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AARON KEL

LY, E

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Kelly / Warner LawPhoenix, AZ-Internet Law -Defamation

Law

-IP Law -Business Law

-Privacy Law -Marketing Law

www.kellywarnerlaw.com

www.aaronkellylaw.com

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JOHN C

. MONARCH

Connexus Inc.Greenville, SC Direct Response firm specializing

in Product launches, media buying, and offer consulting.

Corporate formation consultant

www.connexus.us

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C.J. M

ONTGOMER

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Online Legal Group.

Portland, OR Direct Response merchant

specializing in international CPA/CPL offers in health and beauty industry.

Corporate & Taxation Attorney: Compliance, Tax and Contractual attorney for affiliate marketing clients

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/ Nutr

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Advert

iser

ONLINE BUSINESS & MARKETING LEGAL UPDATEToday we’re going to do a review of the current compliance standards for online marketing & business.

FTC Update – We’ll start off with a quick round-up of what the FTC has been up to over the past 12 months.

Corporate Structuring– From there we’ll dive into why most affiliates and advertisers really aren’t protecting themselves properly.

ONLINE BUSINESS & MARKETING LEGAL UPDATEAfter the general compliance update, we’ll take a look at current legal issues regarding social media, in addition to newer marketing and business models.

Social Media - In recent months, much has happened in terms of social media rulings and regulation reform. We’ll do an overview of those issues and touch on a few points every online advertiser should remember about using social media to solicit customers.

Mobile/SMS- With mobile getting white-hot, many affiliates are diving into the gray area in what is now considered the new “wild west” of internet marketing, mobile. We’ll discuss the legal ramifications, and how you can stay compliant in a scary world of shortcode cramming, paths, and SMS.

Privacy – We’ll take a quick look at developments in online privacy legislation – both domestically and internationally.

ONLINE BUSINESS & MARKETING LEGAL UPDATEWe’ll then spend a few minutes exploring a few proposed and new laws, lawsuits and government hearings that could affect the industry (and the way you do business) in the coming months.

What’s on the Horizon Probable New FTC Regulations for Social Media and Mobile Devices On The Franken Front Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Do Not Track CALEA Online Sales Tax Issues Von Kohorn Patent

ONLINE BUSINESS & MARKETING LEGAL UPDATEAnd we’ll end with a quick rundown of the most important regulations, laws and statutes every online business person should keep in mind when developing new campaigns or dealing with online legal issues.

Online Business Bill & Regulation Rundown DMCA CDA Dot Com Disclosures COPPA GLB California Privacy Protection Act (Default national standard) UK Cookie Law FACTA/FCRA (For Daily Deal Operators)

FTC UPDATEFor the past 12 months, the FTC has been rocking and rolling to their usual tune of arguably inconsistent rulings and ineffective bans.

And they still have an affinity for doling out high fines.

NOTABLE FTC CASES OF THE PAST 12 MONTHSDate Case Outcome Significance

October 2011 Swish Marketing Negative Option Pay Day Loan Program

Fined $4.8 Million and banned from using misleading advertising in the future; must monitor their affiliates.

If they had had a pay-day-loan friendly privacy policy, they may have escaped punishment.

December 2011

HCG Weight Loss Product Ban

FDA (Not FTC) declared HGC products illegal.

If you were/are promoting them, you may want to reconsider.

March 2012 Jesse Willms Negative Option Marketing – International

Fined $358 Million and banned from using negative option marketing and other misleading advertising.

International effort; Willms is Canadian. Solidified FTC’s strong interest in negative option marketing issues.

NOTABLE FTC CASES OF THE PAST 12 MONTHSDate Case Outcome Significance

May 2012 Jeff Paul’s Shortcuts to Internet Millions, John Alexander’s Real Estate Riches In 14 Days, and John Beck’s Free & Clear Real Estate System.“get rick quick” businesses

Fined $450 Million and banned from engaging in various marketing techniques, mainly negative option rebills.

Warning to all marketers who use “continuity programs” (charging clients each month for various services) who don’t make that clear in advertising or disclosures.

July 2012 Google Safari Snafu – cookies illegally circumvented safari privacy measures

Fined $22.5 Million Warning that the FTC is serious about mal-intentioned cookies and are getting better at spotting them.

OTHER IMPORTANT FTC DEVELOPMENTS

New Rules For Kids AppsA study revealed that a large percentage of apps in the Apple and Android Marketplaces did not comply with COPPA privacy standards. Developers now required to provide more information when submitting apps targeted at kids. Expect to see more formal regulations in the upcoming year.

Social Media and Mobile Disclosure WorkshopAt the end of May, the FTC held a workshop on the challenges social media and mobile devices present with regards to marketing disclosures. Explored various options including graphic disclosures, the effect of a link that can be read at a later time (on a larger screen) and the timing of when disclosures should be made with geo-location, mobile marketing.

New Bizopp (Business Opportunity) RulesOn March 1, 2012, new bizopp disclosure requirements went into effect. The new rules stated aim is to allow for greater transparency and reduce costs. Sellers of work-at-home opportunities are now, officially, considered bizopps.

