While American Express was once synonymous with the phrase “it’s everywhere you want to be,” there’s a strong likelihood that the Federal Trade Commission (“FTC”) already is where you operate. From in-app purchases to marketing, the FTC has rules and guidelines that touch much of the modern economy.
For people doing business with customers, the reach of these rules may come as a shock. It does not seem obvious that the FTC would control promotions made over SMS text messages, or how personal endorsements are made. Yet, those are precisely items under the FTC’s influence. Three increasingly common activities that the FTC regulates are discussed below, and they may be surprising.
Website Affiliate Links. Under 16 C.F.R. §§ 255.0-.5, the FTC has rules for how affiliate links on websites must be disclaimed. A bona fide endorsement of a product that a writer actually used does not constitute an endorsement that has to be disclaimed. (See §255.0 Example 8) However, where the writer has a material relationship with the product’s source – such as being paid for the endorsement, receiving a commission for speaking highly of it, or receiving a courtesy copy for review – both the writer and the product’s source can be liable for violating the FTC’s rules if the relationship is not disclosed. (See § 255.1 Example 5 and § 255.5 Example 7) Merely disclosing this connection in the terms of service is not consistent with the intent of the FTC’s rules; a disclosure of the relationship as part of the article, or adjacent to any affiliate link, is preferable.
Paid Endorsements. 16 C.F.R. §§ 255.0 through 255.5 address product endorsements as well, whether for actual consumers, or experts asked to evaluate a product. Generally, endorsers must have actually used the endorsed products, and their endorsements must be repeated verbatim. As for expert endorsements, the endorser must actually be an expert in the area he or she is represented to be an expert. (See § 255.3(a)) Invoking one of the great pretensions of our time, a Ph.D. may be a “doctor,” but is a very different kind of doctor than a M.D. The FTC would not find it cute for some Medieval Studies Ph.D. offering his opinions as a “doctor” on a weight loss treatment. Also, endorsements can expire. If an advertiser learns that an endorser no longer uses or supports a product, their endorsement must no longer be used. (See § 255.1(c))
SMS Text Messages. As of October 2013, the FTC adopted stringent new regulations governing the use of SMS text messages for promotional purposes. These rules were added under the umbrella of the Telephone Consumer Protection Act (“TCPA”), which originally set out to protect Americans from unsolicited sales calls. Under new regulations, customers and potential customers must opt-in in writing before receiving a text message promoting a product or service. (See 47 C.F.R. § 64.1200) The FTC’s new regulations require even existing contacts, who ordinarily would have fallen into the TCPA’s exemption for prior established business relationships, to provide their written consent to further text messages. For non-profits providing “information” via text, or non-commercial messages, only oral consent to receiving text messages is required.
This is particularly important because statutory damages of up to $1,500 per violation of the TCPA incentivizes plaintiff’s lawyers – and plaintiffs – to pursue violations of the FTC’s rules. How can this be if the changes are only FTC rules, rather than statutes in the United States Code? Simple: the TCPA allows a private right of action for violation of the law “or the regulations prescribed under [it],” including the new text messaging rules. (See 47 U.S.C. § 227(b)(3))
These are only a few examples of where the FTC can pop up in consumer promotions. The examples should illustrate, though, that the FTC can be found lurking in many unexpected places. This should not be a discouragement to using novel promotion and customer engagement techniques. But it should serve as a warning that being reckless, or playing fast and loose with the truth, can have expensive consequences.