Category: FTC

FTC v Automators AI: A Guide for Business Opportunity Merchants and Coaches

In this new era where artificial intelligence (AI) has become the golden ticket in e-commerce, a recent ruling by the Federal Trade Commission (FTC) sends a powerful message across the bow of all business opportunity merchants and coaches: integrity is non-negotiable.

The case in point? The owners of Automators AI, a once-promising AI-driven e-commerce scheme that promised the moon but left its investors adrift in space. This case not only underscores the risks of deceptive business practices but also serves as a critical learning opportunity for those navigating the tempting waters of online business opportunities.

Raking in (other people’s) money

The Case of Automators AI: A Cautionary Tale

Spearheaded by Roman Cresto, John Cresto, and Andrew Chapman, Automators AI (also known as Empire Ecommerce or Onyx Distribution) presented itself as the golden key to unlocking untold riches through AI-powered online stores. Yet, beneath the glossy exterior lay a web of deception that would ensnare hundreds of unwary investors—a scam.

The trio’s scheme was ingeniously malevolent: promise passive income from AI-optimized profitable e-stores, lure investors with tales of high returns, and then watch as those dreams evaporated into the ether.

These storefronts, purported to be powered by cutting-edge AI, were nothing more than a façade for an operation built on lies. The claim? That anyone could rake in profits on platforms like Amazon and Walmart without lifting a finger, thanks to their AI and machine learning magic.

Investors were told of a future where their financial worries were a thing of the past, seduced by the allure of easy money. The reality, however, was grim. The promised AI was either non-existent or grossly ineffective.

Many clients saw little to no return on their hefty investments, with some losing their entire stake as their ecommerce stores were suspended or terminated by hosting platforms (Amazon.com and Walmart.com) for failing to meet basic operational standards. Even as consumer complaints amassed, refunds were never granted.

The trio also lied about receiving venture capital endorsements and funds, bringing harm to consumers through a false idea of security.

The fallout from this money-making scheme was catastrophic. Not only did it lead to financial ruin for many, but it also eroded trust in the burgeoning field of AI in e-commerce.

The FTC’s intervention was a necessary blow for consumer protection and restore some semblance of integrity to the online marketplace. The settlement laid down by the courts was a damning indictment of the trio’s actions: a ban from selling business opportunities or coaching programs, a prohibition against making deceptive earnings claims, and a hefty restitution bill to the tune of over $21 million.

A lecture on ethics.

Lessons to Learn: Integrity in Business Practices

The case of Automators AI is a rich source of invaluable lessons for business opportunity merchants and coaches. At the heart of these lessons is the unwavering importance of integrity in business practices.

Upholding Transparency

Transparency isn’t just about avoiding deception; it’s about building a foundation of trust with your clients. Be upfront about the potential and limitations of your offerings. Ensure that your marketing materials, sales pitches, and client interactions reflect the reality of what you’re offering.

Avoid using technical jargon or overcomplicated explanations that might obscure the true nature of your business opportunities. Simplicity and clarity in communication foster an environment where trust can thrive.

Delivering Real Value

The goal of any reputable business should extend beyond merely making a sale. Focus on delivering genuine value that helps your clients achieve their goals. This means offering products or services that are not only profitable but also sustainable and beneficial in the long term.

Stay committed to improving your offerings. The world of e-commerce and AI is ever-evolving; staying informed and adapting to new technologies and methodologies can help ensure that the value you provide remains relevant and impactful.

Ethical Marketing

Make a conscious effort to ensure that your advertising materials accurately represent what you’re selling. Avoid making unsubstantiated claims about earnings or success rates. Remember, ethical marketing is a legal requirement.

Setting realistic expectations is crucial. While it’s tempting to promise the world to close a sale, doing so can lead to disillusionment and damage your reputation in the long run. Honest discussions about potential challenges and realistic outcomes build credibility and trust.

Legal Compliance and Best Practices

Familiarize yourself with the legal requirements and regulations governing your industry. This includes the FTC Act, the Business Opportunity Rule, and the Consumer Review Fairness Act, among others. Legal compliance is not only about avoiding penalties but also about demonstrating your commitment to fair and ethical business practices.

Look to industry best practices as a guide for your operations. Engage with professional associations, attend workshops, and consult with legal experts to ensure that your business aligns with the highest standards of ethical conduct.

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The only way to go is up!

Building Sustainable Success: Beyond the Hype

In the aftermath of the Automators AI debacle, a pivotal question looms large: How can business opportunity merchants and coaches cultivate sustainable success?

The journey toward enduring prosperity in the e-commerce and business coaching realms requires a steadfast commitment to principles that foster long-term growth and resilience. Let’s explore the pillars of building a business that not only survives the test of time but also thrives in the face of challenges.

Anchoring in Authentic Value

Your business should be anchored in a core value proposition that addresses a genuine need or problem in the market. This means moving beyond superficial promises to offer solutions that deliver tangible benefits to your customers.

