What to Expect from FTC in 2011

By John Lichtenberger

WHAT's IN STORE FOR ADVERTISERS AND MARKETERS IN 2011

As we enter 2011, it is important to look ahead to try to determine just what is in store for advertisers and marketers in the regulatory world of the Federal Trade Commission. This article takes a look at some of the things you can expect in the coming year.

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Do Not Track Legislation

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You can expect FTC to continue to push for congressional adoption of Do Not Track legislation. On December 1, 2010, FTC had issued a preliminary staff report that proposed a framework to balance consumer's privacy interests with innovation that relies on consumer information to develop beneficial new products and services. At this point, FTC wants Do Not Track legislation to be voluntary for the Internet. FTC is counting on the goodwill engendered by the Do Not Call list. That program was one of FTC's most popular success stories. "Most of us on the commission believe it's time for Do Not Track mechanism." So said FTC Chairman Jon Liebowitz.

One problem with the do-not-track idea is that the do-not-call concept–which worked out so well in the telephone world– does not easily translate to the realm of the Internet. People love the freedom that being on the Do Not Call list gave them. They were freed from annoying calls at all hours of the day and even the night. The do-not-track idea is exactly the opposite. The concern with making this a legal requirement is that the law-abiding websites will comply with it - most are likely doing so already (i.e., not collecting questionable data from their visitors). Those less-questionable sites - which are the bulk of the problem - aren't likely to comply with any such law. So the net result would be to diminish the freedom that people cherish on the Internet. And while FTC currently wants "do not track" for the web, many believe that this is just an interim step. And nearly everyone believes that, ultimately, “do not track” will not be voluntary. It will be mandatory.

FTC's preliminary staff report–issued on December 1, 2010–criticized industry efforts to address privacy through self-regulation as "too slow." Accordingly, FTC is signaling that voluntary "do not track" will indeed merely be an interim step. Regulations will certainly ensue and the free Internet will be a thing of the past.

One of the bright spots in the retail world during this past Christmas season were online sales. FTC's plan-once it becomes mandatory--would jeopardize that successful record in the future. Online advertising supports a wealth of content across the Internet. This would be jeopardized as well should those future regulations on online advertising go too far. Web operators create content, in large measure, because they receive advertising revenues from a variety of sources. It's doubtful that they will continue to do so if FTC regulations make this problematic.

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Expect More Actions Involving Large Advertisers

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The vast majority of FTC's actions are typically against smaller advertisers. They're easier targets for FTC since they lack the legal resources to fight back effectively. Nevertheless, increasingly, FTC is taking on larger advertisers for perceived advertising law shortcomings.

For example, last December, FTC went after the Dannon Company, Inc. for one of its advertising campaigns. According to FTC's complaint, this large advertiser had claimed in nationwide ad campaigns that DanActive helps prevent colds and flu, and that one daily serving of activity relieves temporary irregularity, among other claims. FTC disagreed with Dannon and under a proposed settlement Dannon would be barred from claiming that any yogurt, dairy drink, or probiotic food or drink reduces the likelihood of getting a cold or the flu, unless the claim is approved by the Food and Drug Administration (FDA). FTC had worked closely with 39 state attorneys general who simultaneously announced the resolution of their own inquiries into Dannon's advertising of Dan active and Activia. Dannon agreed to pay the states $21 million to resolve these investigations.

Another recent example involved an FTC settlement whereby major marketers of children's vitamins agreed to stop making allegedly false and unproven claims that their supplements promote healthy brain and eye development in children. These companies agreed to pay $2.1 million to provide refunds to consumers who bought certain multivitamins in their Disney and Marvel heroes line. These multivitamins were sold by such major retailers as CVS Pharmacy, Wal-Mart, Target and Walgreens.

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Crackdown on Scams Targeting Consumers
In Financial Distress Will Continue

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In 2011, you can expect FTC to continue its crackdown on false advertising that allegedly targets consumers in financial distress. Because of the recession–and the weakened economy we have faced ever since that recession ended– FTC has taken upon itself the task of going after companies that FTC believes target consumers who are financially distressed. During the course of 2010, advertising compliance service, followed FTC's actions in this area very closely. We had a total of 27 articles on this topic throughout 2010. That represents approximately one-quarter of all of the articles written in Tab #23, "Financial Ads". (The first article in that tab is dated September 1, 1981.) This is a clear indication of FTC's strong commitment in this area. It is highly likely, given the continued weakness in the economy, that FTC will continue this commitment in 2011.

In 2010, for example, FTC took on such entities as:

• debt relief operations that allegedly made unsubstantiated claims,
• defendants who allegedly deceptively claimed they could save consumers money by reducing their credit card
• alleged scams that targeted homeowners who are behind in their mortgage payments or face foreclosure,
• and many similar cases.

You can expect to see much of the same in 2011.

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Expect Continued Enforcement and Strengthening
Of FTC's Telemarketing Sales Rule

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Perhaps FTC's most popular action in its history was the telemarketing ("Do Not Call") sales rule. You can expect FTC to bring many actions against those telemarketers that allegedly violate this rule. You can also expect FTC to look for ways to strengthen this very popular rule. For example on December 7, 2010, FTC announced that it was seeking public comments on whether and how to strengthen the caller ID provisions of the telemarketing sales rule. By requiring telemarketers to provide caller ID information, the rule allows consumers to screen out unwanted calls. FTC is seeking ways to combat technologies that can hide callers identities. You can expect FTC to revisit this rule–both in the form of complaints against telemarketers who allegedly violate the rule and via proposed rulemaking to bolster and strengthen this rule.

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FTC Will Continue to Rein in Robocallers

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You can expect FTC to continue its crackdown on so-called robocallers. Consumers are particularly incensed at receiving misleading pre-recorded Robocalls and they continue to demand that something be done to stop this offensive practice. Many attorneys general took up this fight in 2010 and will undoubtedly continue to do so in 2011. You can also expect FTC to continue its series of enforcement actions that the Commission has taken to rein in robocallers. In particular, FTC has focused on those telemarketers who allegedly tried to take advantage of consumers affected by the economic downturn. So you can look for FTC to focus its efforts on this particular aspect of the robocall phenomenon in 2011.

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Increased Congressional Oversight Is Coming

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It is very likely that FTC’s actions in the advertising law arena will face increased scrutiny from Congress in 2011, particularly from the House. Look for several of FTC’s recent proposals to come under close review from a variety of House oversight committees in this new year.

LAWYER's REFERENCE SERVICE

See, generally, Advertising Compliance Service, Tab #2, General Articles and Tab #23, Financial Ads.

NOTE: The Commission issues an administrative complaint when it has reason to believe that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. The consent agreement is for settlement purposes only and does not constitute admission by the respondent of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

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