On January 29, 2018, the Federal Trade Commission (“FTC”) filed a complaint against Digital Altitude LLC, et al. (“Digital Altitude”), for misrepresentations regarding potential earnings and the goods and services it provided. Earlier this month, one of the defendants, Sean Brown, agreed to settle with the FTC. On its face, the business coaching program appeared to be a pyramid scheme. However, the FTC’s complaint focused primarily on deceptive marketing practices which, it alleged, violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) (the “Act”).
How did Digital Altitude allegedly deceptively market to consumers?
The Business Coaching Scheme Complaint
Digital Altitude operated a website that sold consumers the opportunity to start their own digital marketing businesses. Consumers would choose from a multi-tiered membership offering that required a recurring monthly fee in return for training videos, documents, and mentoring from a business coach. The complaint alleged that the videos and coaching were only used to convince consumers to purchase higher-tier memberships, starting at $597 and increasing to $26,997. Online advertisements included the slogan, “6 STEPS to 6-FIGURES Online In 90-Days Or Less With Our System . . . .” In reality, most consumers who received the business coaching services never made six figures or even recouped their investment. To support its allegation, the FTC referenced an un-advertised website on which Digital Altitude published statistics of average earned income, which showed that a majority of its customers earned less than $100 per month. Overall, the FTC calculated that consumers lost tens of millions of dollars from the business coaching scheme, with some individuals incurring losses of as much as $50,000.
Deceptive Marketing Practices
Section 5 of the Act considers a “representation, omission or practice deceptive if it is likely to mislead consumers and affect consumers’ behavior or decisions about the product or service.” Deceptive practices include, among other things, offering false “free” trial offers and claiming that customers will make six figures in ninety-days. In the case at issue, consumers received email from the owner of Digital Altitude claiming that “the ASPIRE program has been tested and proven by tens-of-thousands of people.” To avoid claims of deceptive advertising, marketers should: 1) only publish claims that can substantiated; and 2) where appropriate, include clear and conspicuous disclosures and disclaimers to clarify representations contained in their advertising.
Complying with the FTC Act
The FTC actively polices the industry and takes action when it uncovers cases of egregious deceptive marketing. These enforcement actions can prove to be crippling to businesses and related individuals alike. In the case at hand, for example, the defendant settled with the FTC for $10.8 million. Marketers that wish to avoid a potential lawsuit or regulatory investigation should consult with experienced counsel.