A Look Ahead for the FTC

1/13/2011

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The FTC has a well-deserved reputation as a leader in consumer protection. This year promises to be an active year with policy, guidelines and enforcement actions being made in areas of importance to CBBB national partners.

What follows is a brief summary of major FTC consumer-protection initiatives expected in 2011:

Frauds and Scams: Considered to be the “bread and butter” of FTC consumer-protection work, frauds and scams will continue to be a major focus of FTC enforcement activity in 2011. Recent presentations by FTC officials highlight mortgage assistance relief, job and grant scams and consumer debt-relief services as particular areas of focus. Other recent enforcement actions include bogus prize money scams and bogus weight-loss products. Look to see the FTC make continuing use of its unfairness authority to target businesses assisting or facilitating fraud through payment systems and provision of Internet services.

Negative Option Billing: FTC officials also highlight negative option – “free trial” – billing as a special area of concern. Look to see continued aggressive enforcement to protect consumers from being billed for continuity products without their consent, or where the FTC believes that the terms and conditions have been inadequately disclosed.  The FTC will also be implementing the recently enacted “Restore Online Shoppers’ Confidence Act,” which  prohibits “data passes” of consumers credit-card information to third-party sellers. This also requires the disclosure of the terms and conditions of Internet sales before obtaining consumer’s billing information and  makes violations of the statute enforceable through civil penalties. The statute also provides for enforcement by State Attorney Generals.

Scams, frauds and “free trials” are major sources of complaints within the BBB system. Complaint data from the BBB system and other sources play an important role in assisting the FTC in these developing cases. A recent FTC press release on a major Internet fraud case, for example, credits the assistance of the BBB of North Central Arizona in developing the case. The BBB system currently is negotiating an agreement to provide the FTC expanded access to BBB complaint data.

Privacy:  Privacy has emerged as one of the most important areas of FTC consumer-protection responsibility and policy development and will continue to be so in 2011. Recognizing the importance of the online eco system to these issues the FTC has recently added a “Chief Technology” officer to its staff. In December, the FTC released a new report, “Protecting Consumer Privacy in an Era of Rapid Change,” which outlined an enhanced framework for the protection of consumer privacy, including a recommendation for creation of a “Do Not Track” capability to allow consumers to opt-out of tracking for behavioral advertising and other purposes when they are surfing the Internet. The report outlines policies. It is not self-implementing and proposed policies would need to be implemented through either self-regulatory or legislative mechanisms. The FTC report is open for public comment until January 31, 2011.

Separately, the FTC has a strong enforcement agenda in the privacy area. This includes cases involving data breaches, data collection or use policies that are inconsistent with disclosed privacy policies, failure to maintain adequate data security procedures, and undisclosed or inadequately disclosed data-collection and use policies. Such cases – involving both online and offline data – will almost certainly remain a priority at the FTC. Also coming up are revisions to the FTC’s “Red Flags” rule, a congressionally mandated rule requiring a broad range of businesses to have written identity theft protection programs. In December 2010, Congress enacted legislation limiting the scope of the rules and the FTC will be incorporating the new legislative definitions into its rules. Expect to see follow up enforcement in this area to encourage compliance after the FTC finalizes the rule.

Again the BBB has long played a supporting role in efforts to promote consumer privacy. Privacy protection is an important part of the BBB accreditation standards, the Children’s Advertising Review Unit has been a lead enforcer of the Children’s Online Privacy Protection Act and was the first safe harbor provider under that statute,  and the CBBB is a leading provider of safe harbor services under the European Commission’s Data Directive.

Advertising: The FTC has demonstrated renewed interest in pursuing cases of deceptive or misleading national advertising, particularly those involving health claims. The agency has been particularly active in challenging dietary-supplement and food-product advertising making health claims. The agency and its officials has expressed special concerns about advertising making claims about children’s health, even when those ads are directed to adult audiences. The FTC is demanding that companies have robust scientific substantiation for all health-related claims and the orders imposed on companies found to have violated the FTC’s substantiation standards have required companies to obtain approval from the Food and Drug Administration before making certain claims in the future – claims, for example, that a product or its ingredients can treat, mitigate or cure a disease. The agency provided an extended discussion of its rationale in the analysis to aid public comment in a recently announced settlement with Dannon. Expect to see continued discussion and developments in this area during the coming year.

Again the FTC’s renewed focus is complimented by the work of the CBBB’s National Advertising Division which as of 2010 has issued more than 6000 decision on advertising claims.

Endorsements and Testimonials:  Following amendment of its Endorsement and Testimonial Guides in 2009, the FTC has announced a number of actions to promote compliance, particularly in the area of blogs and public relations. The basic rule under the amended Guides is that bloggers that are directly or indirectly compensated by marketers must disclose the connection between their blog and the marketer.

Green Marketing Claims: Another area of increased FTC activity has been claims related to the environmental qualities of products or services – “green marketing.” In October, the FTC issued a set of proposed revisions to its Guidelines on Environmental Marketing. The comment period has closed and a final set of revised Guidelines are likely to be issued in 2011. In the interim, the FTC has renewed its enforcement activity against deceptive and misleading environmental and energy claims, including claims that “bamboo” products were “environmentally friendly” , that products commonly disposed of in landfills were “biodegradable, ” and just this month that a“tested green” certification program was misleading.   Look for more enforcement activities once the final guides are issued.

The burgeoning green market is also an area of active self regulatory oversight with the NAD providing guidance on the substantiation of green marketing claims through multiple decisions during the past several years.

Advertising to Children: Children's food advertising and concerns about childhood obesity remain a key concern at the FTC. In addition to its ongoing  review  of the food industry's self-regulatory response to obesity concerns, including the CBBB administered Children’s Food and Beverage Advertising Initiative, the FTC is collecting detailed advertising and marketing expenditure data from major children’s food advertisers. A new agency report on children’s food marketing is expected this summer.  The FTC  has also initiated a review of the Children's Online Privacy Protection Act, which governs the online collection of information from children,  to determine what if any changes should be recommended to the statute or made in the FTC’s implementing regulations . The agency is expected to issue a separate report based on this review in 2011.

Educate, Educate, Educate:  Like the BBB, the FTC maintains an active consumer and business education effort. The FTC has introduced a new business education site with links to many compliance resources and a running blog on new FTC initiatives. Check it out: business.ftc.gov

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