New FTC Regulations could cost you $11,000 and an audit!

The Federal Trade Commission in the US has come out with new regulations affecting how goods and services are marketed on the Web. These new regulations are significant for marketing,  customer satisfaction and legal  professionals in your organization.

The Federal Trade Commission is coming down hard on website owners,  bloggers and social media users that make claims about their product and service. We’ve seen the get rich quick schemes that abound on the web… how someone made huge amounts of money in very short periods of time and how you can learn to do the same thing by taking some action, generally associated with buying something, on line.  If the organization has been following best practices, they will have a disclaimer in their text or terms of use  (typical results will vary, or there is no guarantee of results) but now that is no longer adequate.  What the FTC has asked for is that a typical users results be given the same prominence as the testimonials from those who had outstanding results. Failure to comply can result in a fine of up to $11,000 and that can be per page or per blog post.

The new FTC regulations also require those who get some financial reward for posting something on their website to publicize that on their website. So if you are being paid to have ads on your website, or are paid in some way  to promote someone else’s product, this must be clearly stated on the website or it is in violation of FTC rules. Do you have dealers or affiliates who sell for you. They need to post on their website that they are selling on your behalf.  When I worked for IBM, an IBM Business Partner was happy to have the IBM logo displayed on their website or business advertising as it gave them credibility in the marketplace. But not all financial arrangements are public and the FTC requires them to be disclosed now. If your organization sells products for someone else or are paid a commission or other payment or payment in kind, this needs to be disclosed as well on your organization’s  site.

The FTC cannot possibly check every website but it can check those that they get complaints about. The complaints may come from unhappy customers or they may come from your competitors. In an article in Fast Company, Richard Cleland, assistant director, division of advertising practices at the FTC, in a discussion about how this would be enforced said that they have no shortage of complaints from competitors.

What does this mean for those responsible for customer satisfaction processes?

1. Ensure your management team are aware of these issues .

2. Ensure Testimonials, References and Claims are being reviewed. It is common knowledge that customer satisfaction is the balance between what you promise and what you deliver against those promises.  See my blog article on this subject.  In the FTC context, what you promise your product or service does can come under scrutiny. Does your product or service make claims or use testimonials? Are you only showing the ‘best possible’ results and are you publicizing typical results as well? Check your websites to see what testimonials you have and what references you use. Testimonials and References are two key elements of any customer satisfaction strategy but how they are posted on the web will now be under the watchful eye of the public.

3. Ensure External Partners are also following FTC Guidelines. Alert the management in your organization that looks after, Retailers,  Dealers, Business Partners, Affiliates and Influencers that the claims made by these external organizations, can come back to haunt them and processes need to be put in place to ensure they don’t over promise and fail to provide ‘typical’ user scenarios. Any organization using an external sales arm needs to put procedures and policies in place to ensure they are not held accountable by the FTC for the action of those representing them in the marketplace.

While the article in Fast Company implies that the FTC will provide ample warning, no organization wants to spend its precious resources answering audits from the FTC. This time and effort and distraction could cost more than the possible fine from the FTC.

What are you doing in your organization? Post your comments, feedback and best practices.


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Adele Berenstein

Adele Berenstein is an Experienced Customer Satisfaction Executive, recently retired from a Large Global IT Organization after a long productive management career including Sales, Marketing, Services, teaching and education center management and most recently, 19 years in customer satisfaction management. She turned around divisions with customer satisfaction problems, implemented measurable improvements and management systems, and implemented programs to prevent problems from ever affecting customers.

One Response to “Customer Satisfaction mistakes can also violate new FTC Regulations”

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