FTC Business Blog

Ad agency liability: FTC looks to conduct, not the grey flannel suit lfair August 23, 2017 | 11:40AM Ad agency liability: FTC looks to conduct, not the grey flannel suit By Lesley Fair According to the “Mad Men” stereotype, you could spot an old-school advertising agency executive by the tailored wardrobe and expense account lunch. A lot has changed in the ad game, but two truths remain: 1) More than 50 years of FTC cases establish that ad agencies may be liable for their role in deceptive campaigns; and 2) Companies that may not describe themselves as “ad agencies” may still be held responsible for illegal acts or practices. In other words, the FTC looks to the facts, not the grey flannel suit. That’s one of the messages of proposed settlements announced by the FTC and the Maine Attorney General against Synergixx, LLC, Charlie R. Fusco, and Ronald Jahner, all of whom played prominent roles in the promotion of the cognition supplement CogniPrin and a pain relief product called FlexiPrin. Earlier this year, the FTC and the Maine AG announced settlements with two corporations and four individuals for making misleading claims for CogniPrin and FlexiPrin and for committing other violations of federal and state consumer protection law. The just-announced settlements with Synergixx, Fusco, and Jahner put an end to the litigation, but it’s worth a few minutes of your time to focus on the roles those defendants played in the promotions. According to the complaint, Synergixx and its owner Charlie Fusco produced 30-minute radio ads for CogniPrin and FlexiPrin that were deceptively formatted to sound like educational talk shows. (Ms. Fusco also hosted the “programs.”) In addition to challenging the deceptive claims, the lawsuit alleged – among other things – that the defendants featured “experts” in the ads who didn’t have the expertise they claimed to have. Synergixx and Fusco also created inbound call scripts that deceptively claimed that consumers could try the supplements “risk-free” with a money-back guarantee, but failed to clearly disclose the substantial hoops consumers had to jump through to get those refunds. The complaint further alleged that they didn’t clearly tell consumers they would have to enroll in an auto-ship continuity plan to qualify for that “risk-free” offer. The FTC and AG also announced a settlement with Ronald Jahner, whom they allege was falsely presented in the ads as an objective medical expert. According to the complaint, Jahner provided an endorsement without appropriately examining the products or exercising his purported expertise. The three defendants also didn’t mention that Jahner was paid a percentage of FlexiPrin and CogniPrin sales, a material connection that should have been disclosed. The big-picture point for modern-day Mad Men and Women is, depending on the facts, the breadth of potential liability under the FTC Act. Conscientious marketers don’t create questionable claims or engage in deceptive business practices – and they don’t look the other way when others involved in the promotion engage in iffy conduct. Whether you think of yourself as an ad agency executive or something else, the FTC will evaluate the facts, not the title. Furthermore, when it comes to crafting ad copy, it’s fine for creatives to be creative. But you’re still under an obligation to be scrupulously accurate about the claims the ads convey to consumers and the science that supports those representations. Finally, both Fusco and Jahner were held individually liable for their roles in the promotions. That should give any business person pause before assuming that truth in advertising is someone else’s responsibility.  

