FTC Legal Compliance

Does The FTC Franchise Rule Apply To MLM Offers?

Since the inception of the FTC Franchise Rule (16 C.F.R. § 436.1), the FTC has brought more than two hundred enforcement actions under the rule. The FTC has been particularly successful at stopping fraudulent business sales related to the sale of vending machines and rack displays. However, the FTC Franchise Rule has been unsuccessful at stopping many work-at-home and pyramid marketing schemes.
The FTC Franchise Rule seeks to prevent fraud by requiring franchisors and other business opportunity sellers to disclose material information to purchasers before consummating the sale. Under the Rule, a seller of a business, including a franchise, is legally obligated to disclose the following prior to a sale: 1) The seller’s name, address, principal place of business, type of business, and the name of parent company, if any; 2) The seller’s background, litigation history, and bankruptcy history; 3) The offer’s terms and conditions; 4) a statistical analysis of existing […]

Why A Material Connection Puts Your Business On The Hook!

 
If your business actually compensates endorsers or reviewers with cash, gift certificates, coupons, free products, etc. in exchange for their endorsements or positive reviews, this must be disclosed!
The FTC is the watchdog agency over businesses engaged in interstate commerce including online businesses. The revised FTC guidelines state that if a connection exists between the maker/provider of some good or service and another person that provides a positive review or endorsement about such good or service that would materially affect the endorser’s credibility in the eyes of the reasonable consumer (i.e. a “material connection”), this connection must be disclosed. This applies if the endorser is either not known to the general public or is not held out to be an “expert”. The bottom line is that where it isn’t obvious or reasonably understood by the average consumer that an endorser has or will receive consideration for the endorsement or positive review, […]

What Are FTC Disclosure Requirements For “Average Results”?

 
FTC Disclosure of “Average Results”
 
Perhaps the single biggest headache for many Internet marketers and advertisers has been figuring out how to comply with the FTC disclosure requirements regarding average results in their customer testimonials. Most Internet businesses use some type of customer review or feedback to promote their products, including direct customer testimonials. The prior guidelines allowed advertisers to use a “results not typical” or “results may vary” generic type of disclosure. This is no longer allowed under the 2009 revised FTC Guidelines.
Advertisers are now required to disclose what results consumers should generally expect from your product in the circumstances depicted in the endorsement if the results claimed are not typical. This applies to specific performance type claims. These types of claims cause concern as they suggest or imply the results in the endorsement are typical results and make specific claims which are not in fact typical. For example, […]

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