FTC Sends Advisories on Deceptive Testimony and Ad Approval Practices

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Today the FTC announcement he had sent “Notice of violation of the sanction” to more than 700 companies, including leading consumer product companies, large retailers, technology platforms, media and game companies, and advertising agencies, warning them against deceptive and unfair practices when it comes to use recommendations and testimonials in advertisements.

The move wasn’t quite the typical FTC announcement, which often uses its corporate blog and press releases to help inform businesses of their truthfulness obligations in advertising. On the contrary, the FTC seems to have gone back (far back) in its toolbox at its disposal as an administrative enforcement agency and dusted off a rarely used technique.

You see, the FTC generally does not have the power to seek civil penalties for a first violation of the FTC Law, its primary law. Such authority is only triggered in certain circumstances – when an administrative cease and desist order, agency rule, or standards set out by the Commission are violated. It is on this last category – previous acts or practices – that the Commission relies here.

The FTC Civil Sanctions Authority may be triggered when the Commission: (1) has already issued a written decision that certain conduct is unfair or deceptive, and (2) that a particular business knew that the conduct was unfair or deceptive. In this case, the Commission can bring actions in federal court in order to obtain civil sanctions from other companies that commit similar violations. These written decisions that the Commission uses as authority? Well, the first one was released in 1941 and the last one came out in 1984, long before the advent of the internet, e-commerce, social media, or influencer marketing.

By sending more than 700 notices of breaches of sanctions, the Commission hopes to create the knowledge necessary now to identify recipients later. This strategy was announced by FTC Commissioner Rohit Chopra and Director of Consumer Protection Samuel Levine in an October 2020 article, “The Case for Resurrecting the FTC Act’s Penalty Offence Authority”. It is clear that following the Supreme Court ruling in April 2021 rejecting the FTC’s ability to use the FTC law to obtain restitution and restitution from businesses that engage in unfair or deceptive advertising practices, the agency looking for new ways to, in the words of Chopra and Levine, “dramatically increases deterrence and reduces the risk of litigation by noticing entire industries of sanction violations, exposing violators to significant civil penalties, while helping to ensure fairness for honest businesses ”.

According to the FTC Business blog, the fact that a company has now received a notice does not indicate that the Commission has reason to believe that it is breaking the law. The agency has not reviewed recipient advertising for the violations, at least not yet. However, companies receiving this notice now know that engaging in the conduct described therein could be subject to federal legal action by the FTC and subject to civil penalties of up to $ 43,792. by violation.

Today’s action, which is based on a similar approach taken by the FTC last week targeting claims for for-profit colleges has the potential to dramatically change the law enforcement landscape in the future. What to do now ?

  • To verify the list to see if your business has received a notice;

  • Familiarize yourself with the approval and testimonial practices described as prohibited in the Notice; and

  • Review your internal policies regarding the use of recommendations and testimonials in advertisements and make sure they comply with FTC requirements.

Copyright © 2021, Hunton Andrews Kurth LLP. All rights reserved.Revue nationale de droit, volume XI, number 286


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