This presentation is from Affiliate Summit East 2014 (August 10-12, 2014 New York City). Session Description: Ever wonder why the FTC seems to always “win?” This session will explore common pitfalls that subject marketers to FTC scrutiny and how marketers can mitigate their liability before a case is filed.

1. www.ifrahlaw.com www.ifrahlaw.com
MO’ MONEY, MO’ PROBLEMS –
SCRUTINIZING FTC SETTLEMENTS
Affiliate Summit East 2014
Rachel Hirsch, Esq., Senior Associate
P (202) 524-4145 /

2. www.ifrahlaw.com
Meet The FTC –
The “Notorious” F.T.C.
P (202) 524-4145 /
“Independent” Federal Agency 5 Commissioners/ 7-Year Staggering Terms
Chairman With Fixed Term, But
Serves At Leisure of President
No More Than 3 Commissioners
From Same Political Party

3. www.ifrahlaw.com
Meet The FTC – Bureau of Consumer Protection
The “Notorious” F.T.C.
P (202) 524-4145 /
Division of Advertising
Practices
Division of Consumer &
Business Education
Division of Financial
Practices
Division of Privacy and
Identity Protection
Division of Marketing
Practices
Division of Planning
and Information
DIVISON OF ENFORCEMENT

4. www.ifrahlaw.com
Meet The FTC – Bureau of Consumer Protection
The “Notorious” F.T.C.
P (202) 524-4145 /

5. www.ifrahlaw.com
Know The Law –
Ain’t Nuthin’ But An FTC Thang
P (202) 524-4145 /
As the nation’s consumer protection agency, the Federal Trade Commission has a broad mandate to
protect consumers from fraud and deception in the marketplace. To fulfill this goal, the FTC takes
law enforcement actions, provides consumer and business education, issues reports and policy
guidance, leads workshops, and participates in other forums.
The FTC’s Mandate

6. www.ifrahlaw.com
Know The Law –
Ain’t Nuthin’ But An FTC Thang
P (202) 524-4145 /
The FTC Enforces Consumer Protection Statutes, Including:
Fair Credit Reporting Act
Fair Debt Collection Practices Act
Federal Trade Commission Act
Gramm-Leach-Bliley Act
Lanham Trademark Act
CAN-SPAM Act
Telemarketing And Consumer
Fraud And Abuse Act
Truth in Lending Act

7. www.ifrahlaw.com
Respect The Law – Avoid FTC Scrutiny
“Too Legit To Quit?” Or “Slim Shady?”
P (202) 524-4145 /
www.ifrahlaw.com /
rhirsch@frahlaw.com
When It Comes To The FTC Act, The Basic Principles of Advertising Law Apply:
1. Advertising Must Be Truthful And Not Unfair And Deceptive.
2. Claims Substantiation Must Occur Before Ad Is Disseminated.
3. Disclose And Disclose Often.
4. Limitations And Qualifications Must Be Included Where Needed.
It’s Not Just What You Say, But What You Don’t Say.

8. www.ifrahlaw.com
Know the Process – What Makes You A Target
“Can’t Touch This?”
P (202) 524-4145 /
Anyone Who Is Engaged In Interstate Commerce
Except If: Regulated By Federal Banking Agency,
Regulated by FCC, Or
Regulated By A State Insurance Regulator

9. www.ifrahlaw.com
Know The Process – What Makes A Good FTC Case
“Dollar, Dollar Bill Y’All”
P (202) 524-4145 /

10. www.ifrahlaw.com
Know The Process – Top FTC Enforcement Priorities
“It’s Hammer Time!”
P (202) 524-4145 /
Protecting Consumer Privacy
Protecting Economically-
Vulnerable Consumers
Trending in Technology
Challenging Deceptive
Advertising and Marketing
Monitoring Environmental Claims Monitoring Marketing to
Children

