FTC Compliance: What It’s Like To Get Sued By The FTC… And What You Can Do About It!

FTC Compliance – What It's Like To Get Sued By The FTC… And What To Do About It!

By Chip Cooper, Esq.

If you sell products or services online to consumers or to the work-at-home market, you’re subject to the jurisdiction of the Federal Trade Commission (FTC). The big takeaway: FTC compliance is just as critical to your business success as your marketing plan.

They key to FTC compliance – and particularly for FTC online advertising compliance – is understanding and following, FTC online advertising guidelines.

This article will explain what it’s like to get sued by the FTC for violating FTC online advertising guidelines. It will even explain how you can quickly and easily create your own FTC compliance report – essentially your own FTC compliance statement – that can be a valuable FTC compliance guide to help you avoid costly FTC claims as you operate your online business.

What You’ll Learn

You’ll learn 3 key takeaways.

Why the FTC is now going after the little guys for FTC online advertising violations, and why you should be worried.
What it’s like to get sued by the FTC, and how your bank accounts and personal assets can be frozen and lost forever.
Real-life examples of people who didn’t think they were at risk, but who got nailed by the FTC

Why The FTC Is Now Going After The Little Guys

To understand why the FTC is now going after the little guys for FTC online advertising violations, you should understand the 3 distinct phases of FTC enforcement.

Phase 1 – The “Wild, Wild” West. This is the period before 2009 when there was relatively little new FTC online advertising guidelines, and very little FTC enforcement.
Phase 2 – Beginning in 2009, the “tsunami” of new FTC online advertising guidelines. The new guidelines came at a stepped-up rate, and they continue to this day. The primary targets were the big guys – Google, Facebook, Twitter.
Phase 3 – The FTC drill-down to the little guys beginning in 2014. It was bound to happen, and it started in 2014. FTC lawsuits are now focusing on unsubstantiated FTC online advertising claims as well as deceptive ad claims involving such marketing practices as testimonials, membership sites with continuity billing plans, sales to the work-at-home market including turnkey websites, affiliate marketers, free offers, and deceptive statements on privacy policies.

Phase 3 is expected to continue indefinitely into the future, so if you’re a little guy in terms of Internet marketing, protecting your business assets – and your personal and family assets – should now be your highest priority.

How The FTC Collects Information To Build a Case Against You

The FTC uses various techniques to collect information sufficient to build a lawsuit against you for violating FTC online advertising guidelines. These techniques include the following.

Direct observation – You’re visible on the Web 24×7, so it’s easy for FTC personnel to view your ad claims, optin pages, social media posts, etc. Your FTC compliance failures are in full view all the time.
FTC complaint form – The FTC has a very comprehensive FTC compliance report form on their website that enables consumers to file an FTC compliance report about your alleged FTC violations.
FTC Facebook page – The FTC also uses their Facebook page to collect consumer gripes and complaints for purposes of the FTC starting an FTC compliance report file against you.
Better Business Bureau (BBB) – If a consumer files an FTC compliance statement alleging that you’ve committed an FTC online advertising violation, the BBB will usually file a follow-up FTC compliance statement with the FTC. The FTC relies heavily on these complaints filed with the BBB.
Civil Investigative Demand (CID) – When the FTC has collected each FTC Compliance report about you, the next step is to serve you with a CID which is essentially a This may be your first warning that the FTC is targeting you for a claim. You’ll be required to supply the FTC with additional information that they can use to complete building a case against you.

What It’s Like To Get Sued By The FTC

The lawsuit phase begins after the FTC collects all the information it needs to build an airtight case against you for your FTC compliance failures. The lawsuit phase involves the following 3 steps.

The Lawsuit – This is when your life changes forever. To initiate the lawsuit, the FTC will file a Complaint in the appropriate court alleging their claims for your FTC compliance failures. In many cases, the FTC will request the court to grant immediate relief in the form of a temporary restraining order, asset freeze (including all of your bank and investment accounts), and the appointment of a Receiver to assume control of your business. Your life will never be the same.
Settlement demand – After the FTC files the lawsuit, they typically will offer a non-negotiable settlement demand consisting of a continuing injunction, huge fines (equitable restitution), and burdensome requirements involving filing an FTC compliance report routinely for a period ranging from 10 to 20 years. Most marketers accept the settlement demand. A review of the few cases that were litigated (where the settlement demand was not accepted), the defendants would have fared much better had they accepted the settlement demand. Litigating FTC compliance claims is almost always a bad idea.
The final court order – The court will convert your settlement into a court order. You’ll not be able to discharge the fines by filing bankruptcy. You’ll just have to live with it. You will have to start your financial live over from this point forward.

