One of the FTC’s current hot buttons is investigating advertisers who are running offers for all things "free." Specifically, the FTC becomes interested when things advertised as free truly aren’t.
In the affiliate industry most of us are aware of the positive effect on conversions of "free" offers. But beware; if you’re offering something for "free" it should truly be free.
The FTC has addressed this issue in one of their online publications at
http://ftc.gov/bcp/guides/free.htm . I suggest that you print and read the entire document. However, for those who are in a hurry and just want the summary, here’s some of the meat from the document:
. I suggest that you print and read the entire document. However, for those who are in a hurry and just want the summary, here’s some of the meat from the document:
"(b) Meaning of “Free”. (1) The public understands that… an offer of “Free” merchandise or service is based upon a regular price for the merchandise or service which must be purchased by consumers in order to avail themselves of that which is represented to be “Free”. In other words, when the purchaser is told that an article is “Free” to him if another article is purchased, the word “Free” indicates that he is paying nothing for that article and no more than the regular price for the other(emphasis added). Thus, a purchaser has a right to believe that the merchant will not directly and immediately recover, in whole or in part, the cost of the free merchandise or service by marking up the price of the article which must be purchased, by the substitution of inferior merchandise or service, or otherwise…"
As we’ve discussed in earlier columns, it’s up to you as the affiliate to check this out. It’s not a viable excuse to the FTC to say, "I didn’t realize they were charging double for the first item to make up for the ‘free’ offer on the second one." Do your homework and don’t find yourself in trouble for the unscrupulous (or simply "ignorant") acts of one of your advertisers or a network to which you belong.
"c) Disclosure of conditions. When making “Free” or similar offers all the terms, conditions and obligations upon which receipt and retention of the “Free” item are contingent should be set forth clearly and conspicuously at the outset of the offer so as to leave no reasonable probability that the terms of the offer might be misunderstood…"
Stated simply, all material terms, conditions and obligations should appear in close conjunction with the offer itself. That’s right…no tiny asterisks leading to a tiny, lightly colored text footnote intended to be hidden at the bottom of the page.
Just in case you’re wondering how serious the FTC is about making sure that "free" offers are truly free, here’s the summary of a recent case they settled with Experian Consumer Direct.
FTC Alleges Ads For "Free" Credit Report Violate Federal Court Order
Consumerinfo.com, doing business as Experian Consumer Direct, will pay $300,000 to settle Federal Trade Commission charges that ads for its "free credit report" offer failed to disclose adequately that consumers who signed up would be automatically enrolled in a credit- monitoring program and charged $79.95. The FTC alleged that the failure to clearly disclose the enrollment and charges violated a previous settlement.
Consumerinfo.com, doing business as Experian Consumer Direct, will pay $300,000 to settle Federal Trade Commission charges that ads for its "free credit report" offer failed to disclose adequately that consumers who signed up would be automatically enrolled in a credit- monitoring program and charged $79.95. The FTC alleged that the failure to clearly disclose the enrollment and charges violated a previous settlement.
In August 2005, Consumerinfo.com, paid $950,000 to settle FTC charges that it deceptively marketed "free credit reports." According to the FTC, Consumerinfo offered consumers a free copy of their credit report and added that they would provide "30 FREE days of Credit Check Monitoring." The FTC alleged that Consumerinfo’s advertising and Web sites failed to explain adequately that after the free trial period for the credit-monitoring service expired, consumers automatically would be charged a $79.95 annual membership, unless they notified the defendant within 30 days to cancel the service. Consumerinfo billed the credit cards that it had told consumers were "required only to establish your account" and, in some cases, automatically renewed memberships by re-billing consumers without notice. In addition to the $950,000 payment, the settlement required Consumerinfo to pay redress to deceived consumers, barred deceptive and misleading claims about "free" offers, and required clear and conspicuous disclosure of terms and conditions of any "free" offer.
The FTC alleges that Consumerinfo.com ran ads after the settlement that violated the disclosure requirement. The settlement requires Consumerinfo to give up $300,000 in ill-gotten gains, and bars it from misrepresenting any affiliation with the annual credit report available to consumers under the Fair Credit Reporting Act.
As always, remember to use common sense and don’t be blinded by the chance to increase your revenues. Free offers may help conversions, but unless you are careful, they may also help convert the attention of the FTC into an enforcement action against you.
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Come back to the iLegal column every week as we get specific about the rules, regulations, laws and trends that affect the online advertising industry. Each week we discuss important legal issues, talk about how to avoid the pitfalls, and cover the breaking legal and regulatory advertising industry news.
Legal Disclaimer: Information conveyed in this column is provided for informational purposes only and does not constitute legal advice. These materials do not necessarily reflect the opinions of Digital Moses, and is not guaranteed to be complete, correct, or up-to-date. The column is provided for "information purposes" only and should not be relied upon as "legal advice." This information is not intended to substitute for obtaining legal advice from an attorney. No person should act or rely on any information in this column without seeking the advice of an attorney.
Mark Meckler is the General Counsel for UniqueLeads.com, Inc., and Unique Lists, Inc.
Copyright 2007 Mark J. Meckler
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