Responding to FTC Consumer Fraud Allegations

Responding to FTC Consumer Fraud Allegations

Dealing with allegations of consumer fraud from the Federal Trade Commission can be scary. But there are steps you can take to respond appropriately and protect your business. This article will walk through the FTC complaint process, defenses, and best practices for responding.

The FTC Complaint Process

The FTC relies on consumer complaints to detect unfair or deceptive business practices. Anyone can submit a complaint on the FTC website or by calling 1-877-FTC-HELP. The FTC reviews these complaints and decides which ones merit investigation.

If the FTC opens an investigation into your business, they will notify you by letter. This gives you a chance to respond to the allegations before any legal action. Provide any evidence showing you complied with the law. Be prompt, transparent, and cooperative.

If the investigation uncovers violations, the FTC may initiate an administrative proceeding or federal court action. This leads to orders stopping the violations and requiring consumer redress. Failure to comply can result in civil penalties.

Common FTC Consumer Fraud Allegations

Some of the most common FTC consumer fraud allegations include:

• False or misleading claims in advertising
• Failing to deliver products or services as promised
• Charging for products or services without consent
• Violating telemarketing sales rules
• Violating rules for credit repair organizations

The FTC Act prohibits “unfair or deceptive acts or practices.” Almost any conduct that harms consumers can potentially violate the law.

Defenses and Best Practices

If you receive notice of an FTC investigation, don’t panic. There are several defenses and best practices that can help:

Show the Advertising Claims Were Truthful

If the allegations relate to advertising claims, provide substantiation showing the claims were truthful at the time they were made. FTC rules require advertisers to have a “reasonable basis” for claims before disseminating ads. Share any evidence you relied on – consumer surveys, scientific tests, expert analysis, etc. If the evidence wasn’t adequate, work with the FTC to correct the claims moving forward.

Demonstrate Steps Taken to Prevent Violations

For allegations of unfair billing, telemarketing violations, or other illegal practices, demonstrate the steps you’ve taken to prevent violations. Highlight compliance training, monitoring programs, and disciplinary actions. Emphasize that violations were inadvertent and you’ve taken measures to avoid recurrences. These good faith efforts can help mitigate penalties.

Argue the Conduct Wasn’t “Unfair or Deceptive”

In some cases, you may be able to argue the challenged conduct does not meet the legal standard of “unfair or deceptive.” For example, claims that are merely puffery rather than factual misrepresentations may be defensible. Each case depends on its specific facts.

Seek a Settlement

Settlement may be the fastest way to resolve the matter. Settlements typically involve stopping the contested practices and some form of consumer redress, but avoid litigation. If the evidence isn’t in your favor, settlement may be the best option.

Other Precautions

Here are some other precautions to take when responding to FTC allegations:

• Don’t destroy records – this can lead to obstruction charges
• Consult a lawyer experienced with the FTC
• Designate a single point of contact with the FTC
• Respond promptly, accurately, and cooperatively to FTC requests

Avoiding FTC Scrutiny

The best defense is to avoid FTC scrutiny in the first place. Here are some tips:

• Review advertising and marketing for accuracy
• Honor all terms and conditions
• Implement compliance training and monitoring
• Promptly address consumer complaints
• Seek legal review of promotions and contracts

Staying out of the FTC’s crosshairs starts with an ethical, consumer-focused business culture. But if you do get an inquiry, responding appropriately can mitigate the outcome. With preparation and legal guidance, you can successfully navigate FTC allegations.