Electronic Retailer - May 2012 - 30

ERA’S IN YOUR CORNER ON THE KEY ISSUES

to continue to dedicate staff and money to the issue, pool resources and work together to educate the government, retailers and their own industry partners. “What resource do we have? Each other,” Reid says. “The resource we have is that we’re all ERA members who share a common concern. At times we may compete, but on this issue we can cooperate and we can work together to do something that in the end will be less time consuming, less cost prohibitive and more effective than if we were to each fight this on our own.”

FTC Expansion
Another issue that’s being watched closely is what some litigators view as the expansionary role of the Federal Trade Commission (FTC). The FTC was created in 1914 to prevent unfair methods of competition in commerce. Throughout the years, Congress has passed laws that have expanded the agency’s authority, including

directing it to administer consumer protection laws and giving it the authority to adopt industry-wide trade regulation rules. However, some have begun to argue that the FTC is stepping outside its role as an enforcer of the law and is attempting to create policy with its increasingly aggressive financial settlements and recording requirements. Linda Goldstein, partner at Manatt and chair of its Advertising, Marketing & Media Division, says the FTC has strengthened its order provisions for products that make claims based on scientific evidence. “It’s a very clear warning bell to members of our industry, especially members who make health and weightloss claims, that relying on scientific studies and claims that others have made will not pass muster,” she says. “The FTC is looking for independent double-blind clinical studies. It’s more important than ever for companies in

our industry to do their own studies before going to market.” More than that, Goldstein says, the FTC is looking for consensus among the scientific community. “We have seen cases where there was a clinical study, and FTC has taken the position that because their experts tell them those aren’t accurate, because researchers have done studies that conflict, that the study’s findings were therefore insufficient,” she says. “This substantially raises the bar in terms of the level of support you need scientifically.” Some of these recent cases have resulted in considerably higher financial settlements than had been imposed in the past. Goldstein points to the Reebok case as an example. The FTC charged Reebok with making claims about its EasyTone and RunTone shoes that the company couldn’t support. Reekbok agreed to pay $25 million in refunds to consumers. “The commission would typically ask for that type of money if a company violated trade regulation rules or in instances of real fraud,” she says. “Today, even if it’s just a case of whether a claim was adequate, the FTC is asking for full redress or as much money as they can get.” There’s also been a subtle shift in the reporting that the FTC is requiring of companies. Companies that settled with the FTC were once required to share records with the commission for a maximum of up to 10 years, but recent settlements have companies continuously reporting to the FTC for 20 years. This was most recently seen in the FTC’s case with Facebook. For the next two decades, the social network is required to obtain independent, third-party audits certifying that it has a privacy program in place that meets or exceeds the requirements of an FTC order issued in November 2011. What this means for the direct response industry is that marketers need to be conservative and stick with wellestablished claims for their products. “What the industry needs to understand, first and foremost, is that all

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Electronic Retailer - May 2012

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