The landscape of e-commerce and business opportunities is constantly evolving. Staying ahead requires an unwavering commitment to innovation and the flexibility to adapt to new trends, technologies, and customer behaviors.

Cultivating Customer Relationships

Trust is the currency of sustainable success. Cultivate it by consistently delivering on your promises, providing excellent customer service, and engaging with your audience in a transparent and authentic manner.

Sustainable success is built on long-term customer relationships. This involves understanding your customers’ evolving needs and preferences and finding ways to engage them meaningfully over time.

Ethical Growth Strategies

Growth should be pursued responsibly and ethically, with a focus on maintaining the quality of your offerings and the integrity of your operations. This means avoiding shortcuts that compromise your values or the welfare of your customers.

Building a supportive community around your brand and collaborating with others in your industry can amplify your impact and contribute to a healthier ecosystem. This includes sharing knowledge, resources, and best practices to foster mutual growth.

Embracing Transparency and Accountability

Be open about your business practices, successes, and failures. This level of transparency not only builds trust but also humanizes your brand, making it more relatable and trustworthy to your audience.

Hold yourself and your team accountable for your actions and decisions. When mistakes happen, acknowledge them, learn from them, and take steps to prevent them in the future. This approach not only mitigates damage but also demonstrates your commitment to continuous improvement.

Building sustainable success requires more than just capitalizing on the latest trends or technologies; it demands a foundational commitment to ethical practices, genuine value creation, and the cultivation of deep, trust-based customer relationships.

As we reflect on the lessons learned from the fall of Automators AI, let us strive to build businesses that not only seek profit but also embody the principles of integrity, responsibility, and genuine engagement. In doing so, we lay the groundwork for a future where success is not just measured by immediate gains but by the lasting impact and value we bring to our customers and the broader community.

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February 28, 2024
Latest FTC Crackdown Is Out for Business Opportunity Sector, Here’s How to Avoid Shutdown

In the biz op sector, staying afloat means more than just having a killer strategy and an infectious enthusiasm for your venture. It’s also about navigating the intricate web of regulations and staying on the right side of the law. And when we talk about law and business, there’s one heavyweight that can’t be ignored: the Federal Trade Commission (FTC).

Imagine the FTC as the referee in the high-stakes game of business – they’re there to ensure fair play and protect consumers, but they can also call fouls that might send your business to the sidelines. Recently, they’ve been turning up the heat on companies playing fast and loose with consumer protection laws. It’s a wake-up call for all biz op leaders to tighten their compliance laces.

Yes, the FTC can shut you down.

Can the FTC Shut Down a Business?

Let’s talk about something serious: the power of the Federal Trade Commission (FTC). It’s like a superhero in the business world, but instead of a cape, it wields the Federal Trade Commission Act. So, can this powerhouse actually shut down your business?

In short, yes, but it’s not as simple as flipping a switch.

The FTC, with its mission to protect consumers and promote competition, has the authority to take legal action against companies that violate consumer protection laws. Think of it as the guardian of fair play in the market. When a business crosses the line – maybe by misleading customers, running deceptive advertisements, or engaging in unfair practices – the FTC can step in like a referee calling a foul.

But it’s not all about crackdowns and closures. The FTC usually tries to resolve issues through settlements or consent orders first. This is like a friendly warning to play by the rules or face the consequences. However, if a business keeps up its shady ways, the FTC can and will bring down the hammer. That’s when things get real – we’re talking lawsuits, hefty fines, and yes, in extreme cases, shutting down businesses.

The process involves the FTC filing a complaint in federal court, and if the court finds the business guilty, it can order it to cease operations. This is where compliance becomes your best friend. Staying informed about FTC regulations, playing fair, and keeping your business practices clean are your tickets to staying in the game.

Remember, it’s not just about avoiding penalties; it’s about building a trustworthy, sustainable business that thrives in a competitive market.

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The Brady Bunch of telemarketing.

The FTC and ‘The Sales Mentor’ Income Scheme: A Summary

Alright, folks, let’s unpack the story that’s been buzzing in the business world: The Federal Trade Commission’s (FTC) action against ‘The Sales Mentor’ income scheme.

The FTC dropped the hammer on ‘The Sales Mentor’, a scheme promising big bucks through telemarketing and business coaching services. The FTC claimed that this was more smoke and mirrors than real substance. The catch? The promise of a high-income lifestyle through telemarketing and sales skills training that, according to the FTC, didn’t quite deliver.

The allegations were pretty hefty. The FTC accused ‘The Sales Mentor’ of misleading consumers with big promises of financial freedom and success. We’re talking about claims of easy money and a lavish lifestyle – all through the art of selling. The companies claimed to have helped tens of thousands of people make up to $20k per month. A scam, basically.

The result? The FTC stepped in. protecting consumers after customers report fraud. They charged ‘The Sales Mentor’ with deceptive practices under the FTC Act. And based on the announcement from the FTC’s Bureau of Consumer Protection, leniency should not be expected. According to the Department of Justice, a U.S. District Court order will result in a $1 million payout for consumer refunds.