FTC case against DeVry yields $100 million settlement lfair December 15, 2016 | 11:59AM FTC case against DeVry yields $100 million settlement By Lesley Fair Claims about employment prospects and income levels are like any other objective advertising representation – and Job #1 for advertisers is to support those promises with solid evidence. DeVry University and its parent company have entered into a $100 million settlement to resolve the FTC’s allegations that the defendants’ claims didn’t make the grade. According to the FTC, DeVry violated the law by deceptively claiming that 90% of its grads actively seeking employment landed jobs in their field within six months of graduation. The complaint also challenged as misleading DeVry’s representation that one year after graduation, its bachelor’s degree grads had, on average, incomes that were 15% higher than the incomes of bachelor’s degree grads from all other colleges and universities. How will the $100 million settlement be distributed? DeVry will pay $49.4 million in cash to qualifying students who were harmed by the deceptive ads. The proposed order includes an additional $50.6 million in debt forgiveness. That figure represents the full balance owed on all unpaid private student loans issued to DeVry undergrads between September 2008 and September 2015 – $30.35 million – plus $20.25 million in student debt for things like tuition, books, and lab fees. But that’s not all the defendants will be doing for students the FTC alleges were deceived. The order also requires DeVry to: directly notify consumers who will be receiving debt forgiveness; inform credit bureaus and collection agencies of the debt forgiveness; release transcripts and diplomas that DeVry withheld from students because of outstanding debt and cooperate with future requests for diplomas, transcripts, and related enrollment or graduation information; and set up a dedicated telephone hotline where consumers can call with questions about debt forgiveness, their credit reports, or collections concerns. The settlement also includes provisions that will change how DeVry does business from here on in. Among other things, the order prohibits DeVry from misrepresenting the likelihood that graduates will get a job as a result of their degree. In addition, if the defendants want to make future claims about its graduates’ success in finding jobs near graduation, they can’t include jobs that students landed more than six months before graduating. The settlement also prohibits DeVry from misrepresenting the compensation students or grads have earned or can expect to earn. What lessons can others can learn from the FTC’s action against DeVry University? 1.   For many consumers, education is the second-largest purchase they’ll ever make. Companies in that sector and within the FTC’s jurisdiction are held to the same truth-in-advertising standards as any other business. 2.   Say “substantiation” and some advertisers erroneously assume the term refers just to things like health claims. Wrong.  If your company makes any objective representation expressly or by implication – including statements about employment or earnings prospects – you need solid proof to back up those promises. Visit ftc.gov/devry for more information about the DeVry settlement and share consumer tips from the FTC about evaluating educational opportunities.  

OTC homeopathic drugs: Established FTC proof standards apply jonmorgan November 15, 2016 | 10:10AM OTC homeopathic drugs: Established FTC proof standards apply By Lesley Fair The FTC applies a consistent approach to evaluating ad claims. Companies must have a reasonable basis for objective representations, including claims that a product can treat specific health conditions. Whether it’s an over-the-counter drug, dietary supplement, or food, the same established standards apply. And as an FTC Enforcement Policy Statement explains, that also holds true for OTC homeopathic drugs. Consumers can find a host of homeopathic remedies on store shelves. Homeopathy is a view dating back to the 1700s that disease symptoms can be treated by tiny doses of substances that produce similar symptoms if given in larger doses to healthy people. Many homeopathic products are diluted so much that they no longer have detectable levels of the initial substance. Generally speaking, health claims for homeopathic products aren’t based on modern scientific methods and there’s controversy about their effectiveness. Those were some of the topics talked about at a 2015 workshop the FTC convened to explore the issues. We’re following up on that workshop with a Staff Report and an Enforcement Policy Statement that offers guidance to businesses on how the FTC Act applies to marketing claims for OTC homeopathic drugs. Two key caveats from the outset: The Policy Statement applies only to OTC products intended for self-limiting disease conditions amenable to self-diagnosis of symptoms and treatment. And it doesn’t apply to the practice of medicine – what doctors tell their patients. You’ll want to read the Enforcement Policy Statement for the full story – it’s short, but packed with detail – but it boils down to this: “Efficacy and safety claims for homeopathic drugs are held to the same standards as similar claims for non-homeopathic drugs” and there’s no basis for treating them differently under the FTC Act. What are those standards? We’re thumbnailing it here, but according to the FTC’s Advertising Substantiation Policy Statement, if a company conveys that it has a certain level of proof, it must have “at least the advertised level of substantiation.” If there’s no express or implied reference to a particular level of support, the FTC considers “the type of claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim, and the amount of substantiation experts believe is reasonable.” For health, safety, or efficacy claims, companies need “competent and reliable scientific evidence,” a phrase defined in many recent cases. For claims that a product can treat a disease or its symptoms, that generally means well-designed human clinical testing. For most OTC homeopathic drugs, the case for efficacy is based solely on traditional homeopathic theories, and not on studies applying current scientific methods. So claims that they have a therapeutic effect lack the reasonable basis required by FTC law, and therefore are likely misleading.   Image However, the FTC has long recognized that marketing materials may include additional information that may prevent claims from being misleading. According to the Enforcement Policy Statement, the promotion of an OTC homeopathic product for an indication that isn’t substantiated by competent and reliable scientific evidence may not be deceptive if it states and effectively communicates that: “(1) there is no scientific evidence that the product works, and (2) the product’s claims are based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts.” (Of course, established standards for effective disclosures apply.) In addition, as the Enforcement Policy Statement observes, there’s an inherent contradiction in telling consumers that a product is effective and telling them that there’s no scientific evidence for that assertion. So it’s possible that the disclosure may be insufficient to prevent deception. Marketers may want to develop extrinsic evidence to determine the net impression consumers take from their marketing materials. Read the Enforcement Policy Statement for more information and check out the FTC Staff Report on the Homeopathic Medicine and Advertising workshop.

