Is this Legal? FTC Internet Marketing Guidelines

In my previous post, “Internet Marketing Ethics – Is this Ethical” I wrote about an incident where an internet marketer, whose list I am on, sent me an email offering me a chance to win $30,000. So I clicked on the link and read the sales letter page, then signed up “To Be One Of Only 100 People To Attend This FREE Live Sneak Peek Event” and “To Learn How I Can Win The $30,000 Cash“.

The problem arose when, after I signed up, I was then presented with a screen and an email that told me I had to pay a $97 refundable deposit to get the information to attend the “FREE Live Sneak Peek Event” and thus “To Learn How I Can Win The $30,000 Cash“.

As I wrote in my last post, I found this to be unethical and asked for your opinions. While some wonderful discussion transpired on the ethics, one person who responded in email to me suggested it was not illegal. Having curiosity, I explored this further. Here’s what I found…

On the Federal Trade Commission‘s web site I discovered several documents that apply to internet marketing. Here’s a summary:

Is advertising on the Internet subject to the same laws as other advertising?

Yes. Ad claims on the Internet must be truthful and substantiated. Ask the FTC for a copy of Advertising and Marketing on the Internet: The Rules of the Road for more information. Dot Com Disclosures offers special guidance for online advertisers regarding how to make sure that any disclaimers and disclosures in online ads are clear and conspicuous. It addresses ‘Net specific issues such as banner ads, pop-up windows, scrolling, hyperlinks, etc. Internet marketers also should be aware that the FTC’s Mail or Telephone Order Merchandise Rule (“Mail Order Rule”) applies to online transactions. For specific guidance on complying with the Mail Order Rule online, ask the FTC for a copy of Selling on the Internet: Prompt Delivery Rules, as well as A Business Guide to the Federal Trade Commission’s Mail or Telephone Order Merchandise Rule.

My website is attracting visitors from outside the United States. What do I need to know?

Because the World Wide Web is, as its name implies, worldwide, even small online businesses can reach customers around the globe. Electronic Commerce: Selling Internationally – A Guide for Business discusses some online commerce guidelines endorsed by the United States government and 28 other countries.

What do I need to know about consumer privacy online?

Advertisers should be aware of the privacy issues raised by Internet marketing. For more information about recent FTC Reports to Congress on consumer privacy on the Internet, visit the FTC’s website (www.ftc.gov). Basically, the FTC strongly encourages companies to implement four fair information practices: giving consumers notice of a website’s information practices; offering consumers choice as to how their personally identifying information is used; providing consumers with access to the information collected about them; and ensuring the security of the information collected. In addition, companies need to know about the Children’s Online Privacy Protection Act and the rule that implements it. The law requires websites to obtain verifiable parental consent before collecting, using, or disclosing personal information from children, including their names, home addresses, email addresses, or hobbies. For more information, ask the FTC for How to Comply with the Children’s Online Privacy Protection Rule.

After skimming through these, I discovered that the sales solicitation I received could potentially be in violation of the following guidelines (I say potentially as I am not an attorney):

  1. Are there any rules about ads for contests or sweepstakes? Sweepstakes-type promotions that require a purchase by participants are illegal in the United States. Other agencies, including the United States Postal Service (USPS) and the Federal Communications Commission (FCC), also enforce federal laws governing contests and prize promotions. And each state has laws that may require promoters to make disclosures, seek licensing, or post a bond. Since state laws vary, check with the Attorney General’s Office in the state(s) in which you plan to advertise. If a contest or promotion involves telephone calls, the FTC’s Telemarketing Sales Rule requires specific disclosures, such as the odds of winning a prize, how to participate without buying anything, and that no purchase or payment is required to win. If pay-per-call services are involved, the FTC’s 900 Number Rule requires certain disclosures. For more information, ask the FTC for the publications Complying with the Telemarketing Sales Rule and Complying with the 900 Number Rule.
  2. FTC GUIDE CONCERNING USE OF THE WORD “FREE” AND SIMILAR REPRESENTATIONS, http://www.ftc.gov/bcp/guides/free.htm  —  §251.1 The guide. (c) Disclosure of conditions. When making “Free” or similar offers all the terms, conditions and obligations upon which receipt and retention of the “Free” item are contingent should be set forth clearly and conspicuously at the outset of the offer so as to leave no reasonable probability that the terms of the offer might be misunderstood. Stated differently, all of the terms, conditions and obligations should appear in close conjunction with the offer of “Free” merchandise or service. For example, disclosure of the terms of the offer set forth in a footnote of an advertisement to which reference is made by an asterisk or other symbol placed next to the offer, is not regarded as making disclosure at the outset. However, mere notice of the existence of a “Free” offer on the main display panel of a label or package is not precluded provided that (1) the notice does not constitute an offer or identify the item being offered “Free”, (2) the notice informs the customer of the location, elsewhere on the package or label, where the disclosures required by this section may be found, (3) no purchase or other such material affirmative act is required in order to discover the terms and conditions of the offer, and (4) the notice and the offer are not otherwise deceptive.
  3. Dot Com Disclosures: Information About Online Advertising http://business.ftc.gov/documents/bus41-dot-com-disclosures-information-about-online-advertising d. Displaying Disclosures Prior to Purchase — Disclosures must be effectively communicated to consumers before they make a purchase or incur a financial obligation. Disclosures are more likely to be effective if they are provided in the context of the ad, when the consumer is considering the purchase. Where advertising and selling are combined on a Web site, disclosures should be provided before the consumer makes the decision to buy, say, before clicking on an .order now. button or a link that says .add to shopping cart..