What does this mean for the business world, especially for those in biz ops and telemarketing? It’s a loud and clear message: transparency and honesty in business practices are non-negotiable. The FTC is watching, and they’re not shy about enforcing the rules.

For those dreaming of making it big in business opportunities, this story is a cautionary tale. It’s not just about what you sell, but how you sell it. Keeping it real, staying ethical, and being transparent are your tickets to building a sustainable and successful small business.

How the FTC case affects business opportunists.

The Ripple Effect on Biz Op Merchants

In the aftermath of the FTC crackdown, there’s a heightened awareness among biz op merchants. It’s like a wake-up call, echoing across the corridors of commerce. The message? Compliance is king. This isn’t just about avoiding the wrath of the FTC; it’s about building a brand that resonates with trust and credibility.

For biz op merchants, the FTC’s actions serve as a stark reminder to keep their business practices transparent and above board. This means ensuring that marketing claims are not just shiny baubles to attract customers, but genuine reflections of what they offer. In a market where consumers are increasingly savvy and skeptical, authenticity is your golden ticket.

Moreover, this scenario underscores the importance of understanding and adhering to regulations. It’s like navigating a ship through choppy waters – knowing the legal landscape is key to keeping your business afloat. Staying informed, seeking expert advice, and regularly reviewing business practices for compliance can make all the difference.

But it’s not all doom and gloom! For the shrewd and ethical biz op merchant, this is an opportunity to stand out. By championing transparency and fair practices, you can position your business as a beacon of trust in a sea of uncertainty. It’s about turning a challenge into a competitive advantage, creating a business that not only survives but thrives.

In essence, the FTC’s complaint is a call to action for biz op merchants. It’s about embracing best practices, prioritizing customer trust, and building a business that’s not just profitable, but also praiseworthy. And in the world of business opportunities, that’s a reputation worth its weight in gold.

Don’t get shut down, let us help you stay compliant.

Check these off the list.

Safeguarding Your Business Opportunity: Prevention Strategies

With the FTC’s vigilant eye, ensuring that your business is a fortress of compliance and ethical practices is more crucial than ever.

1. Know the Law

It’s essential to understand the commission’s regulations and how they apply to your business. As we’ve seen in the recent past, even big names like Amazon are not immune to adhering to antitrust laws or enforcement action (as seen with their case regarding deceptive acts).

2. Transparency is Key

Be crystal clear about what you’re selling and what customers can expect. It’s like shining a light on your products or services – no shadows, no surprises.

3. Train Your Team

Ensure that everyone in your company, especially those in sales and marketing, is up to date on compliance standards. Think of it as equipping your troops with the right armor for battle.

4. Monitor Marketing Material

Regularly review your advertisements, sales pitches, and marketing materials. It’s like having a watchdog for your brand’s message, ensuring it aligns with legal and ethical standards.

5. Seek Expert Advice

Don’t shy away from consulting legal experts. Consider them as your strategic allies in navigating the complex world of business law enforcement and rulemaking.

6. Create a Compliance Culture

Embed a culture of compliance within your organization. It’s like building a fortress where every brick is a commitment to ethical practices and the advocacy for it.

7. Customer Feedback

Actively listen to your customers. Their insights can be a goldmine for understanding how your business is perceived and where improvements can be made.

Doing business the right way.

Building a Future-Proof Business

In the ever-evolving landscape of business opportunities, staying ahead means more than just innovating and selling – it’s about playing by the rules and winning the trust game. The FTC.gov’s actions are not just regulatory moves; they’re a guidepost for building a business that stands the test of time.

Remember, in this journey, compliance is not your adversary; it’s your ally. Embrace it, and you open doors to a world of opportunities, where trust is your currency and integrity, your badge of honor. Whether it’s through understanding the law, fostering transparency, or creating a culture of compliance, every step you take towards ethical business practices is a step towards success.

If you’re ready to dive into the world of business opportunities, why not do it with DirectPayNet? We’re here to help you navigate the waters of business transactions with ease and security. Think of us as your partner in building a business that’s not just profitable, but also reputable and resilient.

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January 26, 2024
Amazon Sued by FTC for Price Inflation, Monolopy in Antitrust Lawsuit — How This Affects You
In a significant move that sends ripples across the American e-commerce landscape, Amazon.com, Inc is in the legal crosshairs once again, facing a substantial antitrust lawsuit that questions its marketplace dominance and business practices.

The Federal Trade Commission (FTC), backed by 17 U.S. states, has rolled out a comprehensive legal challenge accusing the online superstore of engaging in anti-competitive practices that not only inflate prices for consumers but also impose an undue burden on sellers, stifling the competitive spirit of the online retail market.

The lawsuit emerges as a crucial turning point in the ongoing saga of Big Tech’s confrontation with regulatory authorities, illuminating the intricacies between monopoly power, antitrust law, and the digital economy.