FTC challenges influencer campaign for Warner Bros.’ Shadow of Mordor game lfair July 11, 2016 | 11:17AM FTC challenges influencer campaign for Warner Bros.’ Shadow of Mordor game By Lesley Fair In the popular video game Shadow of Mordor, players don’t just randomly slash, hack, and pillage. They battle specific opponents through a feature known as the Nemesis System. In the FTC’s lawsuit against Warner Bros. Home Entertainment, truth in advertising had a nemesis: paid pitches for Shadow of Mordor that Warner Bros. deceptively claimed were independent reviews. And read on for a startlingly candid statement by one of those influencers. To help launch Shadow of Mordor, Warner Bros. brought a social media company on board to coordinate a YouTube influencer campaign. One strategy was to hire influential gamers to post videos promoting Shadow of Mordor – videos that ultimately yielded more than 5.5 million YouTube views. In addition to free game access, Warner Bros. paid the influencers cash – ranging from hundreds of dollars to five figures. Influencers’ videos were subject to pre-approval and, according to the terms of the agreement, Warner Bros. “will be deemed the author and exclusive owner.” Warner Bros. was quite exacting in what else it required of influencers: “Video will feature gameplay” of the Shadow of Mordor game. “Video will have a strong verbal call-to-action to click the link in the description box for the viewer to go to the [game’s] website to learn more about the [game], to learn how they can register, and to learn how to play the game.” “Video will promote positive sentiment” about the game. “Video will not show bugs or glitches that may exist.” “Video will not communicate negative sentiment” about Warner Bros. Home Entertainment, its affiliates or the game. Warner Bros. also required “One Facebook post or one Tweet by Influencer in support of Video.” “Positive sentiment” posted for cash? That sounds like the kind of material connection between an advertiser and endorser the FTC says should be clearly and conspicuously disclosed. And for FTC watchers, that’s where the story gets almost as interesting as Shadow of Mordor. According to the complaint, influencers were directed to place sponsorship information in the text of the description box – that’s the collapsed box just below a YouTube video – not in the video itself. Furthermore, they were told to put “information about [the game] above the fold” in the description box and that the “description box will include FTC disclaimer disclosing that the post is sponsored.” But as the first example shows, only the top few lines of the description box are immediately visible. Without clicking the “Show More” button and possibly scrolling down, consumers wouldn’t see the sponsorship disclosure – especially since Warner Bros. mandated that game information had to come first. The second screenshot shows an example of the sponsorship information at the end of the expanded “Show More” box and illustrates – inadvertently perhaps – the FTC’s concern with the placement of the disclosure. In this example, the gamer wrote “This video sponsored by Warner Bros.” and followed with this telling statement: “No one reads this far into the description … what are you doing snooping around.” Our sentiments exactly, Dude. In other instances, influencers’ videos included a half-hearted sponsorship disclosure – for example, “This has been one of my favorite sponsored games, so thanks that I could play it for free!!” – that failed to mention that in addition to free play, Warner Bros. was paying them thousands of dollars. The complaint charges that Warner Bros. falsely represented that the Shadow of Mordor gameplay videos reflected the independent opinions or experiences of impartial gamers. The FTC also alleges that, in many cases, Warner Bros. failed to disclose – or failed to adequately disclose – influencers’ material connection to the company. Among other things, the proposed settlement requires Warner Bros. Home Entertainment to clearly disclose material connections to influencers or endorsers. In addition, it puts provisions in place to educate and monitor what influencers do on the company’s behalf – and in certain circumstances, requires the Warner Bros. to withhold payment or terminate influencers or ad agencies that don’t comply. What compliance tips can others to take from the proposed settlement? Disclose material connections clearly and conspicuously.  If there’s a connection between an endorser and advertiser that consumers wouldn’t expect and it would affect how they evaluate the endorsement, the connection should be disclosed. But that’s not all the law requires. A sponsorship statement or any other disclosure necessary to prevent deception must be clear and conspicuous. A “disclosure” that consumers aren’t likely to read isn’t really a disclosure at all. The FTC staff reiterated that point in .com Disclosures: How to Make Effective Disclosures in Digital Advertising: “Simply making the disclosure available somewhere in the ad, where some consumers might find it, does not meet the clear and conspicuous standard.” No one knows better than advertisers how to make disclosures clear and conspicuous. Building on earlier cases challenging the failure to include disclosures altogether, the Warner Bros. settlement addresses allegedly ineffective disclosures. “But how do I convey information effectively?” some advertisers ask. Really? Advertisers are in the “clear and conspicuous” business. One rule of thumb is to apply the tried-and-true principles for conveying a marketing message effectively. In the context of YouTube, for example, a disclosure front and center in the video is likely to be clearer than language buried in the description box. Consider how consumers will view your ads. Warner Bros. directed influencers to put the sponsorship disclosure in the YouTube description box, but then also required them to promote their videos on Facebook or Twitter. But when influencers complied by posting the videos themselves on Twitter or Facebook, it was even less likely that consumers would see the disclosures since “Show More” buttons didn’t appear on those posts. .com Disclosures addresses that, too: “If a particular platform does not provide an opportunity to make clear and conspicuous disclosures, then that platform should not be used to disseminate advertisements that require disclosures.” Keep an eye on what others are doing on your behalf.  