200,000 and stop making false and unsubstantiated claims that their programs permanently improved brain-related health conditions. They had promoted their claims via websites, social media, print and radio ads, direct mail pieces, and Google search ads, targeting consumers searching for terms such as “autism cure” and “Asperger cure”.
- Mercola-brand indoor tanning systems: Marketers of these indoor tanning systems agreed to pay almost $3 million for making false and unsupported claims that their indoor tanning systems are safe, could “Slash [Their] Risk of Cancer” by tanning indoors, and “reverse the appearance of aging.”
- Affiliate marketing operation for weight-loss products: In addition to marketing unproven weight-loss products, their use of false celebrity endorsements, fake news sites, and illegal emailing got this marketing operation in deep water.
The FTC says stopping fraud continues to be its largest consumer protection program. They’re focusing on protecting different communities affected by fraud, including veterans and older consumers. Fee disclosure also remains key to compliance.
- AMG Services: The FTC ordered racecar driver Scott Tucker and several defendants to pay $1.3 billion for deceiving consumers and charging them undisclosed and inflated fees.
- Consumer Assistance Project and Student Aid Center: False promises of “GET RID OF YOUR DEBT TODAY!” and “Get Your Student Loans Forgiven Now!” raised eyebrows at the FTC. The FTC took action against these two student loan debt relief schemes and have halted their operations.
These cases represent only a few of the many ways deceptive marketing tactics have violated FTC regulations and resulted in costly settlements. With the slew of regulations and guidelines out there, more companies are adopting Regulatory Technologies (RegTech) to help them keep pace with evolving compliance issues.