For those keen to read and understand the dynamics of this legal battle, the key takeaway here is straightforward: The antitrust lawsuit represents not just a legal predicament for Amazon but also reflects the broader scrutiny and growing challenges faced by tech giants in the contemporary business environment.

At the heart of this lawsuit lie allegations that Amazon’s practices suppress competition and manipulate the market to its advantage, effectively cornering small businesses and third-party sellers while leaving consumers with higher prices and fewer choices.

Background of the Lawsuit

In recent years, the lens of antitrust scrutiny has increasingly focused on Big Tech companies, including not just Amazon but also Microsoft, Apple, and Meta. Regulators have grown concerned about the immense power these corporations wield, fearing the establishment of monopolies that hinder competition and harm both consumers and small businesses.

The term “antitrust” has thus become a buzzword, denoting a range of legal and business concerns pertaining to fair competition laws. These laws are designed to foster competition and prevent monopolistic practices, providing a level playing field for businesses of all sizes.

Previous Allegations Against Amazon

Amazon has not been a stranger to legal challenges and allegations. In the past, the company has been accused of using sensitive merchant data to launch competing products strategically, effectively disadvantaging other businesses on its robust platform.

There were also whispers and formal accusations about Amazon’s practices regarding price discounting and prioritizing their own product listings, raising eyebrows in the legal and business communities alike.

Activi

Regulatory Shift with FTC Chair Lina Khan

FTC Chair Lina Khan, known for her critical standpoint on Big Tech, has ushered in a new era of regulatory scrutiny. Under her leadership, there has been a discernible shift in how the Federal Trade Commission approaches and handles antitrust cases.

Khan, author of the notable “Amazon’s Antitrust Paradox”, has long advocated for a reevaluation of antitrust laws in the context of modern, digital-dominated commerce, voicing concerns about the potential erosion of competitive practices in the online retail sector.

Amazon Under the Microscope

With the antitrust spotlight firmly on Amazon, this isn’t the first legal rodeo for Jeff Bezos’ brainchild. Before this FTC lawsuit, Amazon faced other legal challenges, including a dismissed case in the District of Columbia and ongoing litigation in California and New York. Each case unveiled more layers of the complex practices Amazon employs, gradually painting a picture of a corporation allegedly willing to bend rules to maintain and extend its market dominance.

Lawsuit Overview

The antitrust lawsuit against Amazon was filed in a federal court in Washington state. This legal action results from an extensive investigation conducted by the Federal Trade Commission (FTC) and supported by 17 state attorneys general. Together, these entities have mounted a collaborative effort to address and counter the alleged anti-competitive practices deployed by Amazon.

Alleged Antitrust Violations

Central to the lawsuit are accusations that Amazon has violated both federal and state antitrust laws. These laws are designed to preserve competitive integrity in the marketplace. Amazon is accused of crafting an environment where sellers are deterred from offering their products at lower prices on non-Amazon sites, which critics argue manipulates the market to Amazon’s advantage and detriment of both sellers and consumers.

Specific Allegations
- Price Inflation: The lawsuit alleges that Amazon manipulates listings to hide lower prices available elsewhere, coercing consumers to make purchases thinking they are receiving the best deal available.
- High Seller Fees: Accusations point towards Amazon imposing exorbitant fees on sellers, who are then compelled to increase prices across the board, affecting consumers on and off Amazon’s platform.
- Degrading Customer Experience: Despite knowing of superior alternatives, Amazon is accused of prioritizing paid advertisements and its products, intentionally degrading the customer experience.
- Revenue from Sellers: With heavy fees, sellers purportedly relinquish nearly half of their total revenues to Amazon, a figure that has been on the rise since 2014, squeezing sellers’ profit margins and contributing to higher prices for consumers.
- Fulfillment Strongarming: Sellers are supposedly strong-armed into utilizing Amazon’s logistics and fulfillment services to be eligible for Amazon Prime’s benefits, even when they might prefer other logistic solutions.
Injunction Request

The FTC and the supporting states are not only seeking legal redress for the alleged antitrust violations but are also requesting a permanent injunction against Amazon. This injunction aims to prevent the continuation of the alleged unlawful practices and seeks to dilute Amazon’s “monopolistic control” over the e-commerce market, thereby hoping to restore a competitive balance to the benefit of sellers and consumers alike.

Amazon’s Defense

Below are the summarized responses by Amazon to the specific allegations listed above.

Refutation of Allegations

In response to the heavy barrage of accusations, Amazon staunchly defends its position, contending that the FTC’s allegations are both factually and legally unfounded. The e-commerce behemoth asserts that the practices under scrutiny are not only lawful but also in line with industry standards, with other large retailers allegedly employing similar strategies.

Consumer and Seller Impact

Amazon argues that adhering to the FTC’s desired outcome would limit product selections for consumers, increase prices, slow down deliveries, and reduce viable options for small businesses utilizing the platform. Amazon emphasizes its role as a vital and supportive marketplace for millions of third-party sellers, underpinning their argument that the platform operates for the greater good of both sellers and consumers.

