In a much-awaited decision, a federal judge has granted summary judgment in favor of the Federal Trade Commission (FTC) against DRTV veterans Gary Hewitt and Doug Gravink and their company, Family Products LLC, in the case FTC v. John Beck Amazing Profits et al. Hewitt and Gravink sold “John Beck’s Free & Clear Real Estate System,” “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions” through national infomercials. The FTC obtained a preliminary injunction in 2009 but failed to get an asset freeze, which allowed the defendants to keep advertising under the strictures of the preliminary injunction and, equally importantly, to continue to pay for a defense – all the way to trial if necessary. The court did not need a trial, however, summarily ruling that all challenged ad claims and marketing practices were deceptive and a violation of either the FTC Act or the FTC Telemarketing Sales Rule (TSR).
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Most antiquities remain forever relics of the past, irrelevant to the present except as objects of interest and amusement. Such had seemed to be the case with the FTC’s dusty old Business Opportunity (“Biz-Op”) Rule, but no more. Once confined to the realm of vending machine businesses and the like, and limited to biz-ops costing at least $500, the rule has been broadened to cover sellers of “work-at-home” opportunities carrying no purchase minimum.

Could these include Internet “make-money” schemes (like “turnkey” web stores, or how to make money on Google or through social media marketing)? The answer, if yes, could have huge implications for the viability of Internet biz-op marketing given the onerous disclosure requirements of the rule.
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The Federal Trade Commission (FTC) continues to define the scope of online affiliate monitoring obligations. Last year, in Legacy Learning Systems, the FTC ordered a merchant, that was paying affiliates to post favorable product reviews without disclosure of the financial tie, to: monitor and report to the FTC about its top 50 money-making affiliates and ensure they are making the financial connection disclosure; monitor and report on a random sampling of another 50 affiliates to ensure they also disclose the connection; and terminate and stop payment to any non-complying affiliate.

This year, the FTC has laid out further its vision of compliant affiliate monitoring in much-awaited settlements of two big Internet marketing cases: Central Coast Nutraceuticals and 1021018 Alberta Ltd., d.b.a. Just Think Media and their respective head honchos, Graham Gibson and Jesse Willms. Gibson and Willms both were engaged in negative option marketing through affiliate programs. In addition to banning them for life from using negative options (a now standard FTC remedy), the FTC orders against Gibson and Willms impose super tough affiliate policing requirements that amount to a de facto ban on affiliate marketing because there is no way they can be satisfied, at least on a large scale.

The Gibson and Willms orders require one or the other of them to:
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Direct response marketers are under assault not only from the Federal Trade Commission (FTC) but also from class action mills that are targeting the advertising of dietary supplements and other consumer products. The financial consequences of an attack from either front can be devastating. Compliant business practices normally are good enough to keep the FTC at bay, but the same can’t always be said for plaintiffs’ lawyers who specialize in the art of the shakedown. Playing the odds, they know that the threat of a class action, even against law-abiding marketers, can be enough to extract a hefty settlement and payday for themselves.

Fortunately, the U.S. Supreme Court, in a series of recent decisions, has given marketers new armor with which to defend themselves preemptively against plaintiffs’ suits: mandatory arbitration of consumer disputes. Last month, in CompuCredit Corporation v. Greenwood, its latest pronouncement on the subject, the Supreme Court barred a class action for violation of the Credit Repair Organization Act (CROA) on the grounds that CompuCredit’s credit card agreement required arbitration, and that CROA did not prohibit arbitration as the sole method of dispute resolution.
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