11. www.ifrahlaw.com
Know The Process – FTC Enforcement Trends
“It’s Hammer Time!”
P (202) 524-4145 /
2010 2011 2012 2013
Identity Theft Identity Theft Identity Theft Identity Theft
Debt Collection Debt Collection Debt Collection Debt Collection
Internet Services Prizes, Sweepstakes
and Lottery
Bankers and Lenders Bankers and Lenders
Prizes, Sweepstakes
and Lotteries
Shop-at-Home and
Catalog Sales
Shop-at-Home and
Catalog Sales
Imposter Scams
Shop-at-Home and
Catalog Sales
Bankers and Lenders Prizes, Sweepstakes
and Lotteries
Telephone and Mobile
Services
Imposter Scams Internet Services Imposter Scams Prizes, Sweepstakes
and Lotteries
Internet Auctions Auto-Related Internet Services Auto-Related
Foreign
Money/Counterfeit
Check Scams
Imposter Scams Auto-Related Shop-at-Home and
Catalog Sales
Telephone and
Mobile Services
Telephone and Mobile
Services
Telephone and Mobile
Services
Television and
Electronic Media
Credit Cards Advance-Fee Loans
and Credit
Protection/Repair
Credit Card Advance Payment for
Credit Card Services
1,339,265 1.8 million# Of Complaints: > 2 million > 2 million

12. www.ifrahlaw.com
Know The Process – How An FTC Case Develops
“Don’t Hate the Player, Hate the Game”
P (202) 524-4145 /
State Attorney Generals “Surf” Days
Private Litigants Your Competitors
Triggers For An Investigation

13. www.ifrahlaw.com
Know The Process – How An FTC Case Develops
“Don’t Hate the Player, Hate the Game”
P (202) 524-4145 /
Targets For Investigation
Industry-Wide Sweeps
Specific Practices
Low-Hanging Fruit

14. www.ifrahlaw.com
Know The Process – How An FTC Case Develops
“Don’t Hate the Player, Hate the Game”
P (202) 524-4145 /
INITIATION OF PRIVATE INVESTIGATION
Informal – e.g., Access Letter
Formal – e.g., Civil Investigation Demand (CID) or Subpoena
Or Seek Immediate Relief By:
1. Filing A Complaint For Permanent Injunction.
2. Filing A Motion For a TRO.
3. Requesting An Asset Freeze.
4. Requesting Appointment of Temporary Receiver.
5. Seeking Other Equitable Relief.
Best Result? FTC Issues “Closing Letter” After Investigation.

15. www.ifrahlaw.com
Know The Process – How An FTC Case Develops
“Don’t Hate the Player, Hate the Game”
P (202) 524-4145 /
RESPONDING TO CID
Read Thoroughly
Preserve Immediately
Communicate Thoughtfully
Negotiate Carefully
Produce Cautiously
Respond Substantively
Preserve Confidentiality
Choose Wisely
Move Quickly
Wait Patiently

16. www.ifrahlaw.com
Know The Process – How An FTC Case Develops
“Don’t Hate the Player, Hate the Game”
P (202) 524-4145 /
Settling By Consent Order
May Occur At Any Point Pre-Litigation, Even After Draft Complaint
Requires Authority From Bureau
Contains Boilerplate Provisions (e.g., Periodic Reporting
Requirements)
Provides For Civil Penalties, Where Applicable, Disgorgement,
Consumer Redress
It Turns A Private Investigation Into A Public Headline

17. www.ifrahlaw.com
Know The Process – How An FTC Case Develops
“Don’t Hate the Player, Hate the Game”
P (202) 524-4145 /
Entering Into Litigation
It Turns A Private Investigation Into A Public Proceeding
FTC Administrative Action
(Judge, Jury, and Executioner?)
Federal Court Litigation
(Bias Toward Government?)

18. www.ifrahlaw.com
Understand The Results – FTC Settlements
“Ain’t Nuthin’ But A Gold Digger”
P (202) 524-4145 /
Health And Beauty
Case Name Court Filed Nature of Complaint Enforcement
Trend
Resolution
(Trial v.
Settlement)
Judgment
FTC v. TriVita,
Inc., et al.
(2014)
Federal Court:
District of
Arizona
Deceptive
Advertising; False
Product Claims:
“Relieves Pain!
Reduces Swelling!
Improves Breathing!
Efforts to Stop
Advertising of
Over-Hyped
Health Claims
Settlement
(2014)
$3.5M for consumer
refunds plus injunction
stipulation
In the Matter
of L'Oreal USA,
Inc.
(2014 – with
violations
dating back to
2009)
No Jurisdiction:
Administrative
Case
Deceptive
Advertising; False
Product Claims:
“Youth Code boosts
gene’s activity and
stimulates
production of youth
proteins”
Cosmetic
Companies
Crossing the
Line with
unproven
Claims
Settlement
pre-filing of
Federal
Charges
(Proposed
Consent Order
– June 2014)
Consent Order
prohibiting similar claims
for product and other
L’Oreal products
FTC v. Beony
International
LLC, at al.
(2011)
Federal Court:
N.D. Illinois
Deceptive
Advertising; Fake
News Websites:
“News 6 News
Alerts: Acai Berry
Diet Exposed.”
Sweep Against
Online
Affiliate
Marketers
Settlement
(2013)
$13M Suspended to only
$1.6M within 5 days;
plus sale of 2008
Porsche

