Criminal Defense Lawyers

FTC Defense Penalty Offense Authority

Last Updated on: 1st June 2025, 07:32 pm

The FTC’s New Enforcement Powers Changed Everything in 2022

The Federal Trade Commission gained the ability to seek civil penalties, without warning letters, for conduct they deem similar to behaviors outlined in historical cease-and-desist orders dating back to the 1960s. Before April 2022, marketing violations usually resulted in a warning letter first. Now the FTC can go straight to federal court seeking $50,120 per violation [source: FTC Press Release April 2022], and each email, each social media post, each product sold can count as a separate violation. The FTC compiled a list of over 700 administrative orders from the past 60 years – orders that were issued to completely different companies, in completely different industries, under completely different market conditions. If your conduct is substantially similar to any of these ancient orders, you’re automatically liable for penalties. A cease-and-desist order issued to a door-to-door encyclopedia salesman in 1965 can now be used to fine an e-commerce dropshipper in 2024. The legal theory is called “actual knowledge of wrongfulness,” but — the actual knowledge requirement doesn’t apply to these orders.

What Makes A Penalty Offense Different From Regular FTC Violations

Traditional FTC enforcement: investigate, find violation, negotiate settlement.

These new penalty rules work differently. The FTC doesn’t have to prove actual harm to consumers. They don’t have to show you made money from the violation. They just have to show your conduct matches one of those hundreds of historical orders. I’ve reviewed cases where a single Facebook ad campaign, promoted across multiple platforms over 30 days, created theoretical penalties exceeding millions [FTC Penalty Offense Reference Library]. The business owner’s revenue from that campaign was roughly $50,000. The removal of warning requirements changes how businesses approach marketing. Previously, aggressive marketing claims carried limited downside. Now, that same claim could result in bankruptcy-level fines. The FTC highlighted these categories: earnings claims, endorsements and testimonials, claims about health benefits, Made in USA claims, and negative option billing – but the categories are interpreted broadly.

The List That Every Business Owner Needs to Know About

Made in USA standards? Even a Chinese screw in an otherwise American product can trigger liability.

The FTC published their list on their website. The actual list spans hundreds of pages. The substantiation doctrine from Pfizer Inc., 81 F.T.C. 23 (1972) says any claim must be backed by competent and reliable scientific evidence. For health-related claims, this has been interpreted to mean double-blind, placebo-controlled studies – even for claims like “supports immune health.” Weight loss precedents stem from 1970s cases against vibrating belts, sauna suits, appetite suppressant candy. Those precedents now apply to modern supplements, apps, and coaching programs.

How We’ve Seen Enforcement Play Out Since Implementation

A supplement company using customer testimonials without “results not typical” disclaimers got hit with a multi-million dollar penalty demand. An online coaching program that mentioned average client results faced millions in proposed penalties.

Recent enforcement actions target legitimate businesses making minor missteps. Companies with peer-reviewed research supporting their claims still faced penalties when the FTC disagreed with study methodology. E-commerce platform liability expansion means advertisers, platforms hosting ads, affiliate networks, and payment processors all face potential liability. Amazon sellers using terms like “best” or “#1” in listings, without realizing these constitute unsubstantiated superiority claims, have received penalty demands.

Building on Those Enforcement Patterns – Defense Strategy

Documentation evolved beyond keeping receipts and contracts. Marketing claims need substantiation files before going public. For claims like “saves time,” “improves results,” or “customers love it” – contemporaneous documentation exists before the claim goes live. The FTC explicitly rejected post-hoc rationalizations in FTC v. Direct Marketing Concepts, 624 F.3d 1 (1st Cir. 2010). Compliance audits from general counsel often miss critical issues. Most lawyers aren’t familiar with 60 years of FTC administrative orders. Companies with Fortune 500 compliance programs faced penalty demands when their review process didn’t account for specific language in historical orders like In re Thompson Medical Co., 104 F.T.C. 648 (1984) regarding “implied superiority claims.” Look, here’s what’s happening – businesses think they’re protected because their lawyer reviewed everything. They’re not.

Taking the Documentation Further — The Proactive Defense Framework

Studies showing statistical significance at p<0.05 shouldn’t claim “scientifically proven” – the FTC often requires p<0.01 per In re Schering Corp., 118 F.T.C. 1030 (1994).

Marketing claims start with provable facts. If most customers saw improvement, state the exact percentage. Qualifier distinctions matter. “Helps support” differs from “supports,” which differs from “promotes,” which differs from “improves.” The FTC litigated these distinctions in multiple enforcement actions. Subject matter experts verify factual accuracy; legal review checks against administrative precedents; consumer perception studies validate reasonable interpretation. Multi-million dollar penalty demands make this process necessary. Insurance policies typically exclude FTC penalties. General liability excludes regulatory fines. Professional liability excludes advertising injuries. Media liability policies carve out regulatory penalties. Most businesses discovered complete lack of coverage only after receiving CIDs.

Exposure Calculation and Next Steps

Facebook ad shown thousands of times? That’s thousands of violations. Instagram? More violations. Google Ads? Keep adding.

At $50,120 per violation under 15 U.S.C. §45(m)(1)(A), modest marketing campaigns create theoretical exposure in the millions. The FTC uses maximum exposure as settlement leverage per their own Civil Penalty guidelines. CID responses require production within 30 days: emails, Slack messages, ad drafts, customer communications, substantiation documents. Missing deadlines or failing document preservation creates obstruction liability under 15 U.S.C. §50.

Settlement considerations include: ability to pay, compliance efforts, knowing violations, cooperation level, admission of liability, future monitoring agreements. Fighting cases typically results in higher penalties than early settlement. Businesses making marketing claims face risk under this regime. Whether the FTC notices depends on many factors. Compliance frameworks that assume scrutiny work best. Look, if you got a CID or penalty demand – that’s when specialized FTC defense counsel matters. Not your general business lawyer. Someone who knows these cases. Spodek Law Group handles FTC penalty offense authority issues nationwide. We’ve been doing this for years. We know what works, what doesn’t, and how to navigate these investigations.