The Federal Trade Commission Act can impose the following penalties on a deceptive ad, depending on the nature of the violation.
Cease and desist. This legally-binding order requires the company to stop running the ad and/or the practice, to pay a fine of $11,000 per day if the company violates the law, to have substantiation for any claims made in future ads and to report these to the FTC.
Civil penalties. This can range from thousands to millions of dollars, depending on the violation. Some advertisers give partial or full refunds to those who purchased their product.
Corrective advertising. Advertisers are required by the law to take down the new ad, correct the misleading information, notify consumers about the deceptive claims, and include disclosures in future ads.
E-mail is a cheap and quick way to promote a product or services, but advertisers should remember that the claims they make for the product or the service must be truthful. This includes honoring any promises made to remove subscribers from their mailing list.
If the e-mail claims that the person can unsubscribe and no longer receive any future messages by following instructions like “click here to unsubscribe”, all removal options must work as claimed. This means that the process of unsubscribing must successfully work. All removal claims in the email must be reviewed to make sure that any representations being made is complied with. If the e-mail includes a hyperlink to unsubscribe, the hyperlink should be accessible and functional. If the individual needs to contact an e-mail address to unsubscribe, the address must be able to receive removal requests.
Advertisers need to inform consumers about all the claims the ad conveys. When claims are being identified, the advertiser should single out not just individual statements, but also the ad as a whole, including the copy, product name and description. If the ad makes any misleading claims without qualifying information, this information needs to be disclosed. The advertisers need to determine which claims need to be qualified and which should be provided in disclosure. All disclosed information must be clear and conspicuous to keep the ad from being misleading.
The function of disclosures is to put limits on a claim in an advertisement. Disclosures cannot fix false claims. If the disclosure contradicts the claim made in the ad, it’s not enough to keep the ad from being deceptive; the claim itself must be changed.
CAN-SPAM stands for Controlling the Assault of Non-Solicited Pornography and Marketing Act. This act establishes laws for those who advertise through e-mail, imposes penalties for spammers and companies who advertise their products in spam mail. CAN-SPAM has the following provisions:
Bans false sender information. The e-mail’s “from” information, including the e-mail address and the domain name, should be accurate and should identify the person or company who sent the email.
Prohibits misleading subject lines about the content of the e-mail.
Requires an opt-out method. A return e-mail address must be provided that allows the recipient to ask the company to not send any more e-mails to that address.
Requires the e-mail to identify itself as an advertisement or solicitation. It should also include the physical postal address of the company.
It’s delusory to misrepresent either directly or indirectly, that a product offers a general environmental benefit. Your ads should qualify broad environmental claims or should avoid them altogether to prevent deception about the specific nature of the benefit. Furthermore, your ads shouldn’t imply significant environmental benefits if the benefit isn’t significant. For example, a trash bag is labeled “recyclable” without qualification. Because trash bags ordinarily are not being separated from other trash for recycling from a landfill or incinerator, it is unlikely that they will be used again. Technically, the bag may be “recyclable,” but the claim is deceptive because it asserts an environmental benefit where there is no remarkable or meaningful benefit.
(Source:FTC,gov)
The Fair Credit Reporting Act requires that consumer reporting agencies (CRAs), such as credit bureaus and resellers of consumer reports should provide information to its creditors, employers, insurers, and others, do so with due regard for the confidentiality, accuracy, and legitimate use of such data. When those parties take adverse action on the basis of information in a credit report, they must identify the CRA that provided the report so that the consumer can learn how to get a copy to verify or question its accuracy and completeness. Creditors and others may not knowingly provide false information to CRAs, which are required to maintain reasonable procedures to guarantee the maximum possible accuracy of their data.
(Source:FTC.gov)
The Internet provides unprecedented opportunities for the collection and sharing of information
from and about its consumers. But recent studies show that consumers have very strong concerns about the security and confidentiality of their personal information in the online marketplace. Many consumers also report being doubtful of engaging in online commerce, in part because they fear that their personal information can be misused.
These consumer concerns present an opportunity for you to build on consumer trust by implementing effective voluntary industry-wide practices to protect consumers’ information privacy. The FTC has held a number of workshops for industry, consumer groups and privacy advocates to explore industry guidelines to protect consumers’ privacy online.
(Source:FTC.gov)
The Franchise and Business Opportunity Rule strictly requires franchise and business opportunity sellers to give and inform its consumers a detailed disclosure document at least 10 days before the consumer pays any money or legally commits to a purchase. The document must include:
- the names, addresses, and telephone numbers of other purchasers;
- a fully-audited financial statement of the seller;
- the background and experience of the business’s key executives;
- the cost of starting and maintaining the business;
- the responsibilities of the seller and purchaser once the purchase is made.
Moreover, companies that make earnings representations must give consumers the written basis for their claims, including the number and percentage of owners who have done at least as well as claimed.
(Source:FTC.gov)
The Equal Credit Opportunity Act forbids lenders from discriminating on the basis of race, color, national origin, religion, marital status, sex, age, receipt of public assistance income, or an applicant’s good faith exercise of any rights under the Consumer Credit Protection Act. The ECOA requires creditors to provide applicants with the reasons why a credit was denied if the applicant asks.
The Electronic Fund Transfer Act establishes the rights, responsibilities and liabilities of participants in electronic fund transfer systems. The EFTA strictly requires participants to follow certain practices when they deal with transaction accounting and pre authorized transfers and error resolution, and sets liability limits for losses caused by unauthorized transfers.
The Consumer Leasing Act sets personal property leases that surpass 4 months and are made to consumers for personal, family, or household purposes. The statute requires that certain lease costs and terms be divulge, imposes limitations on the size of penalties for delinquency and on the size of residual liabilities, and in some instances, requires certain disclosures in lease advertising.
(Source:FTC.gov)
The Fair Credit Billing Act is important to a creditor who are billing customers for goods or services. The Act requires you to accept consumer billing complaints promptly in writing and to investigate billing errors submitted to you. The Act prohibits creditors from taking actions that adversely affect the consumer’s credit standing until the investigation is completed, and affords other consumer protections during disputes. The Act also requires that creditors promptly post payments to the consumer’s account, and either refund over payments or credit them to the consumer’s account.
(Source:FTC.gov)