Lessons to Learn about Marketing Your Business from These Pros Who Got Into Trouble with the FTC over Compliance

Disclaimer: Thesis article is my own interpretation and does not necessarily reflect the legal standing. This article does not assume that these marketers did anything wrong or engaged in unethical advertising: it only reflects the facts gathered through research without the help of AI.

One of the biggest mistakes businesses can make is overpromise and underdeliver. It hurts their long term plans and their reputation, which is hard to repair. However, there are many SMEs who are still looking for the "EASY" button, and make claims that can get them into trouble.

In our business, LMNts Marketing, our principle is to do the opposite: Underpromise and overdeliver, so we can maintain our stellar reputation.

However, when you want to grow your list, your revenue, or your name too quickly, you might turn to shortcuts, And they can get you into trouble as the below examples show.

Meta - 1.23 bn. Euro fine in 2023 - GDPR

Meta was found guilty for mishandling personal data of its members, and transferring them between the United States and he European Union without providing adequate protection. The shares of the company started to tumble.

Amazon Europe 746 Million Euro fine in 2021 -GDPR

Acting on a complaint by a French group for privacy rights, La Quadrature du Net, on behalf of 10,000 customers.

Amazon was ordered to change their business practices and stop targeting customers with commercial advertising and information based on the misused data.

H&M - Sued Over Sustainability Claims

A class action lawsuit was filed by a group of consumers over greenwashing advertising despite H&M being known as one of the largest fast-fashion brands. The brand claimed that they had an extensive recycling programme that prevented clothes from going to landfill. According to the ads, old clothes were recycled and turned into new ones. However, this infrastructure never existed, according to the plaintiff, who said:

“it would take H&M more than a decade to recycle what it sells in a matter of days."

In the wake of the lawsuit, the Competition and Markets Authority (CMA) has started investigating other fast fashion brands, as well, such as Boohoo and Asos.

As there is a lack of legislation around sustainability and companies regularly using third-party companies for certification instead of an independent body, this is a regulatory issue that needs to be tackled by governments.

Activia Yoghurt - Claims Not Backed by Evidence $45 Million Settlement

Putting the below bold claims on your advertising should always be run past compliance, especially if we are talking about a company as big as Danone.

Jamie Lee Curtis said in a convincing ad that Activia is "scientifically proven" to help regulate digestion and boost the immune system. Unfortunately, there was no evidence. A judge said Dannon "simply hadn't proven" its claim and ordered the company to pay $45 million to settle a lawsuit.

Anik Singal - Marketing Guru

He got into trouble with the FCT and his company, Lurn had to pay more than $2.5 million to be used for refunding consumers. The programmes the company promoted included the "Stay-At-Home Millionaire".

The company, Lurn was founded as a hub for entrepreneurs to learn different aspects of online marketing. I must confess that I have been a part of it for a while, and - as I usually do - took all the claims with a pinch of salt. But the content was valuable. I never "enrolled" in any of the high ticket coaching programmes, though.

According to the FCT:

"The complaint notes that while the programs cost thousands of dollars, very few, if any consumers actually made money with the programs, despite the company’s numerous claims and supposed endorsements touting huge profits."

The company was also accused to use telemarketers to call people who purchased an online course to upsell them to coaching programmes costing tens of thousands of dollars. According to the FTC, no matter how much money the customer wanted to do and how unrealistic their goals were, the answer was always: “I’m 100% confident we can help you.”

Grant Cardone - Financial Influencer - Fraud Accusations

If you haven't heard about property investment guru Grant Cardone, you've clearly been living under the rock in the past ten years. A social media sensation with 6.8 million Facebook followers and 2.4 million YouTube subscribers is being accused of conning business owners out of their last savings and giving nothing in return.

We cannot comment on the case, and no verdict has been reached yet, but if you look at any of Cardone's videos, you will see all elements of scams: the flashy cars, the high life, the big house, and all of that. Backed up claims would not hurt. However, according to the Huffington Post,

He is currently at the center of an ongoing class action lawsuit filed in 2020 that alleges that he misled investors on social media with overblown promises of high returns.

If Cardone made the claims more modest and chose clients better (i.e. people who would benefit from their service most), this probably would not have happened.

Conclusion:

Overpromising with higher profits and customer numbers in mind is a double-edged sword. At LMNts Marketing, we always focus on working with the right clients we can really help instead of filling the books. It hasn't resulted in the "huge explosion" of the business, but in our books, it is the right way.

If you would like to avoid reputational damage and loss of profits, you should follow the well put together guide by the FCT here. It talks about the misconceptions and truths of compliance and what you can and cannot use in your advertising and marketing. No matter if you are not in the United States, the principles are based on general ethics and guidelines adopted by many countries.

Do you have an example of deceptive advertising, false claims, non-compliance in marketing? Share them in the comments.