Real-Life Examples Of People Who Didn’t Think They Were At Risk

But Who Got Nailed By The FTC

The following 2 cases illustrate how being ethical is not sufficient to protect yourself from FTC claims for FTC compliance failures.

FTC v. Online Entrepreneur (d/b/a Six Figure Income) and participating individuals. Online Entrepreneur’s engaged in FTC online advertising for the sale turnkey websites to work-at-home purchasers and training to become affiliate marketers for well-known companies such as Prada, Sony, Louis Vuitton, and Verizon to be followed by upsells for additional items such as domain names, website hosting services, coaching training, affiliate marketing training, and website enhancement materials. The FTC claimed the following FTC compliance violations: (i) false marketing practices regarding earnings claims of up to $15,000 per month, (ii) deceptive marketing practices for failure to substantiate earnings claims, and (iii) violations of the FTC’s Business Opportunity Rule by providing “outlets” in the form of turnkey websites without the required disclosures. The final settlement order imposed the following: (i) permanent ban on defendants from sale of business opportunities and work-at-home opportunities; (ii) joint and several, personal liability for consent judgment of $2,923,318 (Judgment suspended upon surrender of all personal assets and bank accounts, sworn under penalty of perjury; full amount of judgment to become due immediately if defendants’ have misrepresented financial condition); and (iii) strict compliance reporting for 15 years.
FTC v. JDI Dating and corporate insider, William Thomas (a United Kingdom company). JDI and William Thomas engaged in FTC online advertising for marketing a worldwide dating service consisting of 18 websites that charged subscribers a fee to gain access to profiles of persons who may be good matches for love interests. Free memberships with limited access to profiles and matches could be upgraded to paid subscriptions with greater access. The FTC claimed the following FTC compliance violations: (i) deceptive marketing practices with fake, computer-generated profiles to trick users into upgrading to paid memberships (the FTC claimed that the only indication the profiles were fake was a tiny “v” encircled by a “c”, and users were unlikely to notice it, let alone understand what it meant); (ii) deceptive marketing practices by failure to disclose automatic renewal terms for the membership continuity billing plan (the automatic renewal terms were buried in multiple pages of densely worded text inside the Terms of Conditions—which most people don't read). The final settlement order imposed the following: (i) permanent ban on defendants from misrepresentations regarding continuity plan disclosures and refund policies; (ii) joint and several, personal liability for consent judgment of $616,165 (not dischargeable in bankruptcy); and (iii) strict compliance reporting for 10 years.

Conclusion

The online entrepreneurs who are the subject of the real-life examples discussed in this article didn’t intend to violate FTC online advertising guidelines. And they probably believed they were OK with FTC compliance. But they didn’t know what they didn’t know, and their lives were changed dramatically for their unwitting FTC compliance violations.

FTC Guardian provides simple and easy FTC compliance tools to help online entrepreneurs operate a worry-free online business.

One of the key benefits of membership in FTC Guardian is the FTC Audit Report generator that enables online entrepreneurs to generate an FTC compliance report that can be used as an FTC compliance guide. The FTC compliance report will specify the key FTC compliance issues and requirements for a specific website that will help online understand FTC compliance requirements for the specific website.

About The Author. Chip Cooper is a full-time Internet Attorney who is Of Counsel to the Atlanta, Georgia law firm of Jones & Haley, P.C. Chip’s practice focuses on SaaS, Internet, software, and intellectual property law. Chip is also a founder and CEO of FTC Guardian, Inc. and its www.ftcguardian.com website. FTC Guardian provides tools to help online entrepreneurs develop strategies for FTC compliance, protect their intellectual property, and to otherwise protect their business and personal assets.

Disclaimer: This article is provided for informational purposes only. It’s not legal advice, and no attorney-client relationship is created. Neither the author nor FTC Guardian, Inc. is endorsed by the Federal Trade Commission.

Here’s How To Make Sure You, Your Business & Website Is FTC Compliant

By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?

Smart business owners around the world are doing it with the help of FTC Guardian.

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Here are some of the things you’ll discover on the training:

Real-Life Examples of People Who Didn’t Think They Were At Risk, But Who Got Nailed By The FTC, And Why It Could Happen To You, Too

The 3 Enormous Powers The FTC Has That Can Change Your Life – And Your Family’s Life – Forever!

How to Avoid FTC Claims When Collecting Leads With Optin Forms

3 Privacy Policy Mistakes Every Digital Marketer Is Making, And Why You’re In The FTC Crosshairs.

And Much More…

Remember: legal protection is a massively important part of your business, and it’s one you cannot afford to ignore any longer.

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