With businesses needing to make the most effective use of smaller advertising budgets, they can be pushed perhaps too far in claims they wish to make about their product or services (or those of a competitor). It's a good time for small businesses to remember the basics of unfair and deceptive advertising rules.
As explained by the Federal Trade Commission (FTC) in its Advertising FAQ for small businesses, the Federal Trade Commission Act mandates that advertisements must:
1. be truthful (and non-deceptive);
2. have evidence to back their claims; and
3. not be unfair.
Truth and evidence seem simple enough, but what does it mean for an ad to be "deceptive" or "unfair"?
According to the FTC, an ad is unfair if it "causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid" and this cost is not outweighed by other consumer benefits.
An ad is deceptive if it contains a statement, or omits information, that is likely to mislead reasonable consumers, and is "material" (important) to the consumer's purchasing decision.
Key in FTC analysis of deceptiveness is whether the advertiser has evidence to back any express, as well as implied claims within the advertisement. Some ads draw particular attention from the FTC, namely those that make claims regarding health or safety, and those making claims a consumer would have trouble proving themselves.
For more information about how the FTC analyzes advertising claims, and about advertising issues in particular industries, see the full FTC Advertising FAQ.
Additionally, state laws generally prohibit false and misleading advertising, and can also set particular restrictions for specific industries.
- GE Must Pay $11.4 Million for False Advertising (Business Wire)
- When 'the truth' rots your credibility (Brisbane Times, Australia)
- Advertising Mistakes: Lessons Learned the Hard Way (FindLaw)
- Behavioral Advertising: Thumbs Up or Down? (FindLaw's Legal Technology Center)
- A Marketing Chronology (FindLaw)
- Deceptive Trade Practices (provided by Ross Law P.C.)