FTC Cracks Down On Affiliate Marketing Programs: The Federal Trade Commission requires advertisers to possess a “reasonable basis” for express and implied claims. The failure to do so constitutes an unfair and deceptive act or practice in violation of Section 5 of the FTC Act.
Providers of online training and business coaching programs have found themselves on the receiving end of unwanted FTC scrutiny of late. What follows below are compliance mistakes made by operators of such programs that are almost certain to result in unwanted regulatory scrutiny.
Making False or Unfounded Earnings Claims
Making false or unfounded earnings and related claims to sell enrollment in online training and business coaching programs. Such claims can be express or implied, are often made via the use of endorsements, and must be substantiated. Claims of those that achieved exceptional, or even above average results, are a regulatory enforcement favorite.
For example, if the advertiser does not have proof that an endorser’s earnings claims represent what people will generally achieve using the program as described in the ad, then an ad featuring that endorser must make clear to the audience what the generally expected results are.
Often, the FTC uncovers that the vast majority of enrollees do not make any money, and many lose money on top of the money they pay the program providers.
Claims that a program can be used to generate substantial income are also almost certain to draw the ire of the FTC. As are photos depicting a lavish lifestyle and representations that earnings can be achieved quickly, by anyone, regardless of education and/or regardless of experience.
Failing to Possess Pre-Dissemination Substantiation
Earnings claims are not the only type of representations that must by adequately substantiation. In fact, advertisers must possess a reasonable basis for all express and implied claims, before such claims are disseminated. It is not enough to possess the requisite level of substantiation after the FTC has initiated a regulatory investigation or lawsuit.
Charging Exorbitant Prices and Failing to Offer Anything of Legitimate Value
Recent FTC enforcement actions have also focused upon exorbitant prices charged by providers in exchange for training materials that the agency alleged to be readily available, at no cost, online.
What consumers are offered in exchange for what they pay for, as well as the amount of money that consumers are charged, are amongst the factors assessed by the FTC when considering enforcement.
Making Misleading Representations About the Background of Instructors
Purported “instructors” that are really salespeople on commission who market enrollment and training materials are another issue to avoid. As is overstating the “expertise” or experience of those teaching courses.
Training sales personnel to deceive consumers while taking them through a suspect sales funnel is a tactic that the FTC is familiar with, and scrutinizes.
Holding people out as successful in a particular industry alone, much less coupled with purported substantial wealth having been amassed via the program, are issues that can easily result in a civil investigative demand (or judicial enforcement action) requesting proof for such claims.
Making Misrepresentations about the Scope and Nature of Products and Services
Representations about the scope and nature of the products and services offered must be accurate and truthful. For example, if consumers are told that they will receive specialized one-on-one expert training tailored to the consumers’ specific needs or business, they must receive just that.
Claims of access to specialized research or materials must also be truthful and substantiated.