FTC Surfs the Web to Snare Violators
Using powerful collaborative enforcement efforts with federal agencies, state attorneys general and even foreign governments, the Federal Trade Commission is dedicating significant resources and using new technology to monitor and rein in Internet marketers.
The FTC has led numerous "Surf Days" to challenge marketing practices that it thinks are false or deceptive. Typically, the surf days begin with the FTC identifying a prominent Internet practice that it thinks is deceptive. It recruits surfers, which may include federal, state and international law-enforcement agencies and public-interest groups. A date and time is set for the surfers to search the Web for sites that promote the targeted claims.
Sites that match the profile for possible law violations are identified and sent to the FTC for review. At that point, the FTC may send the site's operators an e-mail message and/or a warning letter advising of potential problems. The investigators usually make follow-up visits to confirm that questionable claims have been eliminated or revised. In some cases, it may initiate formal enforcement proceedings against the operator without first sending a warning letter.
The FTC initiated seven surf days in 1997, identifying thousands of questionable ads. A Credit Repair Surf Day, working jointly with the Illinois attorney general's office, challenged sites charging fees based on the claim that they could erase accurate negative information from consumers' credit histories.
The FTC and government agencies from Canada and Mexico, the American Heart Association and the American Cancer Society participated in an International Health Claims Surf Day, which focused on the promotion of products or services that claimed to cure or prevent cancer, heart disease, AIDS, diabetes, arthritis and multiple sclerosis.
The FTC continues to target Internet marketers of business opportunities in several sweeps, including:
* Business Opportunities Surf Day, which uncovered several hundred Internet sites making suspicious earnings claims for start-up businesses.
* Coupon-Related Business Opportunity Surf Day, conducted with the nonprofit industry group the Coupon Information Center, which challenged unsupported earnings claims of various coupon-related business-opportunity marketers.
* HUD Tracers Surf Day, conducted jointly with the Department of Housing and Urban Development, which searched for sites promoting business opportunities to market HUD tracing services and/or falsely claiming to be affiliated with the government.
The FTC also participated in an International Internet Surf Day sponsored by the International Marketing Supervision Network, an association of consumer protection agencies from more than two dozen countries, 23 U.S. states, the Securities and Exchange Commission and the Commodity Futures Trading Commission. In this case, regulators identified Web sites promoting possible pyramid schemes or business opportunities.
In the context of privacy rights on the Internet, the FTC has carried out several surf days to monitor how Web-site operators are collecting data on visitors or purchasers. This is especially true of sites that aim to attract minors.
The FTC says it intends to devote significant financial and staff resources to monitor and challenge Internet marketers. This is true even though Internet commerce constitutes a small percentage of business transactions.
Although the FTC's actions against unscrupulous Internet marketers are laudable, legitimate marketers nevertheless need to be on the alert. The FTC's focus on the Internet underlines its intentions to be the primary enforcer of e-commerce. By developing an organizational structure and technological expertise in carrying out surf days with other regulatory agencies, the FTC has demonstrated that it not only will target the rogue marketer but also monitor the actions of legitimate marketers in designated industries.
Marketers need to evaluate their own and competitors' business practices. Regulators seek to obtain decisions or settlements that may effectively hinder legitimate businesses with the same restrictions -- even though those companies may not have done anything wrong in the past. This occurs because the government has extracted a standard that other companies need to consider following.
Given the significant resources devoted to the Internet and the agency's actions industrywide, the FTC's actions against Internet marketers should be closely followed to ascertain what standard the agency is seeking to establish.
Andrew B. Lustigman is a partner in The Lustigman Firm, a New York law firm specializing in direct marketing law.