February 01, 1999 | Response Magazine

FTC Takes Active Role in Web Marketing: Agency takes traditional enforcement activity online

3 min

Previously published in Response magazine

Since 1994, the Federal Trade Commission has issued dozens of complaints alleging fraudulent or deceptive practices by Internet marketers. Most of these cases have involved weight-loss claims, "get-rich-quick" promises and the like. Cases challenging such claims in traditional advertising media were a staple of FTC law enforcement activity long before there was such a thing as the World Wide Web.

Policing the world

But the FTC has plans to be more than just a "cop on the beat" in the online world. In addition to issuing garden-variety complaints and orders against individual Internet marketers, the FTC is holding workshops and inviting public comment on a variety of Internet-related "big picture" issues.

In the spring of 1999, for example, the FTC will hold a public workshop to explore various problems that consumers confront when they go online to purchase goods or services from Internet merchants located in foreign countries. The FTC notice announcing this workshop notes that the number of international business-to-consumer transactions over the Internet is increasing rapidly but that international e-commerce will never achieve its full potential "until consumers develop confidence in commercial activities conducted over global networks and businesses are assured of a stable and predictable commercial environment."

The FTC notice goes on to list a number of questions that it hopes will be addressed by workshop participants. For example, when a consumer in one country uses the Internet to buy something from a business in another country, which country's laws should govern the transaction? If there is a dispute between the consumer and the merchant, which court system should have jurisdiction over that dispute? What happens if government agencies in different countries attempt to enforce inconsistent consumer protection laws against an Internet marketer? While most of the questions posed in the FTC notice are quite broad, some are more specific. For example, the FTC wants to know whether there should be a "cooling-off period" during which consumers can rescind purchases from foreign businesses and whether consumers using credit or debit cards or other electronic payment methods should be entitled to chargebacks if they are unhappy with their purchases.

Expanding enforcement territory

In next month's column, we'll bring you up to date on another FTC initiative of great potential significance to Internet marketers--its recent proposal to issue a policy statement regarding how dozens of existing FTC rules and guides apply to Internet advertising and commercial e-mail.

In last month's column, we told you how a coalition of some 80 government agencies and private organizations from 25 countries--including the Federal Trade Commission and 17 state attorneys general--recently surfed about 1,200 Internet sites in search of false advertising claims relating to health.

Not long after this, another group of law enforcement agencies surfed hundreds of additional Web sites looking for false or illegal representations hyping both traditional and more exotic investment opportunities ranging from private and public stock offerings to foreign currency trading to viatical settlements. Dozens of those sites were targeted for follow-up review and possible legal action.

One of the participating agencies was the Commodity Futures Trading Commission, which expressed particular concern about Web sites and "spam" promising quick profits at little or no risk from foreign currency trading. A CFTC spokesman also warned consumers not to believe claims that it was easy to make money by investing in commodities whose price varied from season to season (like heating oil).

If you use a Web site or e-mail to promote investment opportunities, be careful. Make sure any claims relating to profits or earnings are substantiated and accompanied by the appropriate disclaimers.