FTC Mania

December 15, 2009

People in the online marketing world are getting worked up about a new stand the Federal Trade Commission (FTC) is taking towards enforcing marketing and advertising rules on the internet. Some people are claiming the FTC added new rules or changed the game.

The un-hyped version is that the FTC has issued guidelines for how existing rules will be applied to online marketing and advertising. The rules have always applied, but they have not had the interpretation guidelines or the resources to enforce them online.

If you want to skip the personal story part of this post, you can see a great webinar
by Jim Daniels with Rich Cleland, Assistant Deputy at The Federal Trade Commission, discussing the guidelines and how they apply. The interview is posted here. My story is below.

Since the core element of the FTC’s rules for marketing and advertising has to do with disclosure, let me make one. I generally like the FTC. Maybe more than a lot. In fact, at times in my life I have loved “them.” I’m not sure specifically who I’ve loved, but they’ve been the cavalry, albeit arriving too late to save everyone.

My family spent an embarrassing amount of money buying a business opportunity in 2002. I’ve written bits and pieces about this and talked about it in teleseminars, but some day I’ll publish the full story. It’s in draft form right now. We were naïve, but so were hundreds of other people. By late fall of 2003 I was being sued by the company for “false claims” based on my detailed e-mail response to a “business mentor” the company had assigned to me. He suggested three lame things to get clients, and I told him in detail what we had already tried and how it had gone. Detailed, as in factual.

My business and I were sued, based on the claim my e-mail got into the hands of prospects who backed out of buying their own “distributorship.” I had no contact with prospects so I have no idea if that even happened, but it certainly didn’t go through me. While we prepared to countersue for all the misrepresentations (legal speak for “lies”) by the company, they started collapsing. They notified the list of owners that they would no long sell the business opportunity, because they had reached their target number of distributors, which was around 750 I believe, and didn’t need any more.

Sounded like a great point to make in the lawsuit, since it would prove they suffered no harm from people I didn’t know receiving an e-mail I sent to their representative. But it was just foreshadowing. Soon a list formed of “distributors” trying to get information. The phone service and cards we were selling quit working. Information came out that the company was involved in selling internet kiosks under another business name, and people were not getting their kiosks delivered.

The FTC stepped in and closed them down. The total they took in from people eager to be business owners was estimated between eighty and one hundred million dollars in the report I saw. I never heard if anyone was prosecuted, and I’m sure no distributor got any money back, but the business entity collapsed and the lawsuit was dropped.

Unfortunately for me, but fortunately for me story, I bought another business opportunity just before that one collapsed. I spent a lot less money, four figures instead of five. A year or so after I bought that calamity, I received a letter from the FTC that the company had been shut down. It also had different names and offered different opportunities. It had been operating more than five years, collected more than one hundred million dollars, and had several thousand victims.

The really cool part is that two of the people who started that company and directed the business opportunities, a husband and wife, were prosecuted and spent years in jail. The FTC kept me updated through e-mail during the prosecution. Never got any money back from that, either, but at least there was a measure of justice delivered.

I realize this is a government agency and some time soon I might be railing against the foolishness of their enforcement policies. Even though they were very slow to catch these con artists who fooled me and thousands of others, they might be overly zealous with a solo entrepreneur selling an information product on the web.

But still, their main focus in the new guidelines is to prevent people from being misled by deceptive marketing and advertising practices. Gotta’ say, overall, I’m pretty much in favor of that. When hyperbolic marketing is the norm, as it is in some segments of internet marketing, it drowns out honest marketing.

When hyped-up-claims marketing is aimed at new and would-be solo entrepreneurs, who are overwhelmed trying to figure out how to market, what tactics to use, and what will really work for them, it deceives many and leaves the rest jaded. I talk to these new entrepreneurs on a regular basis. They think they can trust nobody about marketing or business development information and they start worrying there’s no real success for start-ups without using smoke and mirrors.

I know real success is really possible with the right information, preparation and tools, but some days I share their cynicism. Having marketers be worried they’ll have to prove the truthfulness of their statements sounds like a pretty good thing to me.

If you plan to market on the internet, the interview with the FTC official is posted here.

Find Your Mission – Write Your Story – Tell The World

Steve Coxsey

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