Marketplace Competition

Amazon also points to the intense competition within the online retail sector, highlighting that its policies are designed to navigate through this competitive environment efficiently. The company suggests that their platform policies not only reflect but actively promote a competitive spirit, ultimately benefitting the bustling community of sellers and buyers that call Amazon’s store home.

Industry Reaction

The unfolding lawsuit has elicited a spectrum of reactions from different quarters of the industry. While consumer advocacy groups have thrown their weight behind the lawsuit, viewing it as a necessary measure to check Amazon’s growing power, some industry groups and observers argue contrarily. These voices suggest that Amazon’s policies are not unique, with other large retailers engaging in similar practices, thereby questioning the singularity of focus on Amazon.

Antitrust Scrutiny

Speculations abound regarding the possibility of a forced breakup of Amazon to curb its alleged monopoly power. If regulators succeed in making a compelling case, Amazon might have to divest some of its business units to ensure compliance with antitrust laws and restore competition in the sectors it operates.

Comparison with Other Tech Giants

The antitrust spotlight isn’t exclusively on Amazon. Other tech juggernauts, including Microsoft, Apple, and Meta (formerly Facebook), have also been under scrutiny for alleged anti-competitive practices. Drawing parallels and contrasts between these cases and Amazon’s provides a comprehensive understanding of the regulatory environment and the challenges Big Tech companies face.

Microsoft’s Activision acquisition was also just re-challenged after the FTC failed to block to deal last year, reasserting their position on monopolistic mergers (likely to appear more on antitrust and anti-monopoly and less as attacking Amazon).

Administration’s Stance

The shift in administration from Trump (republican) to Biden (democrat) has brought subtle changes to the approach towards Big Tech. It’s crucial to examine how different administrations view monopolistic tendencies, anti-competitive practices, and their strategies in dealing with giants like Amazon.

Amazon’s Antitrust Paradox

The term “Amazon’s Antitrust Paradox” coined by Lina Khan, refers to the conundrum where Amazon is celebrated for customer satisfaction due to lower prices and efficient service while being scrutinized for anti-competitive practices. This paradox encapsulates the challenges regulators face when trying to apply traditional antitrust laws to modern digital conglomerates.

Global Antitrust Landscape

The United States isn’t the only country raising concerns. Amazon faces antitrust scrutiny on a global scale, with regulators in the European Union and other jurisdictions examining the company’s business practices. International antitrust developments offer a broader perspective on the legal pressures Amazon navigates.

Implications for Online Business Owners

The lawsuit’s outcome could profoundly impact third-party sellers operating on Amazon’s platform. Should the FTC and the involved states prevail, Amazon may be compelled to adjust its fee structures and policies, potentially leading to a more favorable environment for sellers, with reduced fees and increased autonomy.

If the lawsuit results in mandatory changes to Amazon’s fulfillment practices, sellers might gain greater flexibility in choosing logistics and fulfillment partners. This shift could enable small businesses to explore more cost-effective or logistically efficient alternatives, which might currently be overshadowed by Amazon’s stringent requirements for Prime eligibility.

With accusations of Amazon discouraging sellers from offering lower prices elsewhere, a win for the FTC could empower sellers with more pricing freedom across different platforms, fostering a competitive pricing environment that could benefit both sellers and consumers.

Depending on the lawsuit’s outcome, the e-commerce landscape might experience a reshaping in market dynamics and competition. A reduction in Amazon’s dominance would potentially open doors for smaller e-commerce platforms and retailers, distributing market share more evenly and fostering a competitive, diverse online retail environment.

The case will likely set a precedent affecting not only Amazon but also other online marketplace platforms. The legal standards and business practices established in the wake of this lawsuit will shape the operational framework for current and future online marketplaces, influencing the way they engage with sellers and consumers.

Conclusion: How to Continue Doing Business

The ongoing antitrust lawsuit against Amazon.com, Inc is a watershed moment in the arena of e-commerce and antitrust law, reflecting the broader struggle between Big Tech’s market dominance and the push for fair competition and business practices. This legal battle encompasses various critical issues, ranging from price inflation and high seller fees to alleged monopolistic control and anti-competitive practices, all of which have significant implications for online business owners, consumers, and the e-commerce landscape at large.

In light of these developments, online business owners should not only stay informed but also proactively explore alternative solutions to safeguard their interests and ensure sustained business growth amidst an uncertain and ever-changing e-commerce environment.

For those online business owners who are navigating through this uncertain landscape and looking for robust, flexible financial solutions, considering opening a high-risk merchant account with DirectPayNet could be a strategic move.

DirectPayNet specializes in providing secure and reliable merchant services tailored for high-risk businesses, offering a safety net and facilitating smooth transactions irrespective of the business environment’s volatility.

With a high-risk merchant account from DirectPayNet, you’ll not only gain access to a suite of payment solutions designed to meet your unique business needs but also enjoy the support and expertise of a team committed to your success.

