You May Also Be at Risk for This, Don’t Let the FTC Shut You Down, Part 2
In my last post, I talked about recent U.S. Federal Trade Commission (FTC) investigations into certain marketing practices that you may unknowingly and innocently do.
While the specific investigation was on “fake blogs” it isn’t a far leap to many of the review sites out there that aren’t really more than affiliate promotion advertising pages.
There is talk that FTC will require explicit disclosure of these sites including social media sites like Facebook, Squidoo and even possibly Twitter.
We also looked at how a possible further step was the move to stop cloaked affiliate links.
There is also a second investigation going on that is also a common enough practice in our Internet Marketing world and I’m pretty sure that that this investigation will result in a ruling that will require some changes into the way some people do things.
Again, you may not do or you may unwittingly do it but you need to be aware of it and change now before the ruling.
What I am talking about is…
FTC’s Complaint Against Forced Continuity
The FTC recently filed a case against a number of infomercial marketers including John Beck, John Alexander and Jeff Paul; you can read the complaint on the FTC websites.
While these were against infomercial makers if you read the complaint you’ll see that it had some marketing techniques that are also very applicable to somewhat common techniques used by Internet Marketers like us.
In a nutshell these companies market like this:
- They sell a product (through an infomercial but that isn’t the essence of the problem)
- The product is sold very cheaply (frequently below cost) just to get the lead
- The lead is then marketed to by a higher priced back end product (in this case it’s usually a 4-figure coaching programs); this is sold by a telemarketing company who pays the original marketer a commission for each lead generated
This actually sounds okay and the complaint doesn’t seem to be about that.
The key thing, and I admit I held out on you, is that there was also a forced continuity program on the front-end or back-end.
The FTC is considering the undisclosed even though the wording was “when you buy so-and-so product you’ll also get a free 30 day trial of my-wonderful-program”
Yep, the people were put into the essence of a membership site and charged every month.
Sounds pretty familiar doesn’t it and the FTC does NOT like it.
Actually what they felt was bad was there wasn’t a mention of the fact that after 30 days people would be charged a monthly fee; if there was a mention is was in fine print.
I think you see how this can apply to many Internet Marketers and it may apply to you; in fact, if you don’t have a membership site you should seriously be thinking about getting one.
What to do to protect yourself is simple.
Just be explicit and upfront about ongoing, recurring fees (and don’t hide it in the fine print).
Make sure your customers know, beyond a shadow of a doubt, that after any trial period (or even if there is no trial period) that they will be every week, 30 days, month, whatever.
Do this in all cases, if you’d doing the “free CD and trial” or “free X and my monthly newsletter or any (ANY) of the variations you can think of.
I love continuity programs, as I said, everyone should have at least one, but don’t try to hide the future monthly charge.
Even though it make the sale harder which you will need to overcome, overcome it with your sales copy not by trying to hide it.
Even though the customer should read the fine print or should not expect to get something for nothing; it’s like they think the people could stay in business if everything was free (ridiculous yes, but the burden is on you not on their Pollyanna behavior).
So while there is no ruling yet I strongly urge you to be ahead of the curve and make the necessary changes now.
Please leave me a comment about your thoughts and how ruling might affect you.
Talk soon,
The “Shameless” (but “Ethical”) Marketer
http://www.Twitter.com/DavidHusnian
http://www.8-8-8Sale.com
http://www.MusicForInternetMarketers.com
http://www.SecretsOfGoogleAdwords.com
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http://www.2ForTuesdaySale.com
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Hi David ~ thanks for the heads up. I am an ethical business person and I intend to keep it that way. I am planning a couple membership and micro-continuity programs – so this info is extremely timely.
Thank you very much!
Hi Robin,
You’re very welcome. I’ll be tracking these issues so if I have any updates I let you know.
David
Hi David
Yes, I’ve also blogged and videos against forced continuity. See:
http://www.marketingsparks.com/forced-continuity-is-it-ethical/
Hi Ian,
I went and watched your video. Nicely done and well thought out, thanks for putting in the link to it.
Personally, I’m not opposed to forced continuity but I am VERY opposed to hiding it, either non-existent or in small print at the bottom.
If a product/offer isn’t good enough to support the being upfront about the forced continuity being part of the “cost” then the person needs to fix that problem not try to trick people into signing up.
Thanks again for the link to the video.
David
P.S. By the way, I’m pretty sure you can set up a forced continuity system with PayPal but I do agree with you it is so much easier to cancel a PayPal subscription than the other options, particularly with the recent user interface change.
Hi David,
I accidentally happened upon your site while researching information about membership sites on google. I’m glad I did. Looks like you provide some great information here and I’m happy to find other marketers that don’t try to HIDE the facts of what their offer REALLY is. I’ve personally been very close to being duped into forced continuity programs quite a few times when trying to get a free download or another. Fortunately, I’m the kind of person that DOES read the FINE print (even when it’s grayed out so lightly you have to strain your eyes to see it – I hate that).
And YES, you can definitely run a forced continuity program through PayPal. Many scripts do this for you these days. In fact, that’s exactly why I was researching membership sites myself as I have a few scripts which allow for “trial” memberships. While I love these features, I wanted to check into all the legalities before launching a site of my own. Fortunately, I don’t see any problem with what I plan on doing since members will know up front that the trial membership is just that, a TRIAL and they will be billed a monthly priced IF and ONLY IF, they choose NOT to cancel their subscription.
No tricks or gimmicks on my end. I hate it when people do it to me so I would never do it to others.
Thanks for such an informative blog.
Matt
MAtt,
Thanks.
I know what you mean about making the fine print so light. Sets off alarms immediately!
I just highlight it with my mouse and then it really easy to read
Good luck with you site.
David
[...] Are the New FTC Rules the Death of Internet Marketing? Posted by David on Oct 7, 2009 in Other Stuff | Subscribe Hello there! If you are new here, you might want to subscribe to the RSS feed for updates on this topic.A couple of months ago I wrote a couple of blogs post about the FTC investigations that could have implications on Internet Marketers; see You May Be at Risk, Don’t Let the FTC Shut You Down, Part 1 and You May Also Be at Risk for This, Don’t Let the FTC Shut You Down, Part 2. [...]
[quote]So while there is no ruling yet I strongly urge you to be ahead of the curve and make the necessary changes now.[/quote]
Do not depend on this type of thinking!! You are already “behind the curve”.
This type of misinformation and bad advice is just what should be targeted.
The FTC has never explicitly excluded the “New Media” from this. Non-disclosure has been illegal in the US, regardless of the media used, for quite some time.
Many other Con-Artist like tactics used by internet marketers are just as illegal, it may be time to clean up. The current administration is going to need every revenue source it can find.
Stephen,
As I said in response to your other similar message, the FTC’s actions seem to show that they feel that existing guidelines are inadequate to go after Internet Marketers.
Otherwise I would think they’d be spending their time working on prosecuting not changing the guidelines so the government could prosecute.
Which suggest to me that the laws and guidelines read that if something isn’t explicitly said then it isn’t illegal.
Of course, there may be other laws that explicitly exempt the Internet but again, I’m not a lawyer so I don’t know the intricacies of all these laws and guidelines.
David
thanks for the heads up.