Advertising is critical for businesses of all sizes. Smart advertising—whether through print, radio, television, or online—can draw new customers and clients to your business, and make your company more widely known.
But are there any limits to what you can say in your advertising? Is there a line between emphasizing your product's strengths and committing outright fraud? Indeed, businesses cannot say whatever they like when it comes to their products. Advertisements are regulated in order to prevent fraud and deception of consumers.
Learn more about some of the basic legal limitations to consider when drafting advertising materials.
Regulatory Framework for Advertising Your Products
Advertising is regulated through a combination of state and federal agencies, as well as through private lawsuits by competitor businesses. This complex framework can make it somewhat difficult to discern the precise rules relating to your particular industry or potential advertising campaign.
However, there are some broad principles to keep in mind.
First, advertisements must be generally truthful and not misleading. Per the Federal Trade Commission (FTC), the federal agency that regulates advertising, "claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based."
A misleading advertisement is one that makes a material misstatement of fact upon which a reasonable consumer is likely to rely. This is somewhat common sense. If you are selling a liquid that you claim will "eliminate all stains from clothing," but in reality the liquid you are bottling is simply water, you are not being truthful. Similarly, if you market a drug with the claim that it will "make you lose ten pounds of fat in a week" when in reality the drug is merely a common pain reliever, your claim is clearly misleading.
Second, you must disclose any material warnings or defects with the product. Importantly, such disclosures cannot be so obscure that a reasonable consumer cannot find them. For example, disclosures cannot be buried in fast-moving crawls on a TV advertisement or hurried in fine print that is impossible to read. Such disclosures would not insulate the advertising business from liability.
Finally, "puffery" is usually permissible. What is puffery? It involves oversized or hyperbolic statements about a product or service that cannot be objectively proven or disproven. For example, you might claim in a print advertisement for your BBQ restaurant that you offer the "Spiciest chicken wings in Boston!" or the "World's best margarita!" No one can say whether these claims are "true" or "false" because they are something closer to an opinion. The average consumer would not rely on such a statement as an objective factual assertion.
To learn more about regulations on advertising, check out the FTC's helpful FAQs, which discuss a range of issues often faced by small businesses.
Special Regulations for Certain Industries and Issues
If you have every watched late-night television, you have probably seen various advertisements for medications. Perhaps you noticed that those advertisements offered numerous disclaimers about the product, including potential negative side effects. Why would a company trying to sell a drug tell you about all the bad side effects that it could cause? The answer, of course, is that such disclosures are legally required.
Indeed, in certain industries, there are heightened regulations on the contents of advertisements. This is particularly common for businesses that market food, over-the-counter drugs, dietary supplements, weight loss solution, contact lenses, and other health-related products. Here, the government has a particular interest in protecting consumers from falling prey to misleading advertisements that could cause them serious harm.
There are also certain issues that the FTC regulates with particular care. "Green" marketing—to promote the environmental impact of your product—is one area of increasing importance. For example, many businesses now tell consumers that their products are environmentally friendly, zero waste, or fully biodegradable. Such labels are popular among many consumers, who seek to reduce environmental harm through their purchases. But these claims are also difficult to verify. The FTC's "Green Guides" can help you ensure that your proposed advertisement meets with applicable standards and is not misleading.
Consequences for False Advertisements
If a business is found to have issued false advertisements, or advertisements that violate applicable regulations, it could face government regulatory action as well as private lawsuits.
Importantly, your business might be affected by the negative advertisements of another competitor—for example, if that competitor makes claims that are clearly false in order to divert away your customers. In such a situation, you might wish to speak with an intellectual property attorney about bringing a lawsuit under your state's unfair competition laws.