For future influencer campaigns, the proposed settlement outlines steps Warner Bros. must take to monitor influencers’ conduct. Of course, the settlement applies just to that company, but The FTC’s Endorsement Guides: What People Are Asking offers advice on how savvy marketers train and monitor members of their network. You can file a comment about the settlement by August 10, 2016.  

8 advertising potholes auto dealers should avoid wfg-adm109 January 9, 2014 | 12:08PM 8 advertising potholes auto dealers should avoid By Lesley Fair In a drive to encourage truth in auto advertising, the FTC has announced Operation Steer Clear – a coast-to-coast law enforcement sweep focusing on deceptive TV, newspaper, and online claims about sales, financing, and leasing.  If you have clients in the auto industry, the lessons of Operation Steer Clear can help keep them on the right track. The companies named in the 10 lawsuits include four California dealers:  Casino Auto Sales in La Puente, Rainbow Auto Sales in South Gate, Honda of Hollywood in Los Angeles, and Norm Reeves Honda in Cerritos.  Also the subject of law enforcement action are Fowlerville Ford in Fowlerville, Michigan; Nissan of South Atlanta in Morrow, Georgia; Infiniti of Clarendon Hills in Clarendon Hills, Illinois; and Paramount Kia in Hickory, North Carolina.  In addition, the FTC took action against Texas-based Southwest Kia companies, including New World Auto Imports in Dallas, New World Auto Imports in Rockwall, and Hampton Two Auto Corporations in Mesquite.  A lawsuit against Courtesy Auto Group in Attleboro, Massachusetts is heading to trial before an Administrative Law Judge. You’ll want to review the complaints to see the allegations in each particular case, but busy dealers can supplement their TO DO lists with these TO DON’TS, ad-related practices the FTC challenged as illegal in one of more of the cases: Deceptive pricing.  Some dealers lured prospective buyers onto the lot by advertising vehicles at a specific low price.  But the real price was $5,000 more.  (The complaint mentions that some of these ads involved a mix of English and Spanish.) Deceptive teaser payments.  In some cases, dealers advertised attention-grabbing low monthly payments.  What they didn’t explain up front was that those were temporary teaser payments that would get jacked up after a short period.  The FTC says dealers didn’t state the number of payments and how much they would be after those first few low monthly payments.   Undisclosed balloon payments.  Another dealer advertised low monthly payments without clearly disclosing that buyers would owe a final balloon payment.  What’s more, the FTC says the dealer didn’t disclose the amount of that balloon – in this case, over $10,000. False $0 up-front leasing claims.  Some companies advertised that consumers wouldn’t have to pay anything up front to lease a car.  Not true, says the FTC.  In fact, lurking behind those goose eggs were hefty fees and other amounts due up front. Undisclosed lease terms.  The FTC says some companies touted low up-front amounts and low monthly payments in their ads without clearly explaining that the transaction was actually a lease and involved substantial hidden fees. Hidden rates.  In one case, the FTC charged that the dealer claimed to offer 0% for 60 months.  But as it turned out, the rate applied only if people bought a new car for up to a certain dollar amount – in one instance $12,000.  If the car of a consumer’s dreams was, say, $18,000, the buyer would have to pay a higher rate, and that rate wasn’t clearly stated. Bogus prize promotions.  One dealership used a mailer to get folks in the door, falsely claiming the consumer had won a sweepstakes prize. Credit and leasing violations.  In many of the cases, the FTC charged that companies violated the Truth in Lending Act (TILA), Reg Z, the Consumer Leasing Act, and Reg M – long-standing laws that any dealer should be familiar with.  One common thread:  the failure to disclose key credit- or lease-related terms in ads. To settle the FTC lawsuits, the companies have signed proposed orders that will change how they do business in the future.  Notable terms in these legally binding settlements:  a ban on ads that misrepresent the cost to buy, lease, or finance a vehicle and a prohibition on other deceptive claims about pricing, sale, leasing, or financing.  When charged in the complaint, the orders mandate that dealers abide by TILA and the Consumer Leasing Act.  Also forbidden:  bogus claims about sweepstakes, prizes, or other incentives. The FTC is accepting comments about the proposed settlements by the February 10, 2014, deadline. Time for a compliance tune-up?  Bookmark the Business Center’s Automobiles page for guidance on steering clear of deceptive practices.  

