Responding to FTC Allegations of Deceptive Conduct

Responding to FTC Allegations of Deceptive Conduct

Being accused of deceptive business practices by the Federal Trade Commission can be scary. But there are steps you can take to respond appropriately and potentially resolve the issues.

What is the FTC?

The FTC, or Federal Trade Commission, is a U.S. government agency that enforces consumer protection laws. Their main role is to protect consumers from unfair or deceptive business practices that could harm them financially or otherwise [1].

The FTC Act gives the FTC authority to investigate and prosecute companies engaged in “unfair or deceptive acts or practices in or affecting commerce” [1]. This includes acts involving foreign commerce that could cause harm within the U.S. [1].

How the FTC Investigates

If the FTC suspects a company of engaging in deceptive practices, they may open an investigation. The first step is usually issuing a Civil Investigative Demand (CID) to the company.

A CID requires the company to provide information and documents related to the potentially illegal practices. This could include sales materials, promotional info, transaction records, and more [3].

Meet and Confer

After receiving a CID, the company can request a “meet and confer” with FTC staff. This is a chance to ask questions about the investigation and clarify what information the FTC needs [3].

Providing Information

Once the company provides the requested info, FTC staff reviews it to determine next steps. Sometimes they close the investigation if no issues are found. Other times, they may approach the company about a settlement [3].

Settlements and Lawsuits

If the FTC believes a company engaged in deceptive practices after reviewing the provided information, they may seek a settlement or file a lawsuit.

Settlements

Settlements allow companies to resolve FTC investigations without litigation. Terms often include stopping the deceptive practices and providing refunds to harmed consumers [3].

Lawsuits

If a settlement isn’t reached, the FTC may file a lawsuit against the company in federal court. The FTC must prove the company should have known its conduct was dishonest or fraudulent [1].

Avoiding Deception Allegations

The best defense is avoiding deceptive practices in the first place. Here are some tips:

• Be transparent about costs, terms, limitations, and other important info
• Have evidence to back up claims about your product/service
• Disclose if you’re being paid for endorsements
• Clearly identify ads and sponsored content
• Honor all promises and commitments to consumers

Responding to an FTC Investigation

If you do receive a CID from the FTC, here are some tips for responding:

• Don’t ignore it – failure to respond can lead to lawsuits and fines
• Be cooperative and provide all requested info accurately and promptly
• Ask for clarification if any request is unclear
• Consider requesting a “meet and confer” to discuss the investigation
• Consult a lawyer experienced with FTC investigations

Avoiding Deception in Advertising

The FTC pays close attention to advertising and marketing. Here are some tips for avoiding deceptive ads:

• Disclose if testimonials are compensated or created by the company
• Use clear and conspicuous disclosures if making claims that require qualification
• Don’t exaggerate or make false claims about products or services
• Clearly disclose relationships with endorsers
• Format ads clearly to avoid misrepresentation

Even if an ad contains a disclaimer, the overall impression can still be deceptive [6]. Look at your ads carefully from the consumer’s perspective.

Take Complaints Seriously

Pay attention to any consumer complaints about deception. The FTC reviews complaint data to detect issues and potential investigations [2]. Address problems quickly and thoroughly.

Getting Legal Help

Consult an attorney experienced with FTC investigations if you receive a CID or lawsuit. They can help protect your interests and guide you through the process.

Dealing with FTC allegations can be daunting, but taking proactive steps can help resolve issues through settlement. Most importantly, commit to transparent and honest practices to avoid deception problems in the first place.