Oprah Flogs and the FTC: Hot Legal Topics 2010

OPRAH, FLOGS & THE FTC
HOT TOPICS 2010
Pete Wellborn
Wellborn, Wallace & Woodard, LLC
www.wellbornlaw.com
Bennet Kelley
Internet Law Center
www.internetlawcenter.net

AFFILIATE SUMMIT WEST 2010 LAS VEGAS, NEVADA
OPRAH, FLOGS & THE FTC: HOT TOPICS 2010
Affiliate Programs

AD CONTENT
TRUTH, PROOF & FAIRNESS

TRUTH IN ADVERTISING
* * * GENERALLY * * *
PROHIBITS
“DECEPTIVE” ADS
AND
“UNFAIR” ADS
F T C

BRICKS & MORTAR = .COM
F T C

“DECEPTIVE” AD
Likely to mislead consumer
and
Likely to affect consumer’s
behavior or decision about
the product or service
F T C

“MISLEADING”
Relevant info left out OR
False claims OR
Unsubstantiated claims.
F T C

“MISLEADING”
COMMON VIOLATIONS
Disclaimers & Disclosures
Demonstrations
Refund Policies
Ads Directed at Children
Environmental Claims
“Free” Stuff
Jewelry-Related Claims
F T C

“UNFAIR” AD
Causes, or is likely to cause, injury that is:
Substantial AND
Not outweighed by
other benefits AND
Not reasonably avoidable.
F T C

WHO IS LIABLE?
Seller (Manufacturer or Provider)
Ad Agencies (Negligence Standard)
Site Designers (Negligence Standard)
Affiliates (Negligence Standard)
Individuals (Personally Involved)
“Negligence Standard” = knew or should have known that the ad included false or deceptive claims.
F T C

OTHER FTC-ENFORCED LAWS
Franchise & Business Opportunity Rule
MLM/Pyramid Scheme Rules/Laws
Truth in Lending Act
Fair Credit Billing Act
Fair Credit Reporting Act
Equal Credit Opportunity Act
Electronic Fund Transfer Act
Consumer Leasing Act
Mail/Telephone Order Merchandise Rule
Negative Option Rule
900-Number Rule
Telemarketing Sales Rule
Written Warranty Rule
Etc. Etc. Etc.
F T C

RULES OF THUMB
Truth
Consumer Point-of-View
Proof
Careful: Disclaimers/ Disclosures
Careful: Endorsement Claims
F T C

OUR FOCUS TODAY
Testimonials &
Endorsements
“Free” Stuff
“Flogs”
(Fake Blogs)
Proof of
Claims

TESTIMONIALS &
ENDORSEMENTS

TESTIMONIALS &
ENDORSEMENTS
FIRST RULE:
Accurate
SECOND RULE:
With Permission
(“Right of Publicity”)

TESTIMONIALS &
ENDORSEMENTS
GENERAL CONSIDERATIONS
Honest Opinion/Belief of Endorser
Guides Concerning the Use of Endorsements
and Testimonials in Advertising (16 CFR Part 255 )

TESTIMONIALS &
ENDORSEMENTS
Same Claim-Standard as Seller

TESTIMONIALS &
ENDORSEMENTS
Endorsers Must Continue in Belief

TESTIMONIALS &
ENDORSEMENTS
Statements Presented in Context

TESTIMONIALS &
ENDORSEMENTS
Statements Presented in Context
Claimed Use: Bona Fide and Ongoing

TESTIMONIALS &
ENDORSEMENTS
CONSUMER ENDORSEMENTS
Claims Must Be Representative
Claims Must Be Substantiated
OR
Claims Can Be Disclaimed (MAYBE)
“Actual Consumer” Must Be Just That

TESTIMONIALS &
ENDORSEMENTS
EXPERT ENDORSEMENTS
“Expert” Must Be Just That
Actual Exercise of Expertise/Opinion
Claims Must Be True As Stated

TESTIMONIALS &
ENDORSEMENTS
ORGANIZATION ENDORSEMENTS
True Collective Judgment/Opinion
Must Be True “Expert” Opinion

TESTIMONIALS &
ENDORSEMENTS
MATERIAL CONNECTIONS
Connection Between Endorser and Seller That Might Materially Affect the Weight or Credibility of The Endorsement Must Be Fully Disclosed.
Rule Often Applies Where Endorser Is Not Celebrity or Well-Known Expert.
“Connection” May Be Money or Publicity.

“FLOGS”
(FAKE BLOGS)
MATERIAL CONNECTIONS RULE APPLIES TO BLOGS AND FLOGS
(EXAMPLES)

“FREE” STUFF
“Free” means free.
“Regular Price” means same price, in the same quality, quantity, and service level at which the seller has sold the product in that geographic market or trade area for a reasonably substantial period of time.
Ad must be clear. All obligations and conditions set forth at the outset (not the end).
Seller must “cut off” deceptive resellers.
State laws may apply !

PROOF OF CLAIMS
REQUIRED PROOF OF AD CLAIMS
“Reasonable basis” for All Express and Implied Claims.
“Reasonable” = Content + Presentation + Context + Qualification
Amount and Type of Substantiation/Proof
- Type of Product (Health Products = High Level)
- Type of Claim
- Benefit of Truthful Claim
- Cost of Substantiation
- Consequences of False Claim
- What Experts in Field Say Is Reasonable

PROOF OF CLAIMS
WHEN SCIENTIFIC EVIDENCE IS
USED OR REQUIRED
Prove Stated Level of Support (“4 out of 5 dentists agree . . .”)
Amount and Type of Proof Varies (“Anecdotes not enough”)
Quality of Evidence (“Competent and reliable”)
Totality of Evidence (“Can’t ignore unfavorable”)
Relevance of Studies to Claim (“Study matches claim”)

QUESTIONS?
Bennet Kelley
bennet@bennetkelley.com
www.internetlawcenter.net
Pete Wellborn
pete@wellbornlaw.com
www.wellbornlaw.com

Oprah Flogs and the FTC: Hot Legal Topics 2010

by Internet Law Center on Jan 28, 2010

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Oprah Flogs and the FTC: Hot Legal Topics 2010 — Presentation Transcript