Last resort wfg-adm109 June 6, 2013 | 10:03AM Last resort By Lesley Fair Three FTC cases, 83 civil actions brought by 28 states, more than 184 defendants facing criminal charges in cases filed by federal and local prosecutors, and 25 actions brought by agencies in 10 other countries.  If you’re unclear on whether law enforcers are presenting a united front against travel-related fraud, then we have some oceanfront property to sell you. One of the scams targeted by the latest law enforcement sweep involves bogus offers to resell people’s timeshares.  Here’s how the operators work:  They call timeshare owners and claim to have people lined up ready to pay top dollar for timeshares.  For an upfront charge — often falsely characterized as “filing fees” or “closing costs” — they promise to put them together with champing-at-the-bit buyers.  Move fast, the high-pressure pitchmen urge.  They need your place now. But once the check has been cashed, those “eager buyers” disappear only to be replaced with endless umms and uhhs from the marketers.  According to the FTC, one defendant avoided consumers’ complaint calls simply by putting them on hold indefinitely. Also in law enforcers’ sights:  deceptive travel prize promotions.  Marketers lure people in with a “Congratulations.  You just won!” pitch for discounted or “free” vacation packages.  Most people got nothing.  Others had to sit through high-pressure “Glengarry Glen Ross”-style sales presentations. We hope your clients don’t use tactics like that, but there are other points businesses should take from this announcement. United we stand.  OK, maybe it’s not quite like Quincy Jones bringing everyone together to sing “We are the World,” but when the head of the FTC’s Bureau of Consumer Protection, the Florida Attorney General, the U.S. Attorney for the Southern District of Florida, and the Deputy Commissioner of Florida’s Department of Agriculture and Consumer Services make a joint announcement like this, we consider it the consumer protection equivalent.  Local, state, federal, and international agencies working together to make efficient use of law enforcement resources:  That’s good news for consumers — and bad news for the scamming set. The Dos and Don’ts of Do Not Call.  The FTC cases allege violations of the Telemarketing Sales Rule, including cold calls to people on the Do Not Call Registry.  Consumers have voted with their finger and the FTC has more than 200 million good reasons to keep the heat on telemarketers who flout the law.  It’s a good time to remind clients of their responsibilities under the TSR. Crime in the suites.  Injunctions, financial remedies, and other consequences of civil lawsuits should make any sensible business person think twice before resorting to deceptive practices in travel-related promotions.  But make sure your clients are aware that certain conduct can result in criminal prosecution.  That’s a stay-cation no one wants to take. The “coast” of “dune” business?  It’s not just timeshare resale scams that have attracted attention.  Other misleading practices are on the state and federal enforcement itinerary, too.  If you have clients who market timeshare or travel promotions, let them know about the reservations law enforcers have expressed about misleading claims.  

