Advertising—the Good, the Bad and the Illegal

Social media, online and mobile campaigns are game changers


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:

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