In a marketplace shadowed by the giants, aligning with partners who understand your challenges and advocate for your interests is not just smart business; it’s essential for survival and growth.

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September 28, 2023
FTC Sues Amazon – “Click to Cancel” Crackdown and How to Avoid Penalty

Amazon is being sued by the FTC (Federal Trade Commission) for forcing customers into Amazon Prime memberships. The government body recently announced their new “Click to Cancel” rule, which is aimed at making it easier for customers to cancel any subscription they may have with a business.

Shares for the Seattle-based big tech titan fell by 1.5% right after the FTC filed their lawsuit against Jeff Bezos’ e-commerce giant.

Clearly, the FTC is not playing games when it comes to consumer protection. If you run an online store, here’s all you need to know to avoid the dark patterns and “Click to Cancel” crackdown.

Quick FTC vs Amazon Lawsuit Breakdown

The FTC’s claims are that Amazon tricks customers into continuing their Prime membership by making it too difficult to cancel.

To do so, Amazon used dark patterns—marketing tactics aimed at deceiving customers or forcing an unwanted action to take place—to make continuing or signing up for Prime just one click away, but canceling a daunting process.

The Prime signup and cancellation process has been under FTC investigation since March of 2021. However, news of this lawsuit is still sending shockwaves of fear throughout the industry.

In fact, in 2021, Amazon settled with the FTC for $62 million over claims that it withheld tips from drivers.

The FTC lawsuit actually comes just one day after a US Senate committee announced its own investigation into Amazon labor practices. An Amazon spokesperson has denied the accusations.

The Dark Pattern Tactics Used by Amazon

Dark patterns have been a tactic—and issue—utilized by online businesses since essentially the dawn of the internet and ecommerce. That fact is unsurprising, at best. If it makes a company money and it’s not illegal, then why not?

The fact now is that dark patterns are illegal. Regulators are also recently taking measures against companies who use these nefarious business practices, which Amazon is guilty of. No wonder “Amazon’s antitrust paradox” is gaining traction…

Dark patterns are user-interface designs and manipulative tactics designed to confuse and mislead consumers into making decisions they don’t necessarily want to make. For example, companies might promote one product but sell another; or shame customers when they decline an upsell or subscription offer/cancellation.

The tactics used by Amazon include:

– On mobile, displaying a big yellow “FREE two-day shipping” button but a tiny blue “no thanks” button to decline. Shoppers might not see the button to decline the offer and feel obliged to subscribe to Amazon Prime.

– There is no indication of Amazon’s automatically-renewing Prime subscriptions.

These are tactics that no business should utilize, let alone one as large as Amazon. As a ecommerce giant, the company doesn’t need to trick customers into subscribing—they make billions as-is!

Amazon Prime Day is coming up…we wonder what the tech giant has in store for consumers.

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FTC’s “Click to Cancel” Rule and How It Applies to Amazon

We like to believe that businesses don’t actively decide to deceive consumers. At best, bad tactics aren’t used nefariously, but naively. With Amazon, though, that’s not the case.

The Prime cancellation process was designed to be a labyrinth for users, even going so far as to be internally named “Iliad” after the epic poem by Homer. Amazon executives Neil Lindsay, Russell Grandinetti, and Jamil Ghani are accused of purposely “slowed, avoided, and even undid” adjustments designed to make the enrollment/unenrollment in the Prime program a better understood process.

That’s exactly what Click to Cancel is designed to accomplish: a clearer, easier, more streamlined way of canceling a subscription.

According to the FTC act, businesses must provide a method of cancellation that matches the method of enrollment. If a user subscribes online, there must be an online unenrollment method. The same goes for over the phone, email, and direct mail.

Amazon actually does offer online cancellations, but they make it too difficult, and that’s another stipulation of the Click to Cancel rule. You see, cancellations must be easy, not labyrinthian. Because Amazon mirrors the Trojan War, in that it takes ten years to complete (joking), the process does not align with the requirements set in the FTC rule.

How You Can Avoid the FTC Coming for Your Business

It’s simple: don’t use dark patterns and make cancellations easy.

You also need to send notifications about recurring and upcoming payments related to your subscription.

These are all easily accomplished feats. In the previous linked text, we’ve outlined exactly what dark patterns and Click to Cancel entails, so you can follow that guide and secure your business.

If you do happen to implement these tactics and are afraid that removing them will result in a serious decline in sales, then you need to review your product. If you have to trick consumers into purchasing, then your product is either too expensive or not usable as advertised.

Security in All Areas of Business

Staying out of the FTC’s watchful eye isn’t always such an easy feat, but you can rest assured that at least your payment ecosystem is reliable and compliant when working with DirectPayNet.

We specialize in providing subscription merchant accounts to online businesses with PCI-compliant payment gateways and top-tier cybersecurity measures to ensure every transaction is safe, so you can avoid chargebacks and fraud.