Good night. Sleep tight. Be sure to get your ad claims right. wfg-adm109 September 13, 2012 | 11:24AM Good night. Sleep tight. Be sure to get your ad claims right. By Lesley Fair No one is going to amend the nursery rhyme, but if you market products aimed at fighting bed bugs or head lice and are itching to keep your promotions in line with the law, two FTC lawsuits merit your attention.  Even if bugs aren’t your bag, the cases are a reminder of the need to back up your claims with solid science. The first case, which resulted in a settlement, challenged claims for Rest Easy, a liquid containing cinnamon oil, peppermint, clove oil, and the like.  Available from national retailers, Rest Easy was advertised to “Kill & Repel Bed Bugs.”  As the ads said, “Rest Easy is HIGHLY effective, killing 90% of bedbugs within 2 seconds of contact, and the rest within 30 minutes . . . ”  In addition to eradicating pesky vermin, the marketers pitched the gallon size as an effective litigation repellant:  “For commercial use in apartments, hotels, and more.  Never have to deal with another tenant complaint and clear away the looming threat of lawsuits.  Don’t let your business be a victim of a growing and serious concern!” But according to the FTC, Florida-based RMB Group and corporate officers Howard Brenner and Bruce Brenner didn’t have sound science to back up their promises that Rest Easy kills or repels bed bugs or that by spraying Rest Easy around a bed, users can create a barrier against the pests.  Under the settlement — which includes a $264,976 judgment suspended due to the defendants’ inability to pay — RMB Group and the Brenners will need competent and reliable scientific evidence to support performance or efficacy claims they make about Rest Easy or any pesticide they market in the future. The second case, which is awaiting trial, challenges claims for BEST YET!, a line of cedar oil products sold by Texas-based Cedarcide Industries, Dave Glassel, and related companies.  Ads for BEST YET! “Get Rid Bed Bugs” sprays, kits, and foggers represented that the products are effective in stopping and preventing bed bug infestations and are more effective than synthetic pesticides.  The complaint challenges similar claims for BEST YET! Louse Eradication Fluid and the BEST YET! Head Lice Treatment Kit.  According to the FTC, the company’s prevention and treatment promises are unsubstantiated and its claims that the products’ effectiveness and superiority have  been scientifically proven are false. In their ads, the defendants also claimed that the Environmental Protection Agency had advised consumers to avoid other products:  “Perhaps that’s why the EPA recently warned victims fighting bed bugs to ‘avoid chemical solutions altogether.’”  Not so, says the FTC.  As the complaint alleges, “In fact, the EPA recommends a combination of techniques known as integrated pest management (IPM) — an approach that includes prevention, monitoring, and limited use of chemical pesticides.” The FTC’s lawsuit also challenges as false the defendant’s claims that BEST Yet! was invented for the United States Army at the request of the United States Department of Agriculture and that the USDA has acknowledged BEST YET! as the number one choice of bio-based pesticides. The complaint is pending in federal court in California.  

Why the FTC’s Myspace case matters to your business: Part 3 wfg-adm109 May 11, 2012 | 12:03PM Why the FTC’s Myspace case matters to your business: Part 3 By Lesley Fair The terms of FTC law enforcement actions apply just to the company in question and the proposed settlement with social network Myspace for alleged privacy-related glitches is no exception. But how should other businesses respond? Some will scan the headline to make sure their company isn’t named and then do that fingers-in-the-ears la-la-la thing. But savvy executives know that understanding where another company might have gone wrong is a good way to keep their company in the right. What tips can your business take from the FTC’s settlement with Myspace and other recent privacy cases? Assurance policy. You may be tired of hearing it, but it bears repeating: Review your privacy policy and double-check that what you promise — expressly or by implication — comports with your day-to-day practices. Like any other claim, what you say about how you handle information has to be truthful and backed up with solid proof. The FTC’s lawsuit alleges that Myspace’s policy made assurances the company didn’t honor. Sure, have your legal eagles review it, but include your operations people in the conversation. They’re more likely to know what’s really happening behind the scenes. Simply put, promise only what you know for a fact you deliver. Default lines. Myspace’s default settings allowed users’ full names to be publicly accessible. Of course, each site is different, but give your default settings serious consideration. Don’t make those decisions by, uh, default. If people have choices about what information will be shared, make it easy for them to understand how and where they can exercise their options. Everything but the kitchen sync? According to the FTC’s complaint, Myspace made it possible for ad networks to match up — or sync — a user’s Friend ID with other data in a way that gave them access to a user’s personal information, including in many cases his or her full name. The FTC says that flew in the face of promises Myspace made in its privacy policy. Smart companies think about how easy it might be for others to sync information in a way that would render their privacy promises misleading. (FTC Chief Technologist Ed Felten talks more about that in his Tech@FTC blog.) May I take your order? Once a company is under FTC order, compliance is legally enforceable. But many provisions in recent orders just make good business sense and cost next to nothing to put in place. For example, the Myspace order, requires the company to designate someone to be responsible for implementing and carrying out the mandated privacy program. Of course, data security and privacy are every employee’s responsibility. But now that you’re building them into your daily operations, doesn’t it make sense for businesses of all sizes to name an in-house point person to coordinate those efforts?    

