By Cassandra A. Soltis –
For the first time ever, the Federal Trade Commission (“FTC”) took action against a consumer for misrepresenting in a testimonial the amount of money she made by purchasing and using a wealth-building program marketed by Russell Dalbey, CEO and founder of “Winning in the Cash Flow Business.” The FTC’s complaint, which was filed jointly with Colorado Attorney General John W. Suthers, charged Dalbey, Marsha Kellogg, and others with misleading consumers about how much money they could make using the program.
In the complaint, the FTC alleged that, in one of the program’s infomercials, Marsha Kellogg, a consumer who provided a testimonial regarding her experience with the program, falsely claimed she earned $79,975.01 from one promissory note transaction and that her total earnings amounted to over $134,000. However, according to the complaint, Kellogg actually made $50,000 less than what she claimed. The complaint also alleged that Kellogg “participated in, assisted in, or facilitated some of the acts or practices set forth in” the complaint.
The order against Kellogg prohibits her from making future misrepresentations, such as failing to disclose material connections, “including where an individual or entity provides the testimonialist with compensation, access to promissory note leads not generally made available to non-testimonialists, and reimbursement of money paid for materials, workshops, seminars, boot camps, programs, or services.” It also requires that Kellogg cooperate with the FTC and the Colorado Attorney General’s Office in their action against Dalbey and others.
This order should prompt advertisers to review the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, particularly the sections on consumer endorsements and the disclosure of material connections, and the FTC guide Dot Com Disclosures: Information About Online Advertising. (The FTC is currently seeking comment on the latter guide to determine whether an update is necessary. Comments are due by August 10, 2011.) Advertisers should also pay careful attention to how endorsements are provided in the world of online marketing, including blogs, Twitter, and Facebook. Finally, consumers should be aware that they are not immune from liability for false claims made in their endorsements if they are paid or receive some form of compensation from the advertiser.