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- [00:00]
A
Free $5 bets, get 200 bucks. Now, DraftKings is a sports betting company. Come give us some money, and we'll give you some incentive.
- [00:07]
B
That's exactly what happened to DraftKings. Why are they paying Connecticut $3 million?
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A
There was a government investigation from the AG's office in Connecticut, looked at a bunch of their advertising practices.
- [00:18]
B
A lot of people are going to hear this and say, but it's online betting. But it's not. It's not just online betting.
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A
The ad is deceptive at the outset.
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B
Explain the difference between. Between deceptive by omission and by outright lies.
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A
Risk free, 30 days, get your money back. But then you get to your refunds page, your returns page. The bigger question, or probably the bigger risk, is gonna be.
- [00:44]
B
What if your most enticing headline deposit $5, get 200, landed you in legal hot water? That's exactly what happened to DraftKing, which just agreed to pay $3 million to settle a Connecticut investigation into deceptive promotional marketing. Hi, I am Emma Rainville, here with compliance attorney Ryan Potee. And today on Marketing on Trial, we're diving into the legal landmine that bonus offers can become from sports betting to subscription trials. If you're using irresistible promotions to. To drive conversions. Listen up. You must disclose the fine print clearly and upfront or pay the price. We're breaking down this case. The new rules of bonus marketing and how to fix your funnels fast. You made a lot of money off of this. Not this in particular case, but this in particular subject.
- [01:43]
A
Oh, it's every case we ever handle.
- [01:45]
B
All right, let's dive in. So who's DraftKings? Why are they paying Connecticut $3 million?
- [01:50]
A
So DraftKings is a sports betting company, which I'm sure you see tons of ads for. There was a government investigation from the AG's office in Connecticut. Won't get into all the details, but looked at a bunch of their advertising practices. Free $5 bets, get $200. Now, a lot of, you know, insistency on, like, come give us some money and we'll give you some incentive. And that turned out to not be the case or not necessarily wasn't the case. There were material limitations or conditions on that offer that were never disclosed.
- [02:22]
B
I want to pump the brakes for just a second because a lot of people are going to hear this and say, but it's online betting. But it's not. It's not just online betting. If you say that someone can lose 30 pounds in the first 30 days, that's the same thing as saying $5 get 200. If you say that something's going to cure a disease, same thing.
- [02:42]
A
Yeah. It's any material limitation in an offer.
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B
Yep.
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A
Here's a good example. So when you have a 30 day money back guarantee.
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B
Sure.
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A
Right. Everybody loves doing it. The little icons all over sales pages. Right. When you say that 30 day money back guarantee, the FTC expects that the consumer has 30 days, that they can use it for 30 days. If they don't like it, they return it. They get their entire, all their money back. They're shipping. You can't deduct for shipping and handling, processing, tax. When you say money back guarantee, it is a. They get it risk free. Risk free is the same thing unless.
- [03:16]
B
You have minus shipping or less shipping.
- [03:18]
A
Yes. So the FTC hates it, regulators hate it because it's not, it's not a money back guarantee. I mean if you're going to put all these material limitations on it, it's not really a risk free trial. It's not a money back. I mean that's what the regulators say. If you are going to impose limitations on it in close proximity where if it's on print or if it's audible, you know, shortly after you're talking about those types of guarantees, you need to disclose those material limitations. And that's what was at an issue in the DraftKings enforcement action. It's.
- [03:48]
B
I don't want to get stuck on the limitations, but.
- [03:51]
A
No, but it goes to the point.
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B
It'S claims in general.
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A
Well, it's claims in general. So if you're going to say, hey, come and get this and there's all this fine print that consumers have to jump through hoops from, you know, the ad is deceptive at the outset. And so if there are going to be limitations or conditions to get something that's free or to get the benefit of an offer, you got to come out and disclose. You can't bury it in fine print at the bottom of a screen or in your website terms. You need to be upfront about it. And that's what DraftKings got into trouble about.
- [04:19]
B
Okay, I'd like you to explain the difference between deceptive by omission and by outright lies. Because a lot of people are deceptive by omission and, and don't believe it's just as bad as outright lying. So I want you to explain the difference and then are the consequences the same?