COPPA: All skidding aside wfg-adm109 November 9, 2011 | 10:49AM COPPA: All skidding aside By Lesley Fair It billed itself as “Facebook and Myspace for kids,” but according to a settlement with the FTC, the Skid-e-Kids website failed to meet critical compliance obligations under COPPA, the Children’s Online Privacy Protection Act.  As a result, the FTC says the site collected personal information from about 5,600 kids without their parents’ consent. Under COPPA and the FTC’s COPPA Rule, website operators like Skid-e-Kids have to notify parents and get their OK before the site collects, uses, or discloses personal information from children under 13.  The Rule also requires that operators post a plain-language privacy policy that’s clear, understandable, and complete. The Skid-e-kids site — skidekids.com — courted “tweenagers” and their parents by promoting the site as “the social networking alternative for kids ages 7 to 14″ where “parents are in charge.”  The website promised, “We ensure that our privacy policy and information practices adhere to the United States Children’s Online Privacy Protection Act, other applicable data privacy laws and all other applicable legislation.” Skid-e-Kids may have talked the talk — the site promised to send parents an email they’d have to use to activate their kid’s account — but the FTC alleged it didn’t walk the walk.  According to the lawsuit, parental notice wasn’t provided and consent wasn’t received.  As a result, kids were able to create profiles, post personal information, upload pictures, and send messages to other users, resulting in the unauthorized collection of their names, birth dates, email addresses, and cities of residence.  Thus, the FTC charged, the site violated COPPA and the deceptive claims in the privacy policy ran afoul of Section 5. The order against Skid-e-Kids and the site operator bars future COPPA violations, requires them to tell the truth in the privacy policy, and calls for the destruction of all information collected from kids in violation of COPPA.  In addition, if the operator of Skid-e-Kids runs a COPPA-covered site, he has to retain an online privacy professional to provide periodic assessments or join an FTC-approved safe harbor program.  That provision applies for five years.  Skid-e-Kids also will post links to OnGuardOnline.gov so visitors have access to tips on protecting kids’ privacy online.  All but $1,000 or the $100,000 civil penalty will be waived if the operator complies with the settlement’s oversight requirements and supplies accurate financial information to the FTC. Looking for the latest on COPPA?  As part of its ongoing review of rules and guides, the FTC has asked for feedback on proposed revisions to the Children’s Online Privacy Protection Rule.  The deadline for comments is November 28th.  Save a step by filing online.  

Debt collection company pays record-setting civil penalty wfg-adm109 March 22, 2011 | 3:40PM Debt collection company pays record-setting civil penalty By Lesley Fair Incessant phone calls to consumers, often about accounts that weren’t theirs. Repeated autocalls to wrong numbers. Illegal disclosures to other people that a consumer owes money. Those are just some of the allegations in the FTC’s recent settlement with West Asset Management, a debt collection company that employs more than 1,500 collectors in 13 states and one offshore location.  According to the FTC’s lawsuit filed in federal court in Atlanta, the company violated the FTC Act and the Fair Debt Collection Practices Act (FDCPA) through those illegal tactics — and more.  The FTC also charged that West Asset Management ignored consumers’ written demands that the company stop calling them and in certain cases, withdrew funds from consumers’ bank accounts or charged their credit cards without their consent. No lightweight in the business, West Asset Management has collected on more than 24 million accounts on behalf of clients in the healthcare, telecommunications, consumer credit, and government service industries.  The company’s tactics led to thousands of complaints from consumers. In addition to a $2.8 million civil penalty — the largest ever in an FTC debt collection case — the settlement with West Asset Management bans a host of prohibited acts, including calling consumers before 8 in the morning, after 9 at night, or at their workplace; harassing them with repeated phone calls; and illegally communicating to third parties that a consumer owes a debt. If you’re in the debt collection industry or have clients who are, you know that this settlement is the latest in a series of FTC enforcement actions to protect the rights of consumers in financial distress.  The hefty civil penalty and far-reaching injunction serve as a reminder that now’s the time for a FDCPA compliance check-up.