Free Enterprise - The FindLaw Small Business Law Blog

5 FAQs About Unlawful Advertising for Small Businesses

Being an entrepreneur or running a small business means that you have to wear many hats. One of the most important is the marketing and advertising hat. Making sure your potential customers know that you exist and know what you do is essential for any business that wants to survive.

So after you've done your research on how to reach your target market and you've selected the type of advertisement you want to run (print, internet, radio, etc.), you have to design your advertisement's content. Will you just let people know you exist? Are you going to offer a special promotion? Or, are you going to tell everyone why your competition's product is inferior? Regardless of what you say, you should make sure you know the limitations on what you can and can't say in advertising.

Below are 5 frequently asked questions from small business owners about advertising.

1. What Qualifies as False Advertising?

The Federal Trade Commission is the federal agency that regulates advertising. They call false advertising 'deceptive advertising.' The FTC explains that an advertisement is deceptive if it includes, or omits, a statement or information that:

  • Is likely to mislead consumers
  • Is important to a customer's decision to purchase

For instance, you can't claim that 5 out of 5 doctors said your product is healthier than the competition when the doctors you surveyed are holding PhDs in journalism, or don't actually exist. Basically, just don't lie to or mislead customers.

2. How Much Can I Exaggerate?

While you may want to shout from the top of a mountain claiming your product will end world hunger, or make some other outlandish claim, even if just to get some attention, be careful not to sound to serious when you exaggerate.

There is a fine line between deception and exaggeration. A common example is when a company claims to have 100 years of experience, despite only being in business for 5 years. While the employees that make up the company may have a combined 100 years of experience, that is a much different claim than the company having been open for 100 years.

So long as your exaggeration are either clearly denoted as 'dramatizations,' or are very clearly satirical or very clearly meant as a joke, you should be okay. Just be wary of crossing the line into the world of deceptive advertising and keep the basic advertising considerations in mind.

3. Can I Badmouth My Competition?

You absolutely can bad mouth your competition, but you better be 100% certain of every claim you make against them, even if you write an informal statement online. It is also important to have hard, documented evidence of any claim you plan to make against your competition. Be warned though that this is the stuff lawsuits get filed over, so be ready to defend your claims in court if you choose to make them.

4. What Can I Do About My Competition's Unfair or Deceptive Advertisements?

If you suspect that a competitor's advertisement is unfair or deceptive, you can report it to the FTC, and/or take other legal steps under state law if the advertisement affects your business either directly or indirectly. There are many state law claims that can be asserted, as well as the perennial favorite common law claim of defamation.

5. Can I Make Claims About My Company Based on Testimonials?

While you can use customer testimonials in your advertising (after getting permission from your customer, preferably in writing), making claims based on testimonials alone is not okay according to the FTC. Although you may think the customer testimonials show that your product will help some particular ailment, making claims that your product does something requires more quantifiable and objective evidence, such as a reliable scientific study (preferably with published results).

Advertising and marketing is filled with legal pitfalls. If you're considering spending big money on marketing your small business, and you probably should, don't forget to budget for legal help. Having your marketing reviewed for legal compliance can save you time, headaches, and even money, in the long run.

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