What is fair advertising? In the United States, we have a set of rules and regulations designed to keep advertisers honest in their claims. Essentially, you can’t make a false or unsubstantiated claim or falsely persuade consumers to buy your product. The exact details of these cases can be confusing, so here’s a list of FAQ for small business owners.
1. Question: For advertisers, what truth-in advertising rules apply?
The main three truth-in advertising rules for advertisers are:
- Ads must be honest and not deceptive
- Advertisers must possess evidence to support claims made in ads
- Ads cannot be considered unfair
For full policies, consult with the Federal Trade Commission Act and note that additionally laws apply for specialized products. Each state has its own regulator guidelines.
2. Question: What qualifies as deceptive advertising?
Under the FTC, deceptive ads contain statements that:
- Mislead consumers otherwise acting reasonably in given circumstances
- Omit important material necessary for consumers to make informed decisions about a product
3. Question: What qualifies as unfair advertising?
Business practices or ads qualify as unfair when:
- They cause or will likely cause significant consumer injury that the consumer couldn’t avoid
- The ad’s benefit to the consumers does not outweigh its design
4. Question: Can testimonials from satisfied consumers substantiate claims?
Customer statements are not sufficient evidence for backing up safety, health and similar claims. Claims require substantiation from a more objective evaluation like a scientific study.
5. Question: What claims does the FTC focus on?
The FTC focuses on two main types of ads. First, it targets ads that make a safety or health claim, such as water filters minimizing harmful chemicals or sunscreen reducing the likely hood of skin cancer. Second, it targets ads that make claims that consumers will have a hard time evaluating. For example, the FTC might look at a company that claims its microwaves are 25 percent more energy efficient. If your ad makes a subjective claim like “our version tastes better,” the FTC won’t pay too much attention to your claim.
6. Question: What are the penalties for a deceptive or unfair ad?
The nature of the penalty will depend on the type and severity of the violation. Common penalties and resolutions include:
- Issuing cease and desist orders. Essentially, your company must stop running the ad immediately or face a per-day fine. Additionally, you must provide evidence for future claims and regularly report your substantiation to the FTC.
- Monetary penalties. Civil penalties can range from thousands to millions of dollars. In the past, some advertisers must issues refunds to anyone who bought the advertised product.
- Corrective measures. Occasionally, advertisers must backtrack and correct any misinformation conveyed through their advertising. They may be required to notify purchasers about deceptive claims and provide comprehensive information about the product.
7. Question: What can you do if a company is running a deceptive ad?
If you believe a competitor is running deceptive or unfair ads, you have several options available to you including:
- Exercise your legal options protecting your business against unfair or deceptive competition.
- File a complaint with the Council of Better Business Bureau’s National Advertising Division for competing ads running nationally or locally.
- File a complainant with your local Better Business Bureau either online or over the phone.
- Contact the entity running the advertisement and inform the appropriate parties that the entity maybe running a deceptive or unfair ad.
- Contact your state’s Office of Consumer Affairs or Attorney General’s Office.
- Contact the FTC by mail or phone to file a complaint.
With this guide in mind, you can make sure your advertising and business practices fall under fair advertising guidelines and you can protect your business against the harmful effects of deceptive advertising. For more information, consult with the FTC and Federal Trade Commission Act.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.