Last Updated: March 11, 2023
Marketing Compliance - Concerns & Challenges for FTC Enforcement in 2023
I help eCommerce and digital marketers with customized Internet marketing and digital advertising compliance tactics and documents to be compliant and competitive without costing them sales.
- My wheelhouse is the tip of your marketing spear: how you present your marketing message to your prospects in a hyper-regulated online marketplace.
- Your marketing message is a big deal. You should be able to navigate new and complex regulations, but instead, you're left with questions.
I'm here to help.
Digital Marketing Compliance Trends in 2023
There are two new trends that you need to be aware of.
Trend #1: FTC Rulemaking Initiatives for Levying Civil Penalties (Fines).
In April 2021, the U.S. Supreme Court issued a decision that limited the FTC's statutory authority to levy monetary relief in the form of civil penalties (fines).
Since then, the FTC has relied upon its rulemaking process to establish clear legal grounds to levy fines for violations that directly affect digital marketers, and with it, to establish personal liability on digital marketer executives.
The FTC has begun to issue new rules, and to revise, update, and strengthen exesting rules, each with the ultimate goal of levying fines.
The FTC States its Case: “Case-by-case enforcement without civil penalty authority may not be enough to stem the growth of deceptive ... (advertising). The Supreme Court's decision has hindered the FTC's ability to seek monetary relief for consumers under the FTC Act. A potential rule that spells out prohibited practices may strengthen deterrence by allowing the agency to impose civil penalties while simplifying FTC enforcement."
Trend #2: The FTC's Interpretation of Advertising Claims is Becoming More Nuanced.
Promotional messaging and advertising claims are the tips of your marketing spear.
They determine whether you get the desired result from your call to action.
A careful parsing of advertising claims characterized by analyzing subtle shades of expression is now essential for determining the “net impression” (or takeaway) that reasonable consumers derive from your specific advertising claims.
The net impression is critical for digital marketing compliance because it must be substantiated before the advertisement is published.
Failure to substantiate net impression before publication is a deceptive marketing practice.
Your Concerns and Challenges: As a digital marketer, your concerns and challenges in today's hyper-regulated environment are twofold.
It's essential that you:
- Have a working knowledge of the specific FTC rules and guides that affect your typical digital marketing campaigns, and
- Understand and apply the FTC's process for evaluating your advertising claims.
Failure to develop and apply these two requirements will increase your risk of an FTC enforcement action and substantial legal liability, with the possibility of personal liability.
How I Can Help You
- Assessment. The priority will be to assess your digital marketing compliance if your marketing campaign is to update existing sales pages, sales webinars, or social media posts, or if the campaign is yet to be launched, to assess how you want to proceed with marketing compliance.
- My Review. Based on the assessment, I'll review the agreed-upon campaign elements and prepare an agreed-upon interim report.
- Discussion and Decision Time Among Recommended Options and Requirements. We'll discuss the interim report on a video conference call. Decision makers will provide input regarding the final strategy and tactics.
- Playbook Delivery. I'll deliver your customized playbook that details the agreed-upon strategy and tactics for your campaign.
Marketing Compliance - FTC Rulemaking
How Does FTC Rulemaking Compliment Marketing Compliance?
The FTC's rulemaking process is the procedure for the development and adoption of consumer protection laws.
Rulemaking typically involves the following steps:
1. Initiation: The FTC may initiate a rulemaking process in response to a problem or concern in the marketplace or as part of its ongoing efforts to protect consumers.
2. Notice of Proposed Rulemaking: The FTC publishes a notice in the Federal Register, which announces its intention to propose a new rule and provides a summary. The notice invites public comment on the proposed rule.
3. Public Comment: The FTC solicits comments from the public on the proposed rule. Providing comments gives stakeholders, including consumers, industry, and advocacy groups, the opportunity to provide their input and recommendations.
4. Review of Comments: The FTC reviews the comments received from the public and considers any changes that should be made to the proposed rule based on the feedback.
5. Final Rule: The FTC adopts the final rule, which is then published in the Federal Register.
6. The final rule takes effect after a specified period of time, usually 30 to 60 days.
7. Implementation and Enforcement: The FTC enforces the final rule by taking action against digital marketers that violate the rule, including penalties and fines.
FTC Digital Marketing Compliance Initiatives With Rulemaking
Earnings Claims – March 2022
The FTC launched the rulemaking process to target money-making claims that lure consumers into bogus business ventures.
Specifically, the FTC is primarily concerned with implied earnings claims made with:
- Success story testimonials, and
- Examples of hypothetical or past profits or earnings.
