FTC v. eCommerce Empire Builders (2024): Unsubstantiated “AI-Powered” FTC Earnings Claims
Chip Cooper
eCommerce Attorney. I help marketers, advertisers & agencies solve their FTC earnings claim compliance problem for a fixed, flat fee. Get new strategies by downloading my Earnings Claim Guide and newsletter (Link Below)
FTC’s “Operation AI Comply” Continues Enforcement Against Deceptive Earnings Claims
Empire’s Earnings Claims
? ??*??Empire advertised classic FTC earnings claims, including: “Skip the guesswork and start a million-dollar business today.”
? ??*? Empire also advertised success story testimonials, including: “Natalia Made $10,000 In Her First Month with Our Ecommerce Platinum Program!” and Natalia made “10k Selling 1 Product.”
Empire Disclaimed Typicality
Disclaiming typicality violates an FTC cardinal rule: substantiate typical results for a typicality claim.
“DISCLAIMER: The sales figures stated above are my personal sales figures. Please understand my results are not typical. I’m using these references for example purposes only. Your results will vary and depend on many factors…including but not limited to background, experience, and work ethic. All business entails risk as well as massive and consistent effort and action. If you’re not willing to accept that, please DO NOT register for this webinar.”
Empire Failed to Comply with the New FTC Earnings Claim Framework
The FTC Earnings Claim Framework requires:
*???Substantiation that the claimed advertising result is “typical” OR;
*????Demonstrate/disclose “generally expected results”; AND
*?????Track participant results;
*?????Without disclaimers that contradict: net impression, duty to track participant results, and generally expected results.
FTC Allegations
The FTC complaint provides the following allegations.
*?????AI-Powered Deception: online stores were “powered by artificial intelligence” and defendants’ “proven” strategies.
*?????Empire’s FTC claims, both express and by testimonials, were false or not substantiated.
*?????Business Opportunity Violations: Empire failed to provide the required disclosures under the Business Opportunity Rule, including earnings substantiation and a list of previous buyers.
*?????Consumer Review Fairness Act: Empire’s form contract contained provisions that prohibit or restrict the ability of an individual to engage in consumer reviews.
Conclusion
The FTC continues its crackdown on earnings claims, particularly if they involve:
*????AI-related efficacy claims (i.e. does the AI-enabled product work as advertised?), or
*????AI-enabled product exaggeration claims.
The FTC’s complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania seeking a permanent injunction and unspecified monetary relief.
The Court issued an order temporarily halting Empire’s business and putting the business under the control of a receiver.
For Informational purposes only; not legal advice
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