What else can a company do to stay clear of potential problems?
Another area where companies get into trouble is when they do not have an adequate call center or clear cancellation procedures, because that leads to unhappy consumers. If consumers have to make several phone calls or endure lengthy hold times in order to cancel, it is more likely they will make a formal complaint. That complaint may be made to the FTC, the Better Business Bureau or a consumer advocacy Web site. The more consumers complain, the more likely you will pique the interest of the FTC or of a plaintiff’s lawyer.
Complaints can also negatively impact your relationship with your credit card company. If consumers believe they have been deceived or are generally frustrated with your company, they will dispute the charge with their credit card company, which generally results in a chargeback. Your agreement with credit card companies or payment processing companies generally requires that monthly chargebacks fall below a certain percentage of sales. When chargebacks routinely exceed that percentage, you are subject to significant fines or termination of the agreement. While you can challenge the chargeback, that is an uphill battle and also requires resources.
What impact can it have on a business if its marketing practices draw the attention of the FTC?
I can’t emphasize enough how much a company does not want to put itself in the crosshairs of the FTC. Once the agency begins to seriously investigate a company, there is generally no turning back. You can fight and force the FTC to sue you in federal court, but the deck is really stacked against you. Courts generally give deference to the FTC’s judgment on what is deceptive. As such, many companies settle, which means making changes to your marketing practices (i.e., changes to your Internet page) and monetary compensation, which can be significant.
If you settle, the FTC posts a press release on its Web site, complete with a copy of the complaint and settlement agreement. Then you just have to hold your breath and hope you don’t get an onslaught of copycat lawsuits.
Where can a business owner get more information on the do’s and don’ts of negative option offers?
The FTC’s Web site at www.ftc.gov is a valuable resource because it contains manuals and guidelines on advertising practices for both businesses and consumers. The other thing to do is hire someone familiar with FTC guidelines and regulations who can help you navigate these waters. While no one can say for sure, ‘If you do it this way, you’ll be fine,’ or, ‘If you do it that way, you’re going to get into trouble,’ they can advise you on best practices, where the problems are with your advertisements and how you can better make them clear and conspicuous.
Stephen Weisskopf is a senior attorney at Theodora Oringher Miller & Richman PC. Reach him at [email protected] (310) 557-2009.