This month, two self-regulatory bodies that are administered by Better Business Bureau National Programs, Inc. (BBB), referred two different companies to the Federal Trade Commission (FTC) for investigation.
First, on October 3, 2019, the Direct Selling Self-Regulatory Council (DSSRC) referred Aloe Veritas, Inc. (a multi-level direct selling company that offers wellness and skincare products) to the FTC. The DSSRC is a new-as-of-2019 national advertising self-regulation program that independently monitors advertising and marketing claims in the direct selling industry. The DSSRC identified several claims made by Aloe Veritas that it considered problematic: first, claims that Aloe Veritas Lifestyle Coaches made on social media relating to the efficacy of Aloe Veritas’s products (including that the products could prevent or cure diseases or illnesses); second, claims that appeared on Aloe Veritas’s website relating to the health benefits of its NuDerma MD product and that product being “Physician Recommended”; and finally, claims Aloe Veritas made on its website relating to the success a consumer would have in selling its products. The DSSRC ultimately determined that the first set of claims should be taken down, the second was not based on competent and reliable scientific evidence, and the third should be supplemented with disclosures showing what typical earners would make in selling Aloe Veritas’s products. While Aloe Veritas initially responded to DSSRC’s inquiries, it apparently did not provide a statement responding to whether it would comply with DSSRC’s recommendations. As a result, DSSRC referred the matter to FTC for review and possible law enforcement action. The DSSRC’s decision can be found here.
Then, on October 8, 2019, the Digital Advertising Accountability Program (DAAP) referred PlantSnap, Inc., a mobile app developer, to the FTC as well. DAAP stated that the decision came about when PlantSnap did not participate in a self-regulatory review process looking into data privacy practices related to geolocation data and advertising. (See the press release here.) DAAP works with a division of the Association of National Advertisers to monitor and enforce compliance with Self-Regulatory Principles established by the Digital Advertising Alliance. More information relating to those Principles can be reviewed here.
Both of these referrals serve as good reminders that companies that do not comply with or respond to inquiries from acronym-heavy, self-regulatory bodies such as the DSSRC or DAAP can find themselves facing a referral to the FTC. And as an article from the BBB’s National Advertising Division (NAD) states, “[w]hen companies take the chance that a referral to the FTC will not result in an investigation of their advertising [NAD’s] statistics show that the gamble is unlikely to pay off . . . . [because] [m]ost gamblers will face an early choice between either undergoing an FTC investigation” or returning to the regulatory process.