Advertising—the Good, the Bad and the Illegal

We all had a favorite: The dogs barking the “Star Wars” theme; the Doritos pug; the eTrade talking baby. Whether a Super Bowl ad was to your particular taste or not, they all had one thing in common—they all had to meet the requirements of numerous laws and regulations.

All advertising, whether traditional media channels or new media platforms, is heavily regulated. And all of your advertising—from the ad you place in this magazine to radio spots you purchase, to the claims you make on your website—must comply with federal laws and regulatory guidelines, as well as state consumer protection laws. You may also have to consider laws, regulation and guidelines related to the copyright and trademark, rights of publicity and privacy, and defamation, as well as industry and self-regulatory programs. Do you use Facebook or Twitter? Send out emails or text message offers? Social media, online and mobile campaigns add additional layers of regulation, and may also implicate privacy of consumer data. If you run sweepstakes, contests or other similar promotions, you’ll have to consider the regulations on those as well.

While I can’t cover the entire legal landscape applicable to the various forms of advertising and promotions in a single column, some basic principles do apply across all forms of advertising.

 

Advertising and the FTC

The Federal Trade Commission (the same crew that brought you the three-day right of rescission) regulates advertising affecting commerce. Advertising that makes deceptive claims, fails to disclose material information, is unfair or lacks substantiation, including traditional, electronic and social media advertising, are illegal and subject to fines and other penalties.

All advertisers must have a “reasonable basis” for advertising claims and the requirement applies to all claims whether expressed, implied and the overall impression in both language and visuals (pictures or other representation, like graphs and pie charts).

Puffery, or statements that can’t be objectively proven, including bald assertions of superiority, or vague or general statements of opinion regarding the advertiser’s product or service, do not have to be substantiated.

In fact, courts have concluded that puffery is not deceptive advertising, because no one would reasonably rely on these exaggerated claims. When you make concrete claims about the quality or performance of your goods and services—and especially where you are making comparisons with a competitor—you must be able to prove them objectively. If you can’t, you might face sanctions or fines from the FTC or state agencies.

You can use disclosures and disclaimers to explain and qualify your statements, but they must be clear and conspicuous, and in close proximity to the advertising claims being modified. Disclaimers can’t be used to contradict an advertising claim. In addition, if your advertising doesn’t adequately disclose material terms of an offer for goods and services, then the net impression may be misleading or unfair to a reasonable consumer.

Advertising does not have to be on a third-party platform to be subject to FTC compliance. You must also be able to substantiate the claims made on your website, as well as Facebook page and Twitter feed.

 

Endorsements and testimonials

The use of endorsements and testimonials is also regulated by state and federal advertising laws. While they are advisory and don’t have the force of law, the FTC’s “Guides Concerning the Use of Endorsements and Testimonials in Advertising,” do indicate what the FTC may consider to be false or misleading advertising, which may lead to big fines. The guidelines define endorsements and testimonials broadly as any advertising message that consumers are likely to believe reflects the opinions, beliefs, findings, or experience of someone other than the sponsoring advertiser. In addition, endorsements must do the following:

  • Reflect the honest opinions or experience of the endorser; may not contain any deceptive or unsubstantiated representations if made directly by the advertiser; and
  • Disclose any material connection between the endorser and the advertiser that might affect the weight or credibility of the endorsement.

Statements made by bloggers and others who post reviews are also governed by the FTC’s guidelines and you may be held liable for false or unsubstantiated statements they make if you requested that they try the product or service and write a review, or if you provide them with a gift, prize or any other material benefit and they fail to disclose it. You may also be held liable if your employees, agents or sales affiliates write positive reviews of your products and services without disclose their relationship to you. The FTC recommends that you provide guidance and training for your bloggers, and that you monitor bloggers being paid to promote your products. And make no mistake—the agency really means it. Fines and sanctions can be significant and the FTC is paying close attention to endorsements.

What else might be considered an endorsement? The “likes” you represent you have on your company’s Facebook page may be considered general endorsements as well, and if you run promotions that require people to “like” your company to participate, so-called “like-gated” promotions, you not only have to make sure that you disclose the material terms and conditions of the promotion before consumers hit the “like” button, but that your “likes” properly convey they endorsements they suggest. In other words, that the people who “liked” your Facebook page received the benefit of the advertised promotion.

 

The new frontier: online and mobile marketing

Technology-enabled advertising, whether you are using your own platform or others, not only must comply with laws and regulations that apply to traditional advertising, but must also meet additional requirements, perhaps several different sets, depending on the form of advertising. Here are additional considerations:

Email and CAN-SPAM: The CAN-SPAM Act applies to all commercial email of which the primary purpose is advertisement or promotion of a commercial product or service, including email that promotes content on commercial websites. The law applies regardless of the number of people to whom you are sending the message and whether you already have a business relationship with them, and does not exclude business-to-business e-mail. If you e-mail customers and potential customers, you must comply with requirements regarding content, labeling and opt-out.

Mobile marketing: If you engage in mobile marking—sending text messages and using mobile devices and platforms to advertise to customers and potential customers—then you must understand and comply with federal and state telemarketing and email laws. For example, the Telephone Consumer Protection Act requires express consent from mobile device owners before you send promotional text messages and CAN-SPAN may also apply in the mobile space. At a minimum some elements you want to include in your messages are identifying them as advertising and providing notice of the right to opt-out and the mechanisms for doing so. In addition, many wireless carriers have their own policies with which you must comply.

Social media advertising: When you use social media platforms to advertise, you must also comply with a number of other requirements, not the least of which are the platforms’ own policies. In addition to dictating how you can use the site to advertise, limiting or prohibiting certain activities for commercial purposes, social media and other technology-enhanced platforms’ privacy policies may limit how you collect, use and share personal information. These sites and platforms may have multiple policies and guidelines and they can change frequently.

Advertising can have huge payoffs but it can also be extremely costly if done wrong. Make sure your advertising is both good and legal.

 

 

Eric Pritchard is a partner in Kleinbard Bell & Brecker LLP, Philadelphia, a commercial law firm with a national practice in the electronic security and life safety industries. This column does not constitute legal advice; contact an attorney with specific questions.

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