The Federal Trade Commission announced that it reached a settlement with a television antenna company and its CEO, resolving allegations that they made false claims that the company's products would let users cancel their cable service and receive all of their favorite channels for free. As part of the settlement, Wellco, Inc. and its CEO agreed to a $31 million judgment, which the FTC agreed to suspend based on their inability to pay that amount -- so long as the defendants paid $650,000.
As part of the announcement, Daniel Kaufman, Acting Director of the FTC's Bureau of Consumer Protection, said, "The defendants used every trick in the book to sell their antennas and amplifiers to people, including older adults, who wanted to save money on cable and satellite TV channels. People should be able to trust the claims companies make, not discover after buying that they were told lies."
Wellco sells indoor television antennas (sometimes called "mud flap" antennas) and signal amplifiers under the TV Scout, SkyWire, SkyLink, and Tilt TV brand names. According to the FTC's complaint, Wellco made a number of false claims about its antennas, including that users can stop paying for cable or satellite TV and still receive all of their favorite channels, a substantial portion of users will receive more than one hundred premium channels in HD, the company's antennas enable consumers to receive more channels than most other TV antennas on the market, and Wellco's antennas are the #1 rated HDTV antennas in the United States.
The FTC also alleged that Wellco used fake consumer endorsements in its advertising (which were just pulled from competitors' ads). In addition, the FTC alleged that the company also used web pages that appeared to reproduce objective news reports and misrepresented that objective news reporters had performed independent tests demonstrating the effectiveness of the antennas.
This enforcement action is chock-full of good guidance for marketers looking to avoid problems with their own advertising. With the first day of spring only days away, here are a few important take-aways if you're planning to do some spring cleaning of your own advertising:
- Don't assume that if you cross the line that you'll just get a slap on the wrist. There's been lots of talk at the FTC of tougher settlements and bigger damages. If you sell a product that doesn't do what you've promised it will do, the FTC is likely going to want you -- and potentially even your company's leadership -- to give consumers their money back.
- This means that if you do make claims about your product that would be material to a consumer's purchasing decision, you'd better have appropriate substantiation in hand that proves the truth of your claims. (If you're looking for a refresher on substantiation, you could start with the FTC Policy Statement Regarding Advertising Substantiation.)
- Don't just assume that positive, boastful statements that you make about your product are just puffery. If they're objectively provable, chances are they are actually claims that require proof. Don't forget that the FTC raised concerns here about statements like "favorite channels" and "#1 rated."
- When advertising new technology, or a technology that consumers may not be as familiar with, it's important to take the extra time to explain to them how it works. It's generally the advertiser's obligation to ensure that consumers are not misled -- and when you're talking about emerging technology, you often need to do some extra educating. If you're talking to a more vulnerable audience -- such as older consumers, which continue to be a high priority for the FTC -- it just means you're going to have to be that much clearer.
- If you use consumer endorsements, you should make sure they're real, that they reflect consumers' honest opinions and beliefs, and that any material connection between the company and the endorser are clearly and conspicuously disclosed. (If you're looking for a refresher on endorsements, check out the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising.)
- And, finally, make sure that the format or design of your advertising doesn't confuse consumers into thinking that they're seeing independent, editorial content (if that's not what it is). The FTC has made a big point over the last several years of going after advertisers who use deceptive formats to mislead consumers. (A great resource on this topic is the FTC's Enforcement Policy Statement on Deceptively Formatted Advertisements.)
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