How Business Coaching Marketers Can Avoid an FTC Action
What is a Work-At-Home Offer?
The Federal Trade Commission (FTC) has been extremely aggressive of late when it comes to marketers that offer business coaching services. Particularly, those that promise a great living by working from home, in your spare time, with little effort.
Deliver on Your Promises
Many work-at-home offers fail to deliver on their promises. If consumers will have to work a lot of hours without pay, advertisements should clearly and conspicuously disclose that. Costs should similarly be disclosed, up-front.
Internet businesses are the FTC’s favorite target.
Most companies that draw the FTC’s ire make unsubstantiated earnings claims. Consumers are told that they can earn thousands of dollars a month starting their own internet business. Often consumers are told that no experience is necessary because they “experts” will be “coaching” them.
If the “coaches” are, in fact, salespeople and consumers are not made fully aware of this fact, the FTC will be interested. The FTC is also often interested in whether educational materials have legitimate value, as well as programs where consumers are informed, after they pay, that in order to succeed they will have to pay more for additional services.
Always disclose the total cost of a work-at-home program, including supplies, equipment and membership fees.
Comply With the FTC’s Business Opportunity Rule
The FTC’s Business Opportunity Rule possesses safeguards in place to make sure that consumers have the information they need to tell whether a work-at-home opportunity is a risky business.
Under the Rule, marketers must provide consumers with a one-page disclosure document that offers key pieces of information about the opportunity.
Consumer should also always be properly advised of what tasks it will have to perform and whether there are other steps involved.
Substantiate (Or Do Not Make) Earnings Claims
Always have a reasonable basis, one that can be substantiated, for all earnings claims. Consider conducting a survey of everyone that who purchased the program. Always be prepared to share documents with the FTC that prove your claims are true.
Of course, if a seller makes a claim about how much money a person can earn, the seller also has to give the consumer an earnings claim statement with more specifics.
Consult with an experienced FTC defense lawyer to learn more about how to avoid suffering the same fate as recent business coaching defendants.
$1.9 Million Reasons Why You Need an Experienced FTC Defense Lawyer
Just recently, a number of defendants were hit with onerous settlement terms related to a multi-million dollar business coaching scheme, including the payment of $1.9 million to resolve allegations that they deceived consumers by claiming they could earn “six figures in 90 days.”
In its complaint, the FTC alleged that the defendants took in millions of dollars by persuading consumers to pay for a series of tiered memberships with increasing fees and falsely claimed that consumers would learn how to make substantial income with an online business.
According to FTC lawyers, the defendants promised consumers they would receive individualized coaching from successful marketers that would provide what they needed to build a successful business. The FTC alleges that, in reality, these marketers were merely salespeople selling higher membership levels in the defendants’ program.
The settlement orders with impose a staggering $54 million judgment, which will be suspended after assets are surrendered totaling approximately $1.9 million. The full judgment will become due immediately if the defendants are subsequently found to have misrepresented their financial condition. The defendants are also permanently banned from creating, marketing, promoting or offering businesses coaching or investment opportunity services; engaging in credit card laundering and fraudulent payment processing activities; and making misleading claims related to business and coaching opportunities.
In 2018, the FTC announced settlements with three other defendants involved in the alleged coaching scheme, including an entity that purportedly processed credit card payments.
If you are interested in learning more about this subject or would like to discuss FTC compliance and defense legal issues, please contact the author at (212) 756-8777 or via email at [email protected]
Richard B. Newman is an Internet marketing attorney at Hinch Newman LLP.
Attorney Advertising. Informational purposes only. Not legal advice. Do not rely on any information contained herein without consulting with an attorney.