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June 26, 2023
Caught by the Fine Print: The FTC’s New .com Disclosures Will Transform Online Advertising
Maintaining transparency between businesses and consumers is no small task. With the growth of online shopping, social media marketing, and influencers, regulations need to keep pace to ensure fairness and protect consumers.

One key player in this space is the Federal Trade Commission (www.FTC.gov) and their dedication to consumer protection laws and eliminating deceptive business practices.

In 2013, the FTC.gov published its ‘.com Disclosures’—guidelines aimed at making online advertising more transparent. These rules required businesses to provide ‘clear and conspicuous’ disclosures in their online ads to prevent consumers from being misled. But as digital marketing practices continue to evolve (and businesses try to find loopholes), these guidelines are due for an update—or at least an amendment.

A key issue prompting the revamp is the problematic use of hyperlinks in disclosures. Some companies have been using these to hide important information—essentially creating barriers between consumers and the full picture. A recent example involving Hopper, a travel site, sheds light on this practice, highlighting the potential for consumers to be misled even when disclosures are technically provided.

In this blog post, we’ll delve into the history of the .com Disclosures, the FTC’s plans for a revamp, and what these changes mean for businesses, particularly online merchants. The FTC’s updated dot com Disclosures aren’t just a regulatory issue—they’re also an opportunity for businesses to build trust and engage more authentically with their customers.

Background and Historical Context

The Federal Trade Commission (FTC) in the United States published the “Dot Com Disclosures” as guidelines for businesses working online to ensure they were complying with FTC regulations regarding advertising and marketing practices.

The .com Disclosures were initially published in 2000 but were updated in 2013 to address changes in the digital marketplace, including the rise of social media and mobile devices. They provide business guidance on how to make clear and conspicuous online disclosures in digital advertising to avoid deception.

You can read the current version of the guidance document, titled “.com Disclosures: How to Make Effective Disclosures”, here.

Here are some key points of the .com Disclosures:
1. Clear and Conspicuous: The most important principle of the .com Disclosures is that disclosures must be “clear and conspicuous.” In other words, disclosures must be noticeable and understandable to consumers.
2. Proximity and Placement: Disclosures should be placed as close as possible to the relevant information they are clarifying. If the disclosure relates to a claim in a headline, it should be placed near the headline. The idea is that consumers should not have to search for the information.
3. Prominence: Disclosures should be displayed in a manner that ensures they will be noticed and read. This could involve using a font size and color that is easy to read and stands out from the background.
4. For Space-Constrained Ads: In space-constrained ads (such as tweets or other social media posts), the disclosure should be incorporated into the ad itself whenever possible. For example, if an ad on Twitter is sponsored, the tweet might include “Ad,” “#ad,” or “#sponsored” to make it clear.
5. For Multimedia Ads: In video ads, the disclosure should be in the video itself, preferably accompanied by audio if the platform allows it. In audio ads, the disclosure should be read at a cadence that’s easy to follow and in a volume that’s easy to hear.
The .com Disclosures don’t just apply to businesses that operate online, but also to any business that uses online advertising, which includes nearly all businesses today.

Now, we’re in 2023, a full decade later, and the digital marketplace has seen even more changes. Social media and influencers play a huge role in marketing strategies, online shopping has skyrocketed due to global events, and consumers are getting more and more of their information from mobile devices.

As such, there’s a pressing need for a revision to the dot com Disclosures.

Is your business FTC and PCI compliant? We can help!

The Problem with Hyperlinked Disclosures

In theory, hyperlinks should serve to provide consumers with more comprehensive information about a product or service. They should elucidate, not confuse. Unfortunately, in practice, the use of hyperlinks in disclosures has sometimes had the opposite effect.

The core issue is that businesses can ‘hide’ crucial information behind these links. Consumers might be unaware of the vital details unless they actively click on and read the content hidden behind these hyperlinks. Moreover, it’s not always clear to consumers that these links contain significant information, especially when these links are visually downplayed or blend into the surrounding text.

Let’s consider the case of Hopper, a travel site, which offers an illustrative example of this problem. In April of 2023, Hopper allowed its customers to lock in airfare prices in advance, promising to cover the difference if the prices went up. However, what wasn’t immediately obvious to customers was that Hopper would only cover up to $100 per traveler if the price did increase. This vital piece of information was tucked away behind a disclosure hyperlink, not immediately visible or required reading before confirming a purchase.

The consequence? Consumers, thinking they had a full price guarantee, could have ended up paying significantly more than they initially thought. While the information was technically disclosed, it wasn’t a conspicuous disclosure as the FTC’s .com Disclosures require.

The Hopper example illustrates the crux of the problem: hyperlinked disclosures can be misused, and this can lead to consumers making decisions based on incomplete or misunderstood information. It’s clear that a new approach is needed to ensure that disclosures continue to serve their purpose of protecting consumers in the online marketplace.