- [04:37]
A
They're exactly the same. Consequences are the same.
- [04:41]
B
Explain the differences though.
- [04:42]
A
Okay, so a mission would be kind of like the draftkings example money back guarantee, buy my product, my dietary supplements, risk free, 30 days, get your money back. But then you get to your refunds page, your returns page and you don't disclose. Oh well, you were going to ding you for this. We're going to ding you for this. We're going to ding. Oh, by the way, you have to return the product. You're luring people in for something but you're not disclosing something that is key to their purchasing decision because they wouldn't have bought the product in the first place if they knew they had to jump through all these hoops. So that's, you know, that's deception by omission. Deception by outright lying. It using the same example, 30 to back, 30 day money back guarantee. Sorry, you're never getting your money back. Or an incentive like enroll now, you're going to get a $5 free bets or something like that. You know, deceptive by omission would be not disclosing all those additional conditions. Outright lie would be like, hey, come give me 200 bucks and I'm never going to give you that $5 free bet. I mean the consequences are exactly the same. Regulators view it exactly the same way. Class action attorneys view it the same way. So bad. Don't do it.
- [05:46]
B
Okay.
- [05:47]
A
Hey everyone, interrupting this podcast to remind everybody to like and subscribe our podcast and to sign up for the visionary.
- [05:52]
B
Vault at www.smartspecialopspodcast.com for a whole bunch of freebies. Next question. I would love for you to explain why affiliate copy and UI banners are triggering state attorney generals right now.
- [06:11]
A
I think it comes down to a matter of control for the advertiser. There's profit motive and there's lack of control on the advertiser side because it's performance marketing, you don't have to pay out of pocket. So you've incentivized this army of independent contractors to go out there and advertise your product in a very persuasive and aggressive way.
- [06:29]
B
Because they don't get paid unless it converts.
- [06:31]
A
Yeah, exactly. For free. So there's no out of pocket cost and then you get all the benefits. They're doing it through banner ads and something that immediately pops up on a website and I don't know, go to Daily Mail and it's just like display ad, display ad, display ad. It's persuasive, it's clickbait. You know, there's usually a reason why you want to click on it. And it's also incredibly visible. Right. It's not like a long form VSL that you have to navigate through an entire funnel to get to it. It's immediately apparent. And it's also on very public facing websites that a lot of people go to. So I think that's why it's attracting a lot of attention.
- [07:04]
B
Makes sense. Okay, so DraftKings, they paid $3 million to the state of Connecticut as a CEO. Here's what I would be thinking right now if I was involved with their company at all. We're multi, we have multi jurisdiction here. We've been selling in how many different states, how many other state AGs are going to see that we just paid $3 million and come after us for the same thing?
- [07:26]
A
I mean that that's always a concern with any sort of government.
- [07:29]
B
Right.
- [07:29]
A
Enforcement action. I mean you're going to have multiple AGs on it. I think the bigger question or probably the bigger risk is going to be the class action risk that falls on anytime you have a public settlement with a regulator. Typically those investigations start out, they're confidential, they're not public. There's a lot of correspondence or interactions between the regulator and the company and then you get a press release notifying the entire public that the government at least thinks that some someone did wrong. The advertiser, the company under investigation says we didn't do anything wrong. This is just a matter of we've agreed to resolve, you know, move on. But unfortunately the class action attorneys, you know, smell or there's blood in the water. So that is the bigger risk. Of course there would be. There can be follow on enforcement actions from other AGs. But remember, regulators are trying to get people into compliance or encourage compliance. Not typically, but not always. When you have a government take action, you know, the governmental interest has been solved. So then it's the class action rest.
- [08:25]
B
So I want to talk about moving on just some of the things that people can do to protect themselves. Number one, don't lie. Number two, don't admit important facts, whether it be a refund policy or about the product performance and what the product does in and of itself. So let's talk about what clear and conspicuous means. Because this is an argument that I have had so many times and I'm excited about just linking people to minute 3 minutes 22 seconds of our podcast and saying I'm making that up. But look at what Ryan said because I have this argument constantly. What is clear and conspicuous? What does it mean? Size, location? Plain English, tell me what all that means.
