Manatt Advertising Chair Comments on FTC's Direct Response Marketing Crack Down

"What Else Is Up the FTC's Sleeve?
Response Magazine

November 1, 2012 - Manatt's Linda Goldstein, chair of the firm's Advertising, Marketing & Media Practice, spoke to Response Magazine about the Federal Trade Commission's latest effort to crack down on violations within the direct response industry.

Response Magazine reports that the FTC has recently levied some of its strongest fines and harshest criticisms of direct response (DR) marketers in years. The FTC announcements against DR marketers puts the industry on notice and includes marketers of the John Beck financial program, the Ab Circle Pro fitness products and the Your Baby Can read line. The publication turned to its Advisory Board of experts for insight into how effective the FTC's practices are and how DR marketers who are not directly affected should react to them.

Goldstein told the publication that the recent big dollar judgments are unfortunately not isolated incidents but part of an increasingly aggressive enforcement trend that has been in the making for several years. The dollar amount of financial settlements that this FTC administration has extracted has been growing exponentially. Many readers may be unaware of the fact that unless a defendant in an enforcement action has violated a previous consent order or a trade regulation rule - like the Telemarketing Sales Rule (TSR) - the FTC does not have the authority to impose fines and penalties.

However, the FTC does have the authority to demand restitution or disgorgement of funds that are considered so-called "equitable remedies." Historically, in cases that merely involved the failure of the advertiser to adequately substantiate claims, the FTC would only seek injunctive relief unless there was also evidence of outright fraud. During the past 10 years, the FTC has been increasingly seeking restitution and/or disgorgement of all funds - even in case involving only claim substantiation. In many cases, the FTC will seek full restitution of all money paid by the consumer, and if (as is often the case) the company is financially unable to pay this, the FTC will seek to take all of the company's available assets. In addition, the FTC is increasingly expanding its enforcement activity to include individual defendants as well and to seize all individual assets, even if some of those assets have been unrelated to the alleged conduct.

Read the article here.