So, was this contest legal since I had to post $97 (refundable deposit) to enter?

Was this website legal since it told me if was “free” but did not make any of the terms or conditions of the offer available until after I paid money?

Was it legal to not reveal any disclosures prior to my clicking on an ‘add to cart’ button?

What do you think?

What would you do with this knowledge?

About Debra Zimmer

After 25 years of growing entrepreneurial businesses at companies such as Microsoft, where she attracted 700,000 members into an online community in 18 months and then grew a second one to 250,000 members in 10 months, Debra Zimmer then struck out on her own to grow an online retail store to 6-figures of income and put it on AUTOPILOT for 3 years. With an engineering degree and an MBA from Columbia Business School, Debra is the undisputed expert in helping experts, entrepreneurs and executives to focus their brilliance and magnify their impact using social media and internet marketing tactics.

Comments

  1. walter daniels says:

    I agree that is it is not only “unethical,” but almost certainly illegal. IANAL, but the $97 is probably to raise the $30K to be given away. I’m saddened that someone “well-known,” by your description, would still be doing things like this. The “Net is not the Wild West anymore, it isn’t NYC either, but it is becoming civilized.

  2. This is substantial, good information. Still,it involves taking the time to police the internet. Who would you report an infraction to?

    All it proves is that a lot of people are unethical about what they promise and try to throw in catches to monetize their enterprise. If there are no consequences, then how will we rid ourselves of them?

    Myrna Greenhut
    President of Points of Persuasion Syndicate
    Blog Url on Facebook: http://tinyurl.com/47ngdej

  3. Deb,

    The ad said: “three of the top marketing powerhouses from the Infusionsoft community (Ultimate Marketer: Bob Britton, SEO Expert: Grant James, and Internet Guru: Micah Mitchell) have now joined forces and developed the SINGLE MOST IMPORTANT thing a business owner needs to triple their sales and profits in 12 months or less…”

    I am PRETTY DARN sure that this ad WAS LEGAL … but is HIGHLY UNETHICAL. I have not been able to find anything on the Web regarding a potential lawsuit by Britton et.al. against the makers of this ad … because IF the makers of the ad used their names against their knowledge, THAT would be a big lawsuit win for Britton et.al. The point I am getting at is that IF IT IS LIKELY that Britton et.al. signed-off on this (yes, they are unethical in my book), you can PRETTY MUCH GUARANTEE that they hired TOP-NOTCH attorneys to check into the LEGALITY of this advertising.

    Bottom line: I NEVER EVER hit the button on something that sounds too good to be true. Period. I don’t care what it says — if my intuition and logic ‘see’ any red light in the dark, it’s a tap on the ‘delete’ button.

    Was it VERY WRONG and very UNETHICAL? YOU BET. Illegal? FINE LINE, but they probably would be found within legal limits — of course, THOSE are becoming more and more UNETHICAL with time!

    Best,
    Simon

    Dr. Simon Atkins, Ph.D., D.Sc. (A.M.) candidate
    CEO
    http://www.AFCrisk.com

    1. Debra Zimmer says:

      Britton et.al. IS the author of the ad.

  4. Scott says:

    Great job Deb. Very impressive research! You are really showing what a reliable expert you are. Thank you, Scott

  5. I have another definition of this kind of marketing . . . “sleazy.”

    Great post.

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