19. www.ifrahlaw.com
Understand The Results – FTC Settlements
“Ain’t Nuthin’ But A Gold Digger”
P (202) 524-4145 /
Financial Services/Debt
Management
Case Name Court Filed Nature of Complaint Enforcement
Trend
Resolution
(Trial v.
Settlement)
Judgment
FTC v.
Forensic Case
Management
Services
(2011)
Federal Court:
Central District
of California
Illegal Debt Collection
Practices: Berated
Customers with
Obscene/Abusive
Language and
Threats of Physical
Harm
Curb Illegal
Debt
Collection
Practices
Settlement
(2013)
$35M combined; reduced
to $1,027,000 for inability
to pay
FTC v. U.S.
Mortgage
Funding, Inc.,
et al.
(2011)
Federal Court:
Southern
District of
Florida
False Advertising of
Claims for Mortgage
Debt Relief;
Collection of
Payment prior to
Service Rendered
Scams That
Target
Homeowners
who are
behind on
mortgage
payments
Settlements
Imposing
Judgments
(2012)
$18.7M suspended to
$998,000; plus 1996 Rolex
Submariner 2-tone steel &
gold, 2007 Cadillac DTC;
1971 53’ Hatteras Yacht
FTC v. Asset &
Capital
Management
Group et al.
(2013)
Federal Court:
Central District
of California
Extorted Payments
from Customers
under False Threats
Stop Debt
Collectors
who
Intimidate
and Scam
Consumers
Settlements
Imposing
Judgments
(2014)
$90.5M which include
frozen corporate assets;
land, vehicles etc.; $4M
went to victim
compensation

20. www.ifrahlaw.com
Understand The Results – FTC Settlements
“Ain’t Nuthin’ But A Gold Digger”
P (202) 524-4145 /
Telemarketing
Case Name Court Filed Nature of Complaint Enforcement
Trend
Resolution
(Trial v.
Settlement)
Judgment
FTC v. Castle
Rock Capital
Management,
Inc.
(2011)
Federal
Court:
Central
District of
California
Allegedly distributed
illegal robocalls for
credit card interest rate
reduction programs,
extended automobile
warranties, & home
security systems
Stop Illegal
Rococalls
Settlement
(2013)
$1.1M suspended due to
inability to pay; Ban from
industry
FTC v. Phillip
A. Flora
(2011)
Federal
Court:
Central
District of
California
Serial text spammer for
deceptive mortgage
relief services and free
gift cards
Crack Down on
Affiliate
Marketers who
sent spam text
messages for
deceptive
websites falsely
promising “free”
gift cards
Settlement
and
Contempt
Judgment
(2014)
$59,000- suspended
upon payment of
$32,000; Compliance
Monitoring- then in May
fined $148,309 and
Industry Ban
FTC v. The
Text Club Inc.
et al.
(2012)
Federal
Court:
Southern
District of
New York
Called Consumers
misrepresenting
companies they had
purchased from in the
past to pitch business
development services
Crackdown on
scams that
falsely promise
jobs and
opportunities to
“be your own
boss.”
Settlement
(2014)
$15M; also $115M
suspended to $2.6M &
$114M to $13M

21. www.ifrahlaw.com
Prep Your Team– When The FTC Comes Knocking
“Mama Said Knock You Out!”
P (202) 524-4145 /
Educate Employees
Designate A Corporate
Representative
Identify Purpose of Visit
Contact Counsel
Involve Counsel Post-Visit
Don’t Panic!

22. www.ifrahlaw.comwww.ifrahlaw.com
1717 Pennsylvania Avenue
Washington, D.C. 20006
www.ifrahlaw.com
P (202) 524-4145 /
Email: rhirsch@ifrahlaw.com
Twitter: TheRealMsHirsch
Blog: www.ftcbeat.com
You May Have 99 Problems, But The FTC Ain’t One Of Them!