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FTC: What is the Federal Trade Commission Doing to Internet Marketing?

By May 18, 2009May 19th, 2009Internet Lawyer

FTC testimonialsFor good or bad, the U.S. Federal Trade Commission under the Obama administration is going to take a more pro-consumer stance than we’ve seen in years. What’s that mean to your business?

With little understanding of how social media works, the FTC will be looking at its prior success in cracking down on deceptive business practices both in franchising and multilevel (MLM)/network marketing.

Here’s where I see things headed…

1. Affiliates will be required to disclose financial compensation is involved when they promote a particular product or service in exchange for a commission. In particular, this is going to affect “review” sites, blogger “recommendations,” Facebook posts, and even Tweets that contain affiliate links. This is going to be particularly troublesome for Twitter because of the 140-character limit.

2. Anyone who receives a complimentary review copy and writes or blogs a recommendation will need to disclose the “freebie” to the reader. That means no more positive spinning buzz for a $2,000 info product as a favor to a friend who gave you a free review copy pre-launch.

3. Testimonials are going to need verification for accuracy and, if the results are atypical, there will need to be a prominent disclaimer to that effect plus a disclosure as to what are typical results. For example, if Joe Smith claims he made $10,000 the first month using your biz opp product, you better (a) verify Smith’s claim is accurate, (b) let the reader know if those results are atypical, and (c) disclose what the typical purchaser really earns.

4. If there are expert endorsements, there will likely be a requirement that the endorsement is backed by generally accepted scientific proof (not some wild theory from Dr. Ima Quack who earned her doctorate from the correspondence school New Age University of Alternative Reality Living while institutionalized as a psychiatric patient). Bogus testimonials aren’t going to cut it, particular when your offer relates to earning money or health issues.

5. In lawsuits and actions by state attorneys general, all of the above will be taken into account when making charges of fraudulent and deceptive trade practices against Internet marketers. That’s in addition to what the FTC and FDA will do at the federal level.

Mike Young, Esq.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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