Online retailing is a booming business—as are concomitant scams.
As a law firm that works with online marketing affiliates and product producers, we often field questions about the legalities of e-tailing and online marketing. So let's review a few frequently asked questions (FAQs).
Is it against the law to buy and sell fake reviews?
Fake reviews contravene guidelines laid out in the Federal Trade Commission's .Com Disclosures (AKA, the Online Marketing Holy Book). In past cases, judges have characterized fake reviews as "false and misleading," and the FTC has successfully sued buyers of fake reviews for violations of the Federal Trade Commission Act. The likelihood of people being thrown in jail over fake reviews, however, is very unlikely.
I suspect that competitors are leaving bad reviews on my products and pages. Can I sue them?
More and more, people are using negative fake reviews as an arrow in their marketing quivers. Is it legal? That depends...
100% fake and false: If a business buys fake reviews, specifically requests negativity, and then posts them on a competitor's webpage, there's a significant chance those reviews would be deemed defamatory by a judge. Using fake reviews in this manner would also be an act of "false and misleading" advertising. Accordingly, perpetrators risk two types of lawsuits if caught: one from the defamed business, and the other from the FTC.
50% fake and false: A person thinks, "I Know! I'll buy the product/hire the service. Then, no matter what, I'll write a bad review. Since I bought the product or service, it's not illegal!" Now we're trudging into some murky legal territory, so pull up those wellies.
Of course, anybody has the right to buy a product or service and then review it online. It's a free country. And if you don't like a product or service, of course you have the right to tell your story on various online consumer review websites. But what you can't do is purposefully lie about a product or service with the intention of harming the business or driving traffic to another business.
Now, is it illegal for you to buy a competitor's product, have a bad experience with it, and then honestly share that experience? Probably not. However, cover your backside and include a disclosure in the review explaining your "competitor" status. You could also simply say that you're "in the same business," but doing so is a little more ambiguous and, therefore, has a higher chance of being deemed "misleading."
100% real: Again, nothing is stopping anyone from posting truthful reviews of competitors' products or services. But you should disclose that you're a competitor.
What must I tell consumers before they make a purchase?
Brands are beholden to various disclosure requirements, which can be found in the Federal Trade Commission's .Com Disclosures. All business owners should read it, understand it, and follow it!
As a general rule, though, a business should conspicuously disclose the following to consumers before they make a purchase:
- Cancellation and return policies
- Billing policies and practices
- Existence of any recurrent charges
- Data collection and sharing policies
I live outside of the United States and just got a notification from the "Federal Trade Commission." What is that, and does it have jurisdiction over me, a foreigner?
The United States Federal Trade Commission is a quasi-governmental body responsible for keeping an eye on consumer rights. Think of the FTC as the nation's consumer watchdog. The department handles a host issues related to commerce and marketing, including online promotional standards.
FTC staffers and commissioners investigate brands and businesses suspected of flouting online marketing laws and regulations. They often work in conjunction with state attorneys general to bring formal charges against companies and people who, they believe, have committed a violation.
In most instances, marketing violators are fined as punishment. The agency, under certain circumstances, can freeze wages and even repossess property—including cars, homes, clothing, and jewelry. Moreover, in some cases, the FTC can go after assets under family members' names, not just the violator's.
Technically, the Federal Trade Commission can pursue alleged violators who live outside of the United States if they market to US citizens. Often, the FTC works in conjunction with officials in other countries when on the hunt for a cross-border violator. The Canadian Competition Bureau and the FTC have a particularly close relationship.
That said, foreign FTC cases don't always work out, especially when laws in the alleged perpetrator's country don't mesh with US standards. Moreover, collecting fines from non-US residents typically proves difficult.
As someone who promotes products and services online, what United States laws should I know and follow regarding marketing?
Again, the most important United States online marketing regulations guide is the .Com Disclosures, which "describes the information businesses should consider as they develop online ads to ensure that they comply with the law," in the words of the FTC.
In addition, businesses and marketers should be familiar with the following:
- Children's Online Privacy Protection Act: COPPA is the only federal online privacy law. Even if you don't have a product, website, or service, take the time to understand how COPPA rules work—especially if you are a plugin or app developer. Many businesses are beholden to COPPA regulations and don't realize it.
- Gramm-Leach-Bliley Act: The GLBA is also known as the Financial Modernization Act, the resulting law has implications for marketers and businesses. It applies to not only creating promotional materials and content but also collecting and using data about existing and potential clients. The GLBA includes parameters regarding the collection, use, and distribution of financially related personally identifiable information.
- Federal Trade Commission Act: The is the law that gives the FTC authority to initiate investigations and punish parties engaging in "unfair and deceptive" marketing and promotion.
- California Online Privacy Protection Act: California has the nation's strictest state online privacy law. If you operate a commercial website and market to—or accept orders or clients from—California state residents, then you must adhere to CalOPPA.
- European cookie laws: Generally speaking, European countries have stricter online privacy laws than the United States and Canada. To play it safe, if you run a commercial website that allows for international interaction, follow the parameters laid out in the UK's cookie laws and regulations.
Speak with an online and mobile marketing lawyer: Depending on where your company is headquartered, regional regulations may apply. Your company's structure could also have an effect on legal obligations. Talk to an Internet law attorney about the specifics of your operation to get a definitive answer as to which Internet laws you are obligated to follow.
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Whether you're an Amazon seller or a traditional online retailer, becoming a successful e-tailer and online marketer is not easy; it takes a tremendous amount of savvy, patience, and dedication. It also takes knowledge of—and adherence to—federal and state online marketing and promotion regulations.
To make sure you're operating on the right side of the marketing law, invest in a consultation with an attorney. The few hundred dollars it will cost may save you tens of thousands, if not millions, in the long run.