The longstanding FTC policy is that:
- The net impression of these claims is that the results claimed are typical for all consumers, and
- The typical results claimed must be substantiated with “reasonable” basis prior to publication.
If the rule is enacted, the FTC intends to target deceptive earnings claims linked to the following types of offers:
- Coaching and mentoring,
- "Gig" work and other job opportunities,
- Multi-level marketing opportunities,
- Franchise opportunities,
- Chain referral schemes,
- Investment opportunities, and
- Business opportunities.
More Information: Ad Claims & Substantiation
More Information: Puffery
Junk Fees – November 2022
The FTC launched the rulemaking process to target junk fees and the deceptive practices that digital marketers use to impose them.
“Junk fees” include:
- Unnecessary or surprise fees that deceptivey inflate purchase cost
- without adding anything of value for concumer,
- “Hidden fees” that are often added at a later stage of the purchase transatcion that add no real value, and
- Fees that are bundled as “Ancillary Products” added to loan and financing transactions, telecommunications transactions, and live entertainment.
Fake Reviews & Endorsements – November 2022
The FTC launched the rulemaking process to target fake reviews and endorsements including the following as described in the FTC's press release:
- "Fake reviews: These include reviews and endorsements by people who do not exist or have not used the product or service or who lie about their experiences."
- "Review reuse fraud: Some sellers hijack or repurpose reviews posted about another product or service."
- "Paid reviews: Marketers may pay for positive reviews about their products or negative reviews about competitors' products."
- "Insider reviews: These include reviews written by a company's executives or solicited from its employees that don't mention their connections to the company."
- "Review suppression: Companies might claim that their websites display all reviews submitted by customers when they suppress negative reviews or attempt to suppress reviews on other platforms by threatening the reviewers.:
- "Fake review websites: This is when a seller sets up a purportedly independent website or organization to review or endorse its own products."
- "Buying followers: This involves buying or selling followers, subscribers, views, or other indicators of social media influence."
More Information: Testimonials & Reviews
Expansion of the Biz Opps Rule – November 2022
What is the definition of a “Business Opportunity” (under the current business opportunity (“Biz Op”) Rule?
The current Biz Op” Rule was adopted in 2012 to enable purchasers of business opportunities to get the information they need to evaluate whether to invest in a business opportunity.
The definition of a Biz Op under the current Biz Op Rule includes a commercial arrangement in which:
- The seller solicits a prospective purchaser to enter into a new business;
- The prospective purchaser makes the required payment; and
- the seller represents, expressly or by implication, orally or in writing, that the seller or its designee will do any one of the following:
- Provide locations for the use or operation of equipment, displays, vending machines or similar devices owned, leased or paid for by the purchaser; or
- Provide outlets, accounts, or customers for the purchaser's goods or services; or
- buy back the goods or services that the purchaser makes or provides.
If a digital marker offers a business opportunity that satisfies the definition of a Biz Op, the marketer is required to provide a disclosure document to the prospective purchaser that includes the following:
- The seller's identifying information.
- Whether the seller is making claims about possible earnings or profits, and if so, information that backs up those claims.
- Whether the seller, its affiliates, or key personnel have been involved in certain legal actions, and if so, information on those actions.
- Whether the seller has a cancellation or refund policy, and if so, the terms of that policy.
- A list of people who have purchased the business opportunity in the last three years.
Sellers of business opportunities have been able to avoid regulation as a Biz Op by carefully avoiding this requirement which has been regarded by some as a “loophole”:
- Providing locations for the use or operation of equipment, displays, vending machines or similar devices owned, leased or paid for by the purchaser.
The FTC's goal in expanding the Biz Op Rule is to expand its scope of the Rule to include almost any coaching or mentoring program, eCommerce opportunity, investment opportunity, and money-making opportunity.
Sellers of business opportunities should take notice of the consequences of the enactment of an (i) earnings claims rule, and (ii) the enactment of an expanded Biz Opps Rule.
The result of combining these two rules would be a significant impact on the current practice of most marketers of business opportunities.
More information: Biz Opps Rule
How to Get Started
The recommended way to get started with marketing compliance is to scroll to the bottom of this page and, click on the "Book a Call" button, then schedule a call.
We'll discuss your requirements and concerns and answer any questions you may have.
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Best wishes for your online business success.
- Juris Doctor Degree, Wake Forest University School of Law
- Adjunct Professor of Law, Wake Forest University School of Law (20 years)
- Martindale-Hubbell Highest Attorney Peer Rating – AV® PREEMINENT™
- Co-Founder & CEO, FTCGuardian.com, #1 in FTC Compliance Training