The Power of the Federal Trade Commission

Whether your company is in its growth stages or is a major player in your industry, you should be aware of the regulations affecting business practices in the market place. Besides adhering to your own state’s consumer protection laws, you should know what the Federal Trade Commission (FTC) regulates so you can develop policies, and design your marketing campaign and pricing techniques to stay in bounds.

Take a look at this chart to understand the FTC’s basic mission:

FTC Goal:	This Involves:
To protect consumers	Preventing and fighting fraud, deception, and unfair business practices in the marketplace.
To maintain competition	Preventing and fighting anti-competitive mergers and other anti-competitive business practices in the marketplace (collusion).

Policies Should Maintain Truthful and Fair Business Practices

The FTC provides information about how to develop your business and marketing practices in the following areas:

• Advertising and marketing;
• Credit and finance;
• Privacy and security; and
• For selected industries.

Under the law, advertising claims:

• Must be truthful;
• Cannot be deceptive or unfair; and
• Must be evidence-based.

For some specialized products or services, additional rules may apply.

No matter where an ad appears — on the Internet, on radio or television, in newspapers or magazines, in information delivered through the mail, or on billboards or buses — the same truth-in-advertising standard applies.

An Example of Regulation

In one action, two paint companies agreed to settle FTC charges that some of their products were free of potentially harmful chemicals known as volatile organic compunds (VOCs). The companies made “zero VOC” claims about some of their paints through a variety of media, including brochures, point-of-purchase marketing, product labels and the Internet.

However, according to the FTC, while uncolored “base” paints might be free of VOCs, it is not true for tinted paint, which typically has much higher levels of the compounds. Consumers usually buy tinted paint.

The FTC charged that the companies were violating federal law by making false and unsubstantiated claims.

The companies were ordered to take a number of steps including: not making claims the products contain “zero VOCs;” disclosing that the “zero VOC” claims only apply to the base paint; sending letters to retailers requiring them to remove all related ads; and putting corrective stickers on current paint cans making the claims.

Additional Standards May Apply

In addition to the advertising and marketing practices described above, there are more standards if you use telemarketing in your promotional efforts. The FTC regulates the Telemarketing Sales Rule and the Do Not Call Registry.

Your business also faces addiitonal compliance responsibilities if you extend credit to consumers, are in the business of offering loans, or help companies that do make loans. The FTC enforces laws that protect consumers from unfair or deceptive financial practices in lending, loan servicing, debt collection, and debt relief services.

The FTC also takes action against certain illegal practices related to billing, payments, and payment processing, as well as other practices that cause financial harm to consumers.

For many companies, collecting sensitive consumer and employee information is an essential part of doing business. It’s your legal responsibility to take steps to properly secure and dispose of it. There may be more compliance considerations with financial data, personal information about children, and material derived from credit reports. In addition, you may have legal responsibilities to victims of identity theft.

The Steps the FTC Takes to Enforce Regulations:

• The FTC usually attempts to bring offending companies into line by pointing out the error of their ways and seeking voluntary compliance. Most complaints about a company come from customers and competitors.
• If a company refuses to voluntarily comply with an FTC request, the agency has the power to enter a “cease and desist” order against the firm.
• If the cease and desist order fails to get the company’s attention, the FTC can file a civil suit asking for an injunction, and may win the right to force the firm to run ads stating that prior ads were deceptive. Being forced to run such ads can obviously do damage to a company’s credibility and goodwill.

To help eliminate risks, proactively develop compliance policies and comply with reasonable FTC requests from the start. Speak with your attorney about what you need to do to make sure you are in compliance with the regulations.