Good morning! This is the twenty-seventh edition of the Compliance Connect newsletter.
The goal is simple: to keep you in the loop on what the FTC and other regulatory agencies are up to so that you can protect yourself.
These newsletters will land in your inbox twice a week – Mondays and Thursdays.
Remember: this is NOT legal advice, only information!
Here’s the rundown today…
- 📊 2 Companies Targeting For Sharing Sensitive Data…
- 📱 Smart Device Creators In The FTC’s Crosshairs?
- 🤖 Why Is The FTC Targeting AI Companies?
- 🗳️ Are Unsolicited Election Text Messages Compliant?
- 💊 Why Supplement Marketers Need To Be Careful…
Compliance Digest: What You Should Read Today
2 Companies Sued Over Misusing Customer Data
The Federal Trade Commission is taking action against Venntel and its parent company, Gravy Analytics, for unlawfully collecting, tracking, and selling sensitive customer data without proper consent.
The companies allegedly sold data linking consumers to events tied to medical conditions, places of worship, and other sensitive characteristics, violating the FTC Act.
The FTC’s proposed order…
- Bans the companies from using, selling, or disclosing sensitive location data.
- They must delete non-compliant data.
- They must implement safeguards to ensure compliance.
Each violation of the consent order could result in significant fines.
These actions come as the FTC highlights risks such as stigma, discrimination, and harm from the misuse of sensitive data.
FTC Fires A Warning Shot At Smart Device Creators
The FTC has found that nearly 89% of smart device makers fail to disclose how long their products will receive software updates.
A review of 184 smart products, including hearing aids and security cameras, revealed that most manufacturers do not provide clear information about update durations. Two-thirds lacked any such details even after basic online searches.
Without updates, these devices risk losing functionality, becoming insecure, or ceasing to work.
The FTC warns that failing to disclose update information may violate laws like the Magnuson Moss Warranty Act and the FTC Act, which require transparency about product usability and warranties.
When the FTC publishes a study like this, it’s usually followed up with investigations.
The FTC Targets AI Companies – Are You At Risk?
In September, the FTC announced that it has set its sights on AI companies.
The explosive growth of AI-startups in recent years has produced some offers that the FTC claims are sold with deceptive marketing techniques.
This isn’t just about AI technology itself—it’s about the CLAIMS companies make about their products and services.
The FTC is clear: if your AI promises don’t match your results, you’re in their crosshairs.
What Happened?
The FTC recently took action against five companies in the AI space, including:
DoNotPay – This company claimed to generate “perfectly valid legal documents in no time” and promised to detect costly legal violations with no substantiation.
Rytr – Marketed as an AI-powered content generator, they were flagged for using fake testimonials and misrepresentations to sell its product.
Ascend Ecom, Ecommerce Empire Builders and FBA Machine – These offered AI tools for creating passive income through automated Amazon storefronts but made unsubstantiated earnings claims.
What’s the Issue?
The FTC doesn’t have a problem with AI itself; the issue lies in claims and misrepresentations.
Many of the companies targeted promised results that were either exaggerated or outright false.
For example:
- Claims of “bulletproof legal documents” that failed to deliver.
- Promises of replacing entire industries without evidence.
- Fake testimonials created using AI.
- Creating done for you businesses with guaranteed returns.
What You Should Know
If you’re using AI in your business, the FTC’s actions serve as a wake-up call. Here’s what to consider:
Be Realistic with Claims
Don’t promise what your AI can’t deliver. Statements like “replace your attorney” or “make $10,000 a month” without proof are risky.
Substantiate Everything
Back up every claim with data and research. You should be able to prove every claim to an independent third party.
Avoid Misleading Testimonials
The FTC is clear with this and other recent actions: using AI-generated personas or fake reviews can get you in serious trouble.
Why It Matters
This isn’t just a crackdown on AI—it’s a warning for all marketers. Whether you’re selling software, services, or physical products, the FTC’s message is clear: misrepresentations will not be tolerated.
Anik and Greg discuss this in more detail in this episode of the Don’t Say That Podcast
Did You Know…
Campaign calls and texts are exempt from the National Do Not Call Registry requirements. That is why even if you are on that registry, you probably still received a bunch of unsolicited texts during the recent election.
Quick Compliance Tip: Supplements
The FTC has filed complaints against a bunch of supplement companies over the years.
Since 1998, the FTC has been involved in more than 200 cases against supplement brands.
A supplement is anything that is not yet FDA approved but is taken to make you healthier.
Because of private labeling and ecommerce stores, supplements have become easier and easier to launch. The competition for them is getting stiff, and the claims being made to sell them get crazier and crazier.
There are great supplements out there and ethical companies that sell them. However, regulators tend to be SKEPTICAL when big health claims are made.
An example comes from 2015, when the FTC charged NourishLife for claiming that their products were clinically proven to improve brain function and memory, and that they were endorsed by medical doctors.
The FTC claimed that none of those things were true. There was no proof of clinical trials, and they couldn’t find a substantial enough sample of medical doctor endorsements either.
Important Takeaway: When it comes to supplements, there is added risk, because you are not only concerned about the representations violating Section 5 of the FTC Act, but you also need to ensure the marketing does not go against FDA guidelines.
FDA guidelines are there because many of these supplements are NOT regulated.
Companies have not gone through the rigors of scientific testing and evaluation that is required for the promotion of a “drug.”
Because of this lower standard, supplement companies cannot expressly state or create the impression that its supplements can help “prevent, cure, or treat” any type of sickness or disease.
Like any other kind of offer, if you make a claim, you MUST be able to back it up.