With the coming release of the Guides on Testimonials and Endorsements by the Federal Trade Commission (“FTC”), I thought it would be beneficial to give you some background about the FTC, the regulatory and law enforcement federal governmental agency that serves as the “consumer protection watchdog.”

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General Background

The FTC is an independent agency that reports to Congress on its actions, and deals with issues that touch the economic life of every American. It is the only federal agency with both consumer protection and competition/antitrust jurisdiction in broad sectors of the economy.

The FTC pursues investigations and law enforcement; shares its expertise with federal and state legislatures and U.S. and international government agencies; develops policy and research tools through hearings, workshops, and conferences; and creates educational programs for consumers and businesses.

When the FTC was created in 1914, its purpose was to prevent unfair methods of competition in commerce as part of the battle to “bust the trusts.” Over the years, Congress passed additional laws giving the agency greater authority to police anticompetitive practices. In 1938, Congress passed a broad prohibition against “unfair and deceptive acts or practices.” Since then, the Commission also has been directed to administer a wide variety of other consumer protection laws, including the Telemarketing Sales Rule, the Pay-Per-Call Rule and the Equal Credit Opportunity Act. In 1975, Congress gave the FTC the authority to adopt industry-wide trade regulation rules.

The FTC’s work is performed by the Bureaus of Consumer Protection, Competition and Economics. That work is aided by the seven regional offices.

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Commissioners

The Commission is headed by five Commissioners, nominated by the President and confirmed by the Senate, each serving a seven-year term. The President chooses one Commissioner to act as Chairman. No more than three Commissioners can be of the same political party.

The current Chairman is Jon Leibowitz (a Democrat). The other commissioners are Pamela Jones Harbour (an independent),  William E. Kovacic (a Republican), and J. Thomas Rosch (a Republican).

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Bureau of Consumer Protection

Given WOMMA’s mission, our focus with the FTC bureaucracy is the Bureau of Consumer Protection.

The basic consumer protection statute enforced by the Commission is Section 5(a) of the FTC Act, which provides that “unfair or deceptive acts or practices in or affecting commerce…are…declared unlawful.” “Unfair” practices are defined as those that “cause[] or [are] likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition” In addition, the Commission enforces a variety of specific consumer protection statutes (e.g., the Equal Credit Opportunity Act, Truth-in-Lending Act, Fair Credit Reporting Act, the Cigarette Labeling Act, the Do-Not-Call Implementation Act of 2003, the Children’s Online Privacy Protection Act, Fair and Accurate Credit Transactions Act of 2003, and others) that prohibit specifically-defined trade practices and generally specify that violations are to be treated as if they were “unfair or deceptive” acts or practices under Section 5(a). The Commission enforces the substantive requirements of consumer protection law through both administrative and judicial processes

The Bureau of Consumer Protection is divided into six divisions, each with its own areas of expertise. Three Divisions are a key concern to WOMMA’s membership: Advertising Practices, Marketing Practices, and Privacy.

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The Division of Advertising Practices

The Division of Advertising Practices focuses on the federal truth-in-advertising laws. Its law enforcement activities include a wide range of products and services and cuts across every industry sector, and includes:

Claims for foods, drugs, dietary supplements, and other products promising health benefits;

Health fraud on the Internet;

Weight-loss advertising;

Advertising and marketing directed to children;

Performance claims for computers, ISPs and other high-tech products and services;

Tobacco and alcohol advertising, including monitoring for unfair practices or deceptive claims;

Protecting children’s privacy online; and

Claims about product performance made in national or regional newspapers and magazines; in radio and TV commercials, including infomercials; through direct mail to consumers; or on the Internet.

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The Division of Marketing Practices

The Division of Marketing Practices focuses on fraudulent marketing practices. It enforces federal consumer protection laws by filing actions in federal district court on behalf of the Commission to stop scams, prevent scam artists from repeating their fraudulent schemes in the future, freeze assets, and obtain compensation for scam victims. The Division also files administrative cases with the Commission to stop these scams.

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The Division of Privacy and Identity Protection

The Division of Privacy and Identity Protection, the newest of the Bureau’s divisions, oversees issues related to consumer privacy, credit reporting, identity theft, and information security.

Specifically the Division enforces:

Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices, including deceptive statements and unfair practices involving the use or protection of consumers’ personal information;

The Fair Credit Reporting Act, which ensures the accuracy and privacy of information kept by credit bureaus and other consumer reporting agencies, and gives consumers the right to know what information these entities are distributing about them to creditors, insurance companies and employers; and

The Gramm-Leach-Bliley Act, which requires financial institutions to ensure the security and confidentiality of customer information, provide notice to consumers about their information practices, and give consumers an opportunity to direct that their personal information not be shared with certain non-affiliated third parties.

The Division also operates the Identity Theft Data Clearinghouse, which houses the federal government’s centralized repository for consumer identity theft complaints.

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Future Makeup of the Commission

Commissioner Pamela Jones Harbour, whose term expires this month, is not expected to be reappointed, accordingly to several published sources; and another slot at the Commission is already vacant. Sources with direct knowledge of the matter said the White House could announce new commissioners within days.

The announcement would be significant, because Obama has not sent an FTC nomination to the Senate since the start of his administration. Jon Leibowitz was named chairman of the FTC in February, but the appointment did not require Senate confirmation, since he had already been serving as a commissioner during the Bush administration.