Internet Marketers Subject to FTC Scrutiny?
Response Magazine, May 2009, Page 10, notes that QVC settled with the Federal Trade Commission (FTC) for $7.5 million. $6 million to consumers, $1.5 million as a civil penalty.
This payment stemmed from a promise that QVC’s made to the FTC in 2000. The promise: QVC would stop making false and unsubstantiated claims about the benefits of health-related products that it was selling.
The charges state that QVC aired 200 programs where false and unsubstantiated claims were made for a variety of products. (See article above for source.)
Also interesting to note: QVC’s legal counsel claims that because of the way that the information was presented, there was no deception.
Why is this important to Internet Marketers?
This is important to Internet Marketers because some Internet Marketers are guilty of the same “fine print warnings,” guilty of “masking claims of earning potential” in the language of legal disclaimers, and guilty or requiring that the customer make a careful reading of the sales page to discover disclaimers…while at the same time, these Internet Marketers use motivational and subliminal control language to distract customers from performing this due diligence.
The information that customers “might not (probably won’t) make the kind of returns that the sales letter celebrates” is shoved “under a rug” of hype and hyperbole.
In fact, like cigarette companies, some Internet Marketers hide relevant facts from customers, facts that would aid customers in performing due diligence.
These facts,
A simple, “This is not for newbies” disclaimer somewhere on a lengthy sales page fails to provide full disclosure and allow a customer can make an informed decision.
Here are some sample claims: “I’ll show you everything I did to make $xyz millions…”
Sure, and I can pay Kobe Bryant $10,000 to teach me exactly how he dribbles full court and dunks, outrunning everyone on the court by a car length. However, if I am 5’6″ tall, a couch potato, and 47 years old; the chances are that I am squandering my money. I might not have what it takes to perform at Kobe’s level, even if he shows me how he does what he does.
Another sample claim: “My last product launch made $xyz millions in a week…”
Sure, but commissions were $xyz/2. Expenses were $xyz/4. Payroll was $xyz/8. My profit before taxes was $xyz/8. My after tax profit was $xyz/16.
So, how does this product launch make money since the product owner barely breaks even? Well, the back end sales process might not be Internet Marketing at all, but a wolf-pack of telemarketers who hound purchasers with high-priced coaching, seminar and outsource service offers.
A telemarketing offer might go like this. “You purchased our Whiz Bang product, but perhaps you don’t have the time to learn how to use it, or you don’t have the staff of specialists to make it work; or maybe you are missing one of the scores of skills that you need…
Join our Winners’ Circle, VIP Mastermind Training Membership Club, and for a small initial investment of $17,000; you can take full advantage of the investment that you just made in our our Whiz Bang product. But, if learning all these skills seem overmuch for you, then, our $27,000 ‘We do it all for you’ service is your ticket to the Internet Lifestyle of your dreams.”
Or, the Internet Marketer might not be selling products at all, but rather selling leads to other companies.
Another sample claim: “My last product sold out in less than one hour after launch.”
Sure, but dozens of my big-mailing-list owner buddies were pushing the product for a week before the product launch. And, the number of product units sold was kept abnormally low to justify the exorbitant price of the product.
Another example: “Promote my Product as an affiliate and earn 50% commission.”
Sure, but unless I make three sales of the $97 product, I never reach the $100 minimum payout. So, I will never see the money.
A Story that Parallels the Internet Marketing Deception
There is a trick that basketball coaches pull on unsuspecting students.
They stand looking at a basket 3/4 of the court away. Then, the coach bets team members 50 pushups that the next shot he makes will be a basket.
Of course the team snaps up this bet. Then, the coach turns around and sinks an easy lay up shot in the basket that he was standing under.
This object lesson proves a simple deception and offers good fun geared to teaching students on the basketball team to remain alert.
However, Internet Marketing misdirection fails to offer “good fun,” laughter and camaraderie. People spending money for products that cannot produce the results that they were promised is serious, and a crime.
LLC Umbrellas offer No Protection from the FTC
Some Internet Marketers shield themselves from financial liability behind two or more Limited Liability Corporations (LLCs).
This strategy is effective in protecting the Internet Marketer that “operates on the shady side of Truth Street,” from competitors and creditors. But these corporate trappings do not shield the marketer and any assets (including personal assets obtained in the commission of a crime) from the FTC.
The FTC issues “Orders” and companies are obliged (required) to abide.
QVC, and their $7.5 million dollar settlement (accepted on the advice of QVC lawyers) provides evidence that the penalties for false, deceptive or misleading claims can be huge.
And what did QVC’s Senior Vice-President-General Counsel say,
“When the vendors offered these products on air, QVC believed, and still believes, that there was no deception in the way they were presented.”
(See article above for source.)
This “there was no deception in the way they were presented” phrase is what will hang Internet Marketers once the FTC regulates the industry.
Internet Marketers’ Version: “The way we worded that claim is technically correct, and we can’t help it if those customers didn’t catch our drift.”
FTC’s Stance: “If the wording is so tricky, couched in disclaimers or presented in ways that hide the real promise, then the advertisement is deceptive.”
Internet Marketers should begin gearing up for a “full disclosure” rework of their advertising.
And, due to the nature of the product, consumers cannot read the contents on the package.
For example, a few years ago, a bakery company was allowed to place the label, “non-nutritive fiber” on a high-fiber bread. What the label didn’t reveal was that the source of that fiber was sawdust.
Sure, humans cannot digest sawdust, so the labeling was “technically true.” Of course, consumers believed that they were purchasing fiber from grains like wheat and oats. But, full disclosure would have meant that few people, if any would buy a loaf of bread loaded with a cheap filler such as sawdust.
Internet Marketers need to not only begin a “full disclosure” dialog with their customers, but, they have to quit selling “sawdust.”
