FTC and Internet Marketers

federal-trade-commission-ftc-logo_jpgRecently there has been several investigations from the FTC (Federal Trade Commission) regarding the practice of marketing. To clarify I should say the underhanded methods of marketing product and services. I’ve spent some time reading the actual documents and complaints  on the FTC website in order that I not make any of the same mistakes. After reading for a few minutes, I have absolutely nothing to worry about and neither should most honest marketers out there.

With that being said, there are somethings you need to take note of and learn from and that is my reason for writing this post. Although most of the practices the FTC is investigating are shady, the innocent victims here are not only the people whom fraud was committed against but also the real marketers honestly marketing products and services online. These are who the greatest crime is committed against.

Specifically there has been two cases which you should pay close attention to.

1.) The FTC against FLOGS
2.) The FTC against may infomercial marketers

Let’s start off with the FLOGS. If you are not aware of what a FLOG is, it is a FAKE BLOG. These have been popping up left and right mostly promoting Acai Berry products, essentially weight loss products.

First off these FLOGS don’t even tell the truth about their product. They even use FAKE photos. Pete Sisco did an excellent expose on these scams. Read Pete’s Article Here

Why should this concern you?

From what I understand, the FTC is considering making disclosure mandatory on affiliate promotions. This especially holds true if you received the product for FREE and then promoted it. They considered this paid advertising and it is to a point. They may even extend this to Twitter and other various social media sites like Facebook and Myspace as well. If you promote you may have to ad tag to state that it’s an advertising promotion.

My point in telling you is so you keep your eyes out for more information concerning this.

2.) The FTC against may infomercial marketers

Now this one hits closer to home. (Not my home though.) The FTC recently filed a case against several infomercial marketers. John Beck, John Alexander, Jeff Paul and several others. You can read the complaint on the FTC websites Click Here To Read It.

Again, so why does this concern you?

After spending a bit of time reading the complaint filed against the various companies, I see several point worth noting.

Essentially each of these companies work like this. They sell a product through an infomercial. The product is essentially a loss leader, meaning they basically break even with their marketing costs and then take the names of the people who purchased and send them to a a telemarketing company who then tries to sell $1500 – $8000 coaching programs. (These programs suck.) The telemarketing company now pays the marketer a commission for each sale generated from their leads. This income can be pretty substantial in the backend sales process.

We’re not even to the good part yet.

The MAIN REASON, let me repeat that the MAIN REASON why each of these companies were targeted was NOT the high-pressure sales pitch from a telemarketer, but for an undisclosed CONTINUITY PROGRAM.

Let me explain a bit more. Many of these marketers would sell the product on the front end and then charge these customers anywhere between $47 to $80 a month on the backend. They way it is stated is something like… “Also get a free 30 day trial to my XXXX program”.

Sound familiar? Well hold on you’ll see where I am heading with this.

So the FTC nailed these people for a Membership site. Let me say that a different way. They nailed them because they did not disclose the customer would be charged additional fees later in the form of a membership site.

Why does this matter to you?

It’s simple. Haven’t you all seen similar offers being promoted online with various Internet Marketers? The answer is yes you have. In a few cases the customers almost revolted because of not knowing the charge was coming.

In fact, some of these marketers sell their leads to the same telemarketing companies listed in the FTC complaint!

How do I know? I’ve been approached by these same telemarketing companies and I’ve said no. They’ve used other people I know as references about their services. They neglected to use the FTC as a reference though. 🙂

Back to my point…

Hey I’m all for membership sites. I run several. The difference is when you purchase access to my membership site, you know 100% you are going to be charged not only now but again in the future too. I am 100% up front about it. Heck, I even charge you the first month up front in most cases.

If you run a membership site whether you are giving away a free trial to a magazine, an interview site or giving away a free CD LET PEOPLE KNOW THEY ARE GOING TO BE CHARGED.

The reason why most marketers don’t do this is the fact that IT’S NOT SEXY to sell a membership site. Prospects would rather believe the fairytale that the marketer is so wealthy and generous they are just giving stuff away. Wake Up.

FREE does not mean FREE!

