There is nothing new about companies providing platforms for other companies to sell their wares. That is, after all, exactly what supermarkets do, and TV and radio networks have long run ads for other companies. The rise of the digital world has only accelerated and broadened this trend. Some sites are set up purely for third parties to sell on. Others sell products themselves but open their platforms to a third-party marketplace.
Most if not all of these platforms want to be good citizens and only give truthful advertisers access to their customers. Nevertheless, one still very important question that has often vexed these companies is what legal obligations they have when it comes to the claims being made by the third parties that utilize their platforms. Finding a definitive answer to that question is not easy. The Federal Trade Commission (FTC or the Commission) standard under Section 5 is that any party that participates in the creation or dissemination of an ad claim is liable. That is incredibly broad in the wording, but the FTC has often been far more judicious in exercising its enforcement discretion. There is an old case that suggests a retailer may be liable even though it is simply advertising a product with the manufacturer’s claims (Porter & Dietsch, 7th Circuit),but some have suggested that this result might not hold up in a court today. At the same time, the Commission has more or less conceded that the media, such as television networks, are not legally responsible for the content of advertising they carry. As a result, the Commission has instead used its bully pulpit through things such as the Weight Loss Red Flags Guidance to persuade the media to police its advertisers, so the Commission’s approach in this area seems to vacillate between coercion and persuasion.
As part of its proclamation that July is Made in the USA (MUSA) month, which we blogged about here, the Commission last week sent out multiple warning letters to manufacturers. The current Commission has suggested it will use warning letters more often, and MUSA claims are certainly one area where in the past the Commission has often utilized warning letters, perhaps because such letters typically lead to a quick takedown of the allegedly misleading claim in a situation where the product itself likely performed as promised.
In addition, the Commission sent letters to several digital marketplaces, bringing to their attention seemingly misleading MUSA claims being made by several third parties on their platforms. The letters appear to adopt more of a persuasion approach than one of coercion, although they do note at the end that the letter does not “reflect any assessment” as to whether the platform “has engaged in conduct violative of the FTC Act or MUSA Labeling Rule.”
Even if only meant to be persuasive, the letters do provide some insight into how far the FTC expects a reasonable digital marketplace to go in responsibly policing claims by the third-party products on its site. With respect to potentially misleading Made in the USA claims, the letters do not suggest that digital marketplaces should be routinely vetting substantiation for such claims; rather, the FTC’s focus is on claims that appear to be deceptive on their face – advertising a product as MUSA when the company is based overseas or the product is separately listed as imported. Of course, digital platforms may choose to go further, but it’s nice to know there are limits on the vetting the FTC expects to see digital platforms engage in.
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