Posts Tagged ‘guidelines’

Jan. 27, 2010 - In the wake of several merchant account closures due to what major credit card companies consider ambiguous continuity program terms, ClickBank, a global online retailer, is offering several guidelines regarding best business practices for continuity program merchants.

Dush Ramachandran, ClickBank vice president of sales and business development, says clarity is key.

“If you are engaged in a practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing, you must be very clear and upfront about it,” he said. “This type of practice is not unethical unless buyers do not fully understand the terms or sellers do not accept the consumer’s decision to discontinue the service or return the product.”

Ramachandran said the need for transparency and a willingness to accept cancellations also hold true for offers with confusing terms or delayed charges. “Credit card companies are no longer going to support merchants engaging in ‘free’ offers that are not actually free.”

Finally, he said, customers must receive goods or services in exchange for a credit card payment and, for any offer, must provide an affirmative consent such as a mandatory “I agree” statement checkbox where the customer acknowledges the terms and conditions of the offer and consents to be entered into a continuity program.

“At ClickBank, we’ve found that the best way to avoid compliance issues and keep our client’s continuity programs up and running without interruption is to be completely transparent with consumers regarding the terms of continuity programs.”

The U.S. Federal Trade Commission continues to make internet commerce a top priority. The FTC recent issued new regulations that govern the use of “endorsements” to promote products. Those regulations can be found at 16 C.F.R. § 255 or here. Note, the new regulations are effective December 1, 2009.

The new regulations cover all sorts of third party testimonials and endorsements—by consumers, experts and celebrities. If your promotions use customer or consumer endorsements, the FTC requires that the results described must be typical or, if not, you should “clearly and conspicuously” disclose that the results presented are not typical. Also, such customers should be “bona fide” buyers of your product, and not, for example, a fictitious person or your cousin who is doing you a favor. For expert endorsements, the person involved should have special knowledge that qualifies him or her to make the endorsement, e.g., if you use a doctor to sell a diet plan, that doctor shouldn’t be an eye doctor, but have special knowledge in the area of nutrition.

Also, the FTC requires all endorsements to disclose any “material connection” between the vendor and the advertiser. For example, if an affiliate runs a website offering an “independent review” of two products and gives a favorable review of one, they should disclose the fact that they are receiving a commission from the sale of that product. These rules also apply to third parties, such as bloggers, who receive a free product and are asked to do a review. Under the new FTC rules, not only should the blogger disclose he got the product for free but the vendor who gave him the product should make some effort to make sure that the blogger makes that disclosure.

Please review these new rules yourself and if you have questions, please ask your own legal counsel. ClickBank cannot and does not give legal advice to our vendors or affiliates, and our approval of your product does not constitute an approval of any specific marketing, promotion or endorsement used to sell the product.