According to the Federal Trade Commission (FTC), “claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based,” but what does that really mean? Clients often ask us for guides to help them successfully navigate through the various matters subject to advertising laws. While there are many legal issues and nuances to consider when marketing your product or service, below we break down some of the high-level principles of advertising law.
What Is The Purpose Of Advertising Law?
The purpose of truth-in-advertising laws is to protect and educate consumers and to promote fair competition. Advertising laws create a legal setting within which brands can promote their products while providing a safe and constant flow of truthful information to consumers.
What Is The Law And How Is It Enforced?
The FTC is the main federal governing body that regulates advertising practices. Section 5 of the FTC Act (15 U.S.C. §45) prohibits “unfair or deceptive acts or practices in or affecting commerce.” In addition to the federal statute, the FTC provides guidelines on a variety of specific topics within advertising law, such as the Guides Concerning Use or Endorsements and Testimonials in Advertising, the Guides for the Use of Environmental Marketing Claims, and the Advertising Substantiation Principles.
Other sources of law include analogous state and local unfair competition laws, which can be enforced by state Attorneys General or local District Attorneys, as well as rules enacted by self-regulatory groups such as the National Advertising Division (NAD).
Basic Guidelines:
1. The advertiser can be held responsible for all reasonable interpretations of an ad. A “reasonable interpretation” takes into account the entire context of the ad (words, images, etc.).
2. Ads must clearly and conspicuously disclose all material terms relevant to the offer. Disclosures may be necessary but cannot be used to contradict the primary message.
3. Claims (including express and implied claims) must be substantiated in advance with recent, reliable data. Avoid broad, unqualified claims.
4. Brands typically need permission to use third party content in their ads (e.g., intellectual property and rights of publicity).
5. If you’re marketing to kids, other rules may apply, like the Children’s Advertising Review Unit Advertising Guidelines and COPPA.
The Dangers of Getting It Wrong:
1. Complaints and/or lawsuits, which can be brought by:
- Consumers (including individual lawsuits and consumer class actions).
- Regulators (e.g., FTC, Department of Justice, state attorneys general, district attorneys).
- Self-Regulatory Groups (e.g., NAD, Ad Standards (Canada), etc.).
- Competitors.
2. Government investigations.
3. Monetary damages.
4. Advertisers may be required to stop or change their advertising practices (including the possibility of product recalls).
5. Reputational harm to the advertiser.
