Both federal and state law can create legal liability for advertising claims. Not only can the Federal Trade Commission (FTC) or the state attorney general lead the charge against you, but so can your customers and even competitors. The goal of these laws is to protect consumers by making sure that all advertising is truthful and not misleading. If your business has a website, advertises on social media, distributes flyers or brochures, etc., you need to be very familiar with the legal risks posed by the claims you make.
Businesses that make unsubstantiated representations, omissions or engage in practices that are material and likely to mislead a reasonable consumer could be held liable for false or deceptive advertising.
Following is a list of just a handful of many FTC guides regarding advertising. A “guide” is actually the FTC’s way of helping you understand and comply with the corresponding law – they are not law. My description of each guide is extremely general and brief so please refer to the guide for the big picture. If you have any questions about any of them please let me know.
Guides Against Deceptive Pricing – Never say something is discounted from the “regular” price if you have actually inflated the regular price and the discount price is really just your regular price! You also have to be careful with “manufacturer’s retail price”.
Guides Against Bait Advertising – “The old bait and switch” (advertising one thing for sale but really trying to sell something else).
Guides for the Advertising of Warranties and Guarantees – If you advertise that an item comes with a warranty, you have to also mention prominently in the ad that purchasers can see the warranty where the product is sold, prior to purchasing.
Guides for Advertising Allowances and Other Merchandising Payments and Services – If you are a manufacturer, wholesaler or distributor you are subject to certain rules regarding promotional services that you a) provide to your customers, or b) pay your customers to provide for you, c) when those customers are in competition with one another d) at the same level of distribution.
Guides Concerning Use of the Word “Free” and Similar Representations – A great read on what “Free” really means! If you plan on having 2-for-1 sales, “BOGOs”, or advertising anything as “Free”, you really need to read this one carefully.
Guides Concerning Use of Endorsements and Testimonials in Advertising – The guide to this law covers experts, celebrities and consumer endorsers but could even apply to a blogger who receives a free item through a network marketing program and writes a rave review on the blog. Very particular and the definitions for celebrity and expert are pretty broad. (See today’s news story about the FTC warning “‘Modern Family’ star Sofia Vergara, supermodel Heidi Klum, former basketball star Allen Iverson”)
Guides for the Use of Environmental Marketing Claims – This covers environmental claims about a products made both in the B2C and B2B realm. You can’t make a general and unqualified statement that your product has “far-reaching environmental benefits” because such claims are very hard to substantiate.
These are merely the tip of the iceberg, but you get the picture. We’ve all seen ads that border on dishonesty and some that go way over the line. I would stay so far away from the edge that you can’t even smell dishonesty. I don’t know about you but I don’t like going to a discount store and seeing “regular price $75 – our price $25” when I’ve see the exact same cheap item for $18 regular price at another store. Once a business has crossed into that territory if the FTC doesn’t get them, their customers will bail anyway. There’s nothing wrong with buying low and selling high, just sell something different from the competition and don’t try to trick people – you’ll be in business a lot longer that way.
I’ll write more later specifically about online advertising issues.