To complement our recent post regarding attorney general proceedings, we felt it would be helpful to our readers if we commented on another regulating body that affects the marketing and advertising spaces: the Federal Trade Commission (FTC).
An Overview of the FTC
The FTC is an independent agency established in 1914 to, among other things, protect consumers from unfair or deceptive business practices, especially focusing on advertising and marketing, telemarketing fraud, and privacy/identity protection. A business and/or individual will be found to be engaging in an unfair business practice if the practice is found to be unethical and injures consumers, in violation of established public policy. Likewise, a business and/or individual will be found to be engaging in deceptive business practices if it makes a material representation/omission or engages in an activity that is likely to deceive reasonable consumers. The FTC has stated that a “material” representation, omission, or practice is one that affects the consumer’s behavior.
FTC Investigations and Lawsuits
There are several ways that a business and/ or individual can become the target of an FTC investigation or lawsuit. The most common of these are complaints from consumers, congressional inquiries, or reports from the media. For obvious reasons, the best practice for businesses and individuals should be to retain experienced counsel to monitor their compliance with FTC regulations, before an FTC investigation or lawsuit is instituted. A compliance attorney will also be very useful in setting practice policies, which will preemptively protect the person or business should an FTC investigation or lawsuit arise.
Recent FTC Case
A recent FTC case illustrates the above points. On Friday, Equifax, one of the largest U.S. consumer reporting agencies, agreed to pay $392,803 as a settlement for violating the Fair Credit Reporting Act (FCRA) and the FTC Act. The violations stemmed from Equifax’s alleged failure to monitor FTC regulations and properly screen third parties who requested private consumer information. As a result, sensitive information regarding millions of consumers was sold to unqualified third parties in violation of the FCRA. The settlement amount paid by Equifax equaled the gross revenue gained from the wrongful sale of consumer information. Additionally, the FTC found Equifax’s actions to be an unfair business practice in violation of the FTC Act. As a result, Equifax agreed to comply with a consent order issued by the FTC, requiring Equifax to maintain higher screening and compliance procedures. You should note that no finding of bad intent was necessary; this was simply a matter of a company failing to monitor and comply with FTC regulations.
This topic should be of interest to any company or individual engaging in a commercial venture within the United States, especially those involved in the marketing, data collection and/or consumer product industries.
If you are interested in ensuring that you are compliant with current regulations or if you are facing an investigation from the FTC or other regulatory agency, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.
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