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Lead Generation Compliance 101

In what has become an annual event, the Federal Trade Commission has once again reminded the lead generation advertising ecosystems of the legal regulatory obligations.

In a recent article published in Law360, the Director of the FTC’s Bureau of Consumer Protection first referenced a proposed FTC settlement with the operator of Colorado Technical University and American InterContinental University whereby the defendants will pay $30 Million to settle FTC charges that it used deceptive lead generation tactics via third-party lead generators to market its schools.

In conjunction with the settlement, FTC lawyer Smith stated that “[y]ou can’t skirt the law by outsourcing illegal conduct to your service providers.” This case demonstrates that the FTC will seek to hold advertisers liable for the deceptive or illegal practices of their affiliates, publishers, or other lead generators. We expect companies purchasing leads to implement strong vendor management programs and stay on the right side of the law.”

Strong. Vendor. Management. Programs.

= Lead Generation Compliance 101

The FTC will not hesitate to hold those that purchase leads liable if they knew or should have known that the leads were acquired through deception. In fact, the FTC has made it clear that it expects lead buyers – both end service providers and intermediaries (e.g., aggregators), to ensure that they are not profiting off of deception.

What does this mean?

It is not just lead generators that utilize deceptive means to extract information from consumers that face liability. It is also those that purchase and profit from such activities.

Those in the lead generation ecosystem must not turn a blind eye to their lead generators’ practices because the FTC has already brought numerous actions challenging the conduct of companies that extract personal information from consumers under false pretenses and then sell that data as leads, including lead buyers.

Consulting with an experienced FTC defense attorney to design and implement programs that are reasonably tailored to ensure responsible monitoring of what others – including lead generators – are doing is paramount. As is ensuring forceful responses in the face of misleading claims or conduct.

According to the FTC, lead buyers can revise or review/reject marketing materials that lead generators use to obtain personal information. Which direction is most appropriate can depend upon a number of factors that should be discussed with an FTC defense attorney.

No longer may lead purchasers simply claim to be unaware of the FTC’s policy regarding lead generation advertising deception. Rather, they are expected to look into the source of leads that they acquire.

Takeaway: Lead buyer advertisers and intermediaries should take charge in ensuring the leads they use were not the product of deception. As questions about the sources of leads . Ensure that lead generators did not obtain consumer information under false pretenses. Insist on specifics and do not contract with lead generators or lead aggregators who are ambiguous or evasive. Establish contractual requirements and service-level standards for compliance and performance, and actively enforce them. Audit lead generators via scheduled and random audits. Monitor lead generators for compliance. Reasonably ensure that sub-affiliates and third-party vendors are bound to standards no less stringent that your own.

Richard B. Newman is an FTC defense attorney at Hinch Newman LLP. Follow him on Facebook @FTC defense attorney. 

Informational purposes only. Not legal advice. May be considered attorney advertising.

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