Under New Captain, FTC Trims Sails For Speed

*Results may vary

The Federal Trade Commission is lighting a match under its "rocket docket" this year, and that means marketers can expect a lot of firepower from the commission and from agencies with which the FTC cooperates.

Leonard L. Gordon, FTC director for the Northeast Regional Office, speaking this week at New York law firm Venable LLC, advised marketers to expect new regulations, better oversight and stronger enforcement.

The message: with FTC Chairman Jon Liebowitz (chosen by President Obama for the position last May), and David Vladeck as director of the Bureau of Consumer Protection (appointed last April) on deck, the sails are being trimmed for speed. "They are risk-tolerant, and they are willing to take hard positions," he said.

Also coming to the FTC are two new commissioners, one of whom is Julie Brill, former head of the consumer protection agency in Vermont. "She's very aggressive and will want to push the agency to work with the attorney general."



Among the areas Gordon said the commission will revisit are advertising to kids, health claims for food and supplements, and privacy issues. And changes are definitely on the way surrounding testimonial and endorsement. "You will have to disclose much more prominently that, say, for weight loss claims, results are not typical."

There will also be more joint enforcement between the Food and Drug Administration and the FTC. One example is a joint warning that went to Dr. Weil's Weil Lifestyle LLC, urging it to cease marketing so-called "Immune Support Formula" supplements as a treatment for H1N1.

Gordon said Vladeck will seek to build more inter-agency bridges to find supplement makers or food companies that don't support health claims with defensible data. "If supplements will make drug claims, they better have substantiation -- drug-like substantiation," he said. "More and more food products are making health claims, so you will see more enforcement there. They will have to have science or there will be problems."

In terms of financial oversight and protection of consumers, Gordon said the agency will take a more paternalistic view of the role of the government in protecting consumers from predators in areas like mortgage-foreclosure rescue under Mortgage Acts and Practices Servicing, comprising "cradle-to-grave" mortgage regulations aimed at upholding best practices.

Under the regulatory microscope will be loan modification services and debt reduction. "That includes bans on upfront fees," said Gordon. "That's one way to weed out charlatans." He said there will be further scrutiny of companies that buy distressed debt.

Gordon said that guidelines issued last fall have created a firestorm over two revisions: that "results may vary" is not enough of a disclaimer any more; and material-connections disclosure to address a murky area of social-media participants who might be, for instance, Tweeting about a product they claim to use and love without disclosing that they are getting remuneration to say so.

"If a celebrity endorses a product in a commercial, everyone gets that he is being paid to appear in the commercial," said Gordon. "It gets harder when someone mentions in a Tweet that they had some coffee and it's wonderful," he said. "But we have no plans to go after mommy bloggers ... yet. The real focus is much more on companies paying people to blog, Tweet, and do other kinds of viral marketing without disclosure."

The commission will look at online privacy issues differently than it has in the past, per Gordon, especially when it comes to behavioral marketing. He said that until now, the agency has operated on two primary paradigms -- at least for the past 15 years.

One is notice and consent, wherein the marketer tells consumers they will be tracked if they opt in. Gordon said that parameter is not stringent enough in many cases. "The commission is not clear it's working," he says, noting a case against Sears in which the retailer paid visitors to its Web site $10 to have spyware installed on their computers to track their online behavior.

"But the specifics were three pages down the disclosure fine print." He said the commission found that consumers didn't understand what was really being done to their computers: that financial records and prescription drug records were all open to examination.

"There were no allegations that Sears actually misused the data, but there's a sense that if you are collecting this, you have to disclose what you are collecting much more clearly. So the Sears case will be a tipping point, watershed case."

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