Free means, I’m not going to charge you for this, but I am going to charge you for that. Or Free means, it’s Free for 30 days but then you’re going to pay. Yes, it’s the consumers job to read too, but it’s the marketers job to market their products with openness.

In the past few years I’ve seen some over the line marketing techniques being promoted and endorsed. If marketers don’t wake up and be up front with their customers, I predict you’ll see a marketer being made an example of by the FTC and it won’t be pretty. Trust me the writing is on the wall it’s only a matter of time.

What really gets me is that to avoid all of this, you just need to be up front with you customers and tell what is going to happen. It really is that simple.

6 Comments

  1. Michel Fortin on July 19, 2009 at 9:23 am

    Amen and Hallelujah!

    Well said. The two most important parts of this entire article are:

    1. “The innocent victims here are not only the people whom fraud was committed against but also the real marketers honestly marketing products and services online.”

    And…

    2. “If marketers don’t wake up and be up front with their customers, I predict you’ll see a marketer being made an example of by the FTC and it won’t be pretty.”

    Both incredibly important statements we should look out for.



  2. Bryan Bliss on July 20, 2009 at 2:18 am

    Armand,
    Thanks for this. It’s a little unnerving that you think it may even lead to having to label full disclosure in even Twitter posts.
    Could be funny though, watching all the spammers try and figure out the easiest way to cram the full legal disclaimer AND their pitch for “400 twitter followers a day on Full autopilot” all into 14o characters.

    Where I am still confused and unsure in this ftc sphincter tightening exercise is how exactly are Testimonials going to be treated.
    I know you have a history and a profound love of the customer testimonial but wont this affect your sales pages and processes if you have to begin to post all “TYPICAL” results and case studies, not just the successful ones?

    what are your thoughts?
    thanks and take care
    Bryan Bliss



  3. Mike Stenger on July 20, 2009 at 2:18 am

    You hit some extremely good points home Armand. I know quite a few marketers doing especially the non-disclosure of their membership charges. Ryan Deiss recently talked about him using Forced continuity, why he finally dropped it and how it’s actually benefiting his business better by being straight up honest with all the details.

    I’ve always believed that honesty is the best policy. Honesty builds trust and trust creates sales. The more trust, the bigger the sales.

    I’m also glad the FTC is finally doing something about the FLOGS. It really isn’t right to pose as a news authority (which is what I mostly see) and have all these “As seen on…” stickers to falsely sell a product. Hopefully they realize it can only go so long until angry customers take action or, you got it, the FTC comes a knockin’.

    -Mike



  4. Ed Hudson on July 20, 2009 at 9:56 am

    With all the scammers and spammers out there, I would welcome the FTC to try to clean up the crap that crawls around looking for it’s next customer (er… victim). They have a huge task at hand however, as I’m not sure there are enough people working at the FTC to catch them all. Great post though!



  5. Jack on July 21, 2009 at 12:58 pm

    These fake blogs are scourge…BUT, here’s the reality:

    The FTC only has any real power over U.S. citizens. There is a HUGE number of affiliates outside the U.S. This means most of the shady operations will ultimately shift to untouchable non-U.S. citizens. There are plenty of seedy marketing forums where you can see them openly plotting how to scam people using every trick in the book. It’s pretty hideous.

    The net result of all this is that legitimate (honest) U.S. operators will have to jump through more hoops and follow more regulations, while the scammers elsewhere will continue doing what they do, and probably make even more money.

    The only winners will be the scammers located outside U.S. jurisdiction. The only viable way to get them would be to hold the companies that pay them accountable. (But can you imagine if someone held YOU accountable for every last statement someone ELSE made about your products, unknown to you?)

    It’s not going to be pretty.



  6. Alex Newell on September 2, 2009 at 4:42 am

    Excellent article, thank you for making this clear. I am all for making continuity programs clear and upfront and all for wiping out fake blogs too.

    More room for me!

    But the possibility of tagging just about all affiliate promos seems unreal. Most press releases, articles, tweets, blog posts all to be tagged as ads?

    A step too far I think.

    One point that does interest me is how much does this concern those of us not in the US but blogging etc mostly with US readers?