- [09:06]
A
Proximity. Locate. So proximity. So when I say proximity let's start with proximity. Where are you talking about this? So if you're talking about it in the audio portion of an ad, those material limitations or conditions need to be discussed shortly after or shortly before that claim so that everybody knows or when the person's hearing that ad. Understand? Oh, okay, so you're giving me something for free if I do something. So that's when we're talking about proximity. Location. That's more in print. Same thing. Like you can't be burying all these terms and conditions at the bottom of a website, expecting a consumer seem. Because they just never are. And then think about prominence. That's the other component of this. If it's gray on gray text or it's really, really fast text in the audio portion of an ad, nobody's gonna be able to hear that or comprehend it. Comprehend it in a way that's meaningful to them. So, you know, making sure that it is open and obvious, unavoidable, that everybody knows exactly what they're getting into. Don't bury it. Those are really the key component.
- [10:05]
B
Okay, I'm just going to go over a quick checklist on what I'm recommending to people and then you can add or subtract from there. Number one, review all promotions for accurate, complete disclosure. That includes getting spyware and checking on what your affiliates are saying. Just because you have in your IO that they're supposed to get something approved. And while there's a lot of argument over who's ultimately responsible, being thrown into a lawsuit, a class action lawsuit, an ag investigation, you just don't want to deal with that. So having spyware where you're regularly reviewing.
- [10:40]
A
Promotions and affiliate tracking or monitoring programs, essentially.
- [10:44]
B
Absolutely, absolutely. And there's lots of spyware out there. We can do a podcast on that at some point, display terms in proximity to every offer.
- [10:54]
A
Correct.
- [10:55]
B
Not buried in footers. One of the things that I was going to say, and it sounds like you're. So let's say we have a video. If my disclaimer is below the video, that's good enough. I don't have to say it in the video. Correct or incorrect?
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A
Incorrect.
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B
Oh, okay.
- [11:08]
A
So if you're talking about it in the app, hey, buy now, get five bucks off. Or, or. And then there is some condition on.
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B
That offer, even if it's displayed clear of you in text under the ad, it needs to be set in the ad.
- [11:21]
A
Correct.
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B
Okay, I didn't know that. Okay, so we'll mark that off, make sure it says it in the ad, eliminate or clarify vague phrases like free or instant.
- [11:31]
A
Absolutely.
- [11:32]
B
I have tried to play with that for many years and it just makes a lot of sense to me. Eliminate those things. There are better ways to do it. Train affiliate teams and partners on compliant copy. So that doesn't mean go train people who are your affiliates. Train your team on what's compliant and what's not. So when they see something, they can say something. If you don't, train them and you expect them to know it's the biggest gap I see. Well, I have someone looking at it, but she didn't tell me she didn't know and she sees it on everybody else's ad. So make sure you're training people on what compliant copy is. Monitor complaints and AG signals. Don't wait for a cid.
- [12:12]
A
Oh my gosh.
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B
BBB Profile trustpilot yeah, if you have a lot of complaints on trustpilot or the Better Business Bureau, you should be looking at what people are complaining about. A lot of us that have continuity subscriptions to our products are going to have issues, but make sure that they're not founded. You're going to have complaints at some point in doing business. That doesn't mean you know that you've done something wrong, but make sure that.
- [12:42]
A
If there's a recurring theme and like.
- [12:44]
B
If you read something, go back and look. You've said this before on our podcast. Have your grandmother or aunt who's older and doesn't really isn't tech savvy. Read through your copy and see what they think of it. If if they understood it, you're good. If they didn't, then you probably need to look through that. So yeah, if your offer sounds too good to be true, make damn sure the terms don't prove that it is too good to be true. Transparency isn't optional, it's the price of playing in a regulated market. DraftKings got hit because of one promo. I skipped a few truths. Don't make the same mistake. Ryan and I are putting in the the marketing compliance template, including tested language, visual cues and flow audit questions. So go ahead and grab it atwwspecial opspodcast.com Be sure to like and subscribe so that you get notifications whenever we drop a new podcast. Thank you, Ryan.