FTC’s Proposed Rulemaking Revamp

In response to the increasingly problematic use of hyperlinked disclosures, the FTC has proposed a significant revamp of the .com Disclosures. While the exact details are yet to be fully unveiled, the crux of the update aims to enhance the transparency of online advertising and protect consumers from hidden conditions or terms.

The revamp is expected to specifically address how important information should be presented to consumers, curbing the misuse of hyperlinks that obscure vital details. The goal is not to eliminate hyperlinked disclosures altogether, but rather to regulate their usage more effectively.
1. Firstly, the FTC is likely to enforce stricter rules on the visibility and clarity of hyperlinks in disclosures. This could involve guidelines around hyperlink labeling, encouraging phrases that explicitly indicate the importance of the information behind the link. For example, instead of generic phrases like “more info” or “terms and conditions,” links could be required to have descriptive labels such as “important limitations” or “key conditions apply.”
2. Secondly, the FTC might address the proximity of these hyperlinks. Businesses may be required to place such links closer to the claim they qualify, making it less likely for consumers to overlook them.
3. Lastly, there could be stronger emphasis on the necessity for businesses to ensure that customers have accessed and understood critical information before proceeding with a transaction. In the case of important terms or limitations, this might mean the consumer must interact with the link, or a summary of the critical information could be required to appear directly on the page, not just behind a hyperlink.
This is isn’t the first crackdown on advertising laws. FTC acts are already in place to reduce dark pattern use by advertisers and detail qualifying ads. The government is becoming more adept at understanding the digital landscape and how consumers use it.

Take social media platforms scrolling as a potential culprit. Users are now so used to scrolling through content, it’s become too easy for advertising disclosures to be hidden away if a section on a webpage is slightly too long.

These changes are designed to ensure consumers can make fully informed decisions, knowing all the necessary details about a product or service before making a purchase.

Implications for Merchants

While the proposed changes to the FTC’s .com Disclosures may seem daunting for businesses initially, they represent an opportunity to foster trust and improve customer relations. Here’s what these changes could mean for merchants:

Need for Transparency

The most direct implication of the revamped .com Disclosure requirements is to be more transparent. Businesses will have to ensure that crucial information is not hidden behind hyperlinks but presented clearly to the consumer. This may require changes in how they format their advertising or communications.

Review of Current Practices

Businesses will need to review their current practices to ensure they comply with the new guidelines. This might involve scrutinizing the placement, labeling, and content of hyperlinked disclosures in current advertising and communication channels.

The problem is inherently a visual problem. Remember that disclaimers of any kind are, above anything else, visual in nature. Visual disclosures cannot be in 4pt font and greyed out. Audio disclosure are easy (though one day the FTC will likely stop allowing advertisers to make disclaimers at x4 speed).

One can only imagine what will happen with virtual reality…

Adaptation and Training

There may be a need to adapt current systems, especially for businesses that heavily use hyperlinked disclosures. This adaptation could include changes to website design, ad formats, or even updating scripts used in video or audio advertising. Additionally, training for marketing and communications teams will be crucial to ensure everyone understands the new guidelines and implements them correctly.

Potential Impact on Trust and Customer Relationships

While the above changes could pose short-term challenges, there’s a significant long-term benefit: improved customer trust. By making all important information readily accessible, businesses show they respect their customers’ right to make fully informed decisions. This can strengthen customer relationships and enhance the company’s reputation.

Many affiliate marketing arrangements, multi-party selling arrangements, and endorsements are hidden behind these links. But this information doesn’t have to be a secret nor harmful to your business. In fact, if you feel the need to hide this info behind a link, then maybe it isn’t a good business practice in the first place.

Innovation and Creativity

Finally, these changes could spark innovation and creativity in digital advertising. To make effective disclosures ‘clear and conspicuous’ within the boundaries of the new guidelines, businesses may come up with unique ways to present necessary information, leading to more effective and engaging communication strategies.

Why not try pop-ups displaying the terms that force the customer to click continue?

Is your business prepared for a regulatory update?

The FTC’s .com Disclosures represent an essential mechanism for protecting consumers in the ever-evolving digital marketplace. The proposed revamp, aimed at addressing the misuse of hyperlinked disclosures, reflects the need for regulations to keep pace with changing online practices.

As we navigate these changing regulations together, it’s important to remember that changes aren’t just about compliance. They’re about demonstrating respect for your customers, reinforcing trust, and building long-term customer loyalty. These are principles that we at DirectPayNet hold in high regard.

If you’re a high-risk merchant concerned about how these changes might affect your business, DirectPayNet is here to help. We specialize in providing high-risk merchant accounts and offer extensive support and guidance on maintaining compliance with evolving regulations like the .com Disclosures. We’re committed to helping you navigate these changes and ensuring your business is well-positioned for success in this new landscape.

Don’t navigate these waters alone. Contact us today and let’s create a plan that puts your business ahead of the curve.

SECURE YOUR BOTTOM LINE FROM WHATEVER THE FTC THROWS YOUR WAY
June 21, 2023