New cover sheet required with specific information.

Disclosure of past buyers, their contact info, your bizopp history, plus any fraud or illegal marketing legal actions (within the last 10 years) wherein you were found complicit.

Financial disclosure statement.

Clarification on what constitutes fraud when it comes to marketing bizopps

OTHER FTC DEVELOPMENTS

The process of choosing to become an LLC, S-Corporation, C-Corporation, Partnership, LLP, LLLP, PLLC, can save you a lot of trouble and money. A brief overview of each entity type can really clear up several misconceptions.

Am I Safe?No entity is 100% safe from veil piercing. Even Fortune 500 Corporations have had their veil pierced in extreme cases, and the C-level executives and Board of Directors have been found personally liable for the actions of the company. Keeping everything separate as possible as previously mentioned will reduce the risk.

PICKING THE RIGHT ENTITY

Corporate StructuringThink your single member LLC is enough to protect you from civil liability from consumers, trade associations, and government? Think again. The corporate veil is being pierced with regularity due to inconsistencies in structuring, improper organization, bad bookkeeping, and mixing personal spending with business.

Best PracticesWhether you’re a partnership, single member LLC, all the way up to a C-corporation with VC, treat everything you do completely separately. Having your business pay your home electric bill is a bad idea, it should be accounted for properly and paid out of your salary. Everything should be as separated as possible.

No entity will protect you from criminal liability. Period. If you are committing a criminal act, such as the catch-all Wire Fraud, nothing will protect you from government interference.

What about Offshore?Offshore corporate formation is a highly complex topic, and very difficult to keep in compliance without proper guidance. One wrong move can inadvertently put you in bad graces with the IRS, even if your purpose wasn’t to dodge taxes. On the positive side, in many cases offshoring can indeed reduce your civil suit liability dramatically. Caution: Don’t try this at home. This is not for novices, consult your experienced attorney (wink wink).

BUT WHAT IF…

Social MediaSocial media is no longer new – it’s nearly a requirement these days. As such, law-makers are now getting around to drafting and passing laws that govern privacy, data security and marketing on social media platforms. Judges are also making rulings which are helping to shape legal precedence when it comes to social media law.

Mobile MarketingMobile marketing is a powerful tool that is finally coming into its own. The most personal form of communication a person has is their cell phone, and access to market to this key device has proven to be a goldmine for marketers.

The Many PitfallsBeing that it is relatively new, the guidelines for marketing to this platform are still very vague and largely not determined. A recent report showed that the FTC itself is highly limited in its ability to enforce Mobile, as in the field the Federal government only allows Blackberry devices, and the FTC mobile lab is a limited amount of devices, without carrier access.

CrammingShortcode cramming is a very hot topic, as many carriers have recently shut down many shortcodes. Cramming multiple billing paths into one PIN submit offer is a functional equivalent of merchant cross-selling, which is highly non-compliant.

SMS SpammingWhile many assume that SMS spam is covered under CAN-SPAM, it isn’t fully yet. If a message is sent via carrier email (ie 8885551212@vzwpix.com) it is covered by CAN-SPAM. However, if it is sent directly over the network, the FCC takes jurisdiction here, and is still vague in enforcement. Consumers are allowed to sue in small claims court for at least $1 per spam SMS message received – has been as high as $175 per SMS.

MAJOR MOBILE TOPICS

Privacy and Data Security Issues

Online privacy and data security are a hot topic. While there is not

currently a universal privacy policy in the U.S. there are COPPA

rules, plus the EU does have a universal law. Moreover, California

codified a set of online privacy laws, which have become the de

facto national standard. FTC enforcement of Identity Theft laws has

also been ubiquitous, however industry enforcement leads the

way.

PROTECTING CONSUMER PRIVACY

• Data Retention Security

• Industry Standards: PCI Compliance

• Reselling of lists and data

THINGS TO KEEP AN EYE ON

What are the legal issues and

lawsuits that every online

business person and marketer

should keep an eye on over the

next few months?

• US National Online Privacy Law

• FTC Enforcement of Claims in Ads

• FCC enforcement with Mobile

• Fraley v. Facebook

• Private “Scam Report” sites and Defamation

ISSUES & PEOPLE TO WATCH

QUICK LAW LIST OF WHICH EVERY ONLINE BUSINESS SHOULD BE AWARE

Dot Com DisclosureNew EU Privacy Laws – Cookie LawNew Business Opportunity (BizOpp) Rules from the FTC

New updates to the FCC Telemarketing RuleFDA Labeling Compliance

QUICK LAW LIST OF WHICH EVERY ONLINE BUSINESS SHOULD BE AWARE

CDA – Communications decency act – protection for website owners for non-ip claims like defamation, taking down not required for protection

DMCA – safe harbor to “service providers’ who remove infringing content – must designate a Copyright Agent that is registered with the US Copyright Office – notice requirements: evidence of authorization, identification of copyright work claimed to have been infringed, complaining parties contact info, good faith statement of belief; provisions may not be available to those who have knowledge of infringement and do nothing about it, aware of facts or circumstances from which infringing activity is obvious.

QUESTION AND

ANSWER