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IP & Regulatory Law Blog Reflections of a former regulator on FTC and IP issues

If You Are Marketing Continuity Plans, Let Consumers Know.

Posted in Advertising, FTC

Yesterday, the FTC reported that it had filed its 11th case involving the promotion of dietary supplements via fake news sites run by affiliate marketers.  Sure, companies need to be concerned about how consumers are driven to their websites.  However, it appears that the driving factor for many of the FTC’s complaints involving fake news sites was not the misleading claims on the affiliates’ websites, but rather the undisclosed negative option continuity plans on the defendants’ websites and the inability of consumers to get refunds.

Even though technology has improved, it’s the same old story.  At the end of the day, consumers complain to their state AG’s offices and the FTC because they claim that they were enrolled in undisclosed continuity plans, not that they lost $1.95 for a sample of a product that did not work.  The FTC’s Complaint involving the sale of acai berry/colon cleanse products is yet another example of this common fact pattern. 

The fact that these products were pitched through allegedly fake new sites is only icing on the cake.  If companies honored their 100% money back guarantees, not enough people would complain to give the FTC the incentive to bring an action.  The FTC has limited resources so many of its cases are derived from consumers’ complaints.  Make no mistake that if you make claims that are on its top hit list (e.g., claims to children or claims directed at curing diseases), you could see an FTC inquiry. However, if everyone is happy, then it’s less likely that your claims will come under scrutiny.

Now, it might not be economically feasible to offer 100% refunds because companies pay out commissions to affiliates to drive consumers to their websites before consumers request refunds. This makes it even more important for companies to make sure that they have defensible positions for using any negative option continuity plans.  Also, companies need to understand how consumers were pitched to arrive at their websites.  If the true “product” is the continuity plan, then companies need to be ready to defend why all of the downstream affiliate marketing as well as the marketing on their own websites focused on the $1.95 product.  While companies like to blur the issue, the question is fairly simple. If at the end of the day, the consumer believed that it was just buying the $1.95 product instead of signing up for the $79.95 plan, you could have an issue. Also, failing to investigate how consumers got to your website (i.e., by failing to monitor downstream affiliate marketing) can only lead to further trouble.  Be clever in your marketing, but make sure that consumers understand what they are buying.

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