The Regulatory Environment
In today’s competitive environment, attempts to influence customer behavior take place in many shapes and forms, whether on the Internet, in blogs, in the print media, on broadcast media, via telemarketing, through direct mail, or even through word-of-mouth. This has all fostered a robust regulatory environment where all industries are impacted by governmental trade regulations, and where business policies and practices are under heightened scrutiny, facing uncertainty and potential federal and state investigations. Thus, matters relating to deceptive or unfair advertising, the appropriateness of marketing practices, the fairness of trade practices, and the effectiveness of compliance programs must capture the attention of senior management before they cause expensive or irreparable damage.
The Federal Trade Commission is the governmental agency at the forefront of regulating advertising and investigating allegations of deceptive and unfair marketing practices. Its jurisdiction is wide-reaching. Industries affected by the FTC touch every sector of the U.S. economy, ranging from e-commerce and technology, to financial services, to health care, to retail, and to consumer products and services. The consumer protection laws and regulations involving the FTC include:
- Spam and commercial e-mailing
- Solicitation on electronic mail, through facsimile, and by telephone
- Comparative advertising
- Substantiation of advertising claims
- Endorsement and testimonials in advertising
- Use of the terms “free” and “rebate”
- Guarantees and warranties
- “Made in the U.S.A.” label
- Multi-level marketing
- Contests, sweepstakes, and games of chance
- Consumer credit (including credit reporting, credit billing, and truth-in-lending)
- Debt collection
- Franchise and business opportunities
- Mail orders
- Group-specific target marketing (e.g., children, senior citizens, Hispanic citizens)
- Advertising and consumer regulations in specific industries (e.g., food, alcohol,
medical products, funeral, jewelry, motor vehicles, retail food stores, drugs)
- Labeling (e.g., clothing, appliances, cosmetics, drugs, food, furs,
hazardous substances, tires)
- Data security and identity theft
The FTC’s enforcement power is extensive. The Commission regularly engages in extensive investigations, and can request courts to issue injunctions, civil penalties, and asset-freezes. The FTC can also refer matters to the Department of Justice for criminal prosecution.
Regulatory pressures do not, however, stop at the federal level. Each state, through its attorney general or department of consumer affairs, enforces unfair trade practice laws through so-called “Little FTC Acts,” allowing an attorney general or appropriate state official to investigate;
initiate lawsuits or proceedings; or enter into settlements, consent decrees, or assurances of voluntary compliance. Such action may be independent or, at times, in concert with the FTC.
Given this landscape, preventive legal counseling, sound risk analysis, and effective representation before these governmental agencies are essential.
Reed Smith’s Solution
Reed Smith’s team approach in its Federal Trade Commission and State Attorney General Investigations, Compliance, and Counseling Practice is integrated and holistic. Using our first-hand knowledge, and experience with the rules of the road and the factors that influence key decision-makers, we partner with clients to develop strategic and workable best practices for compliance. When clients face an investigation or inquiry from the government, we seek to develop a strategic approach to resolve the matter efficiently and effectively.