May 21, 2020

Advertising Law News and Analysis

3 min

Marketing Guru Markets Itself to the FTC

Despite what the "gurus" say, the FTC takes the position that there is no quick or easy path to success. Whether that is true or not, the FTC has sued several companies that purportedly taught consumers how to start a home-based Internet business—often advertising the potential to earn vast sums of money—and last week the FTC settled with a company allegedly helping newly formed Internet businesses market more effectively. However, despite ceasing new sales in 2017, it inevitably drew the FTC's attention with a pitch that allegedly contained unsubstantiated earnings claims, high-pressure sales tactics, and elusive disclaimers, coupled with high chargeback rates and "gag clauses."

Latest FTC Payment Processing Case Results in $40 Million Proposed Judgment and ISO Oversight Requirements

First Data Merchant Services, LLC, and its former executive, Chi "Vincent" Ko, will pay $40.2 million to settle Federal Trade Commission charges that they ignored obvious warning signs of fraud and processed transactions for an array of scams that caused tens of millions of dollars in harm to consumers. This action serves as a powerful reminder that the FTC seeks to hold processors and their independent sales organizations (ISOs) financially responsible for facilitating the unlawful conduct of merchants by enabling merchants to access the payments system to allegedly defraud consumers and launder card transactions.

FTC Negative on Business Focused Subscription Offers

We have written repeatedly about the FTC and various states' efforts to clamp down on "negative option" offers to consumers (see blog posts here and here). Last week, consistent with a newly found focus on protecting small businesses, the FTC challenged negative option marketing aimed at business entities. The case underscores the FTC's continued focus on negative option marketing and its new focus on protecting small businesses.

NAD Launches Fast-Track SWIFT Process

Last month, the National Advertising Division launched its much-anticipated NAD Fast-Track SWIFT process (Single Well-defined Issue Fast Track). As we blogged previously, the Fast-Track SWIFT program reflects NAD's plans to resolve advertising disputes more quickly and efficiently. The most significant aspect of Fast-Track SWIFT is its expeditious resolution process. Parties receive a NAD decision within 20 business days from the initiation of a challenge, i.e., the time that the advertiser receives the challenge.

Something to Smile About: NAD Provides Guidance on Key Claim Substantiation Issues in Recent Decision

A recent decision from the National Advertising Division regarding claims made by SmileDirectClub, LLC (SDC) in online advertising for its Smile Direct Club Clear Aligners provides guidance on a variety of key advertising issues, including comparative and savings claims, guarantees, and consumer reviews and testimonials. NAD recommended the modification or discontinuation of many of the claims challenged by Align Technology, Inc., maker of Invisalign clear aligners.