October 26, 2021
Online marketing and online advertising, the necessity of regulatory compliance with consumer protection laws to avoid liability for fraud.
Online marketing and online advertising are monitored and regulated simultaneously at the state and federal level. At the federal level the Federal Trade Commission (FTC) is the main governing body of consumer laws that regulate the sale of goods to consumers, and at the state level most states have adopted their own body of governing laws to protect consumers from fraud and other deceptive corporate practices.
As discussed in a previous article California has adopted unfair competition laws and the unfair practices act to protect consumers against unfair and deceptive business practices.
Arizona has adopted the Consumer Fraud Act. The Consumer Fraud Act is geared to eliminate unlawful business practices in merchant-to-consumer transactions, while affording consumers private recourse in the event they fall victim to such unfair practices and fraud. Among the numerous obligations under the Consumer Fraud Act, Arizona requires sellers and product distributors to be clear and conspicuous with material terms and conditions for the sale their products.
New York has similarly adopted a body of laws, deemed Consumer Protection Laws, which forbids all “deceptive or unconscionable trade practices in the sale, lease, rental, or loan, or in the offering for sale, lease, rental, or loan of any consumer goods and services, or in the collection of consumer debts.” New York State Department of Consumer Affairs refers to the Consumer Protection Laws commonly as CPL and they have authority to adopt rules prohibiting businesses engaged in online marketing and online advertising from participating in practices it deems deceptive, fraudulent or unconscionable.
Regulatory compliance with online advertising and online marketing must be considered when selling, marketing or distributing products directly to consumers. When engaged in online sales, marketing or advertising, to avoid liability for fraud, deceptive business practices and unfair competition, sellers and distributors of direct to consumer goods have an obligation to clearly and conspicuously disclose all material terms and conditions regarding the products as well as the terms of any trial offers. When considering whether the terms of the product sale are clear and conspicuous there are several factors which regulating bodies consider.
Print communication regarding the products themselves as well as the terms associated with the purchase of the product must be sufficiently noticeable for an ordinary consumer to read and comprehend. When evaluating this condition regulating bodies take a broad view approach, looking at the font, background on which the terms appear, and location of the disclosures.
Online marketing and online advertising regulatory compliance requires that communications regarding the material terms of the transaction or the products themselves must be made prior to the consumer incurring a financial obligation. When regulating bodies evaluate this aspect of the merchant-consumer transaction, they look at the totality of the circumstances, including whether the disclosure was made, how these disclosures were made and when prior to the sale such material disclosures were made.
When evaluating whether a business is partaking in unfair business practices when online marketing or online advertising, regulating bodies look to the terms of the disclosure themselves. To avoid liability for consumer fraud or unfair deceptive practices, the material disclosures as to the terms themselves and the product must be understandable to the average consumer. Online marketing and online advertising are deemed understandable when disclosures are made using simple language, are consistent with other messages associated with the transaction and do not contradict any other messages associated with the sale.
The best way to avoid liability when it comes to consumer fraud, specifically as it relates to online marketing and online advertising, is to take early preventative measures. When partaking in direct to consumer sales, the disclosures themselves as well as the manner in which such information is disseminated to the public should be reviewed by legal counsel to help make adjustments to assure regulatory compliance with existing state and federal consumer protection laws.