Millions, perhaps billions, of dollars are spent on advertising every day, and it is a rare advertiser who is called to account for deceptive or misleading advertising. It is, however, important to know the boundaries so you do not stray outside the law.
Advertising is regulated by both federal and state law. Under the law, your ad is unlawful if it tends to mislead or deceive. It is possible to run an ad that is unlawful, even if you did not intend to mislead. Ignorance or your intentions are not a defense in this case.
What agencies regulate advertising?
At the federal level, the Federal Trade Commission is primarily responsible for supervising advertising. Often an investigation is triggered by a consumer complaint or a report from a competitor. Initially, the FTC may try to encourage compliance through voluntary action. If that does not work, they can take a business to court. They can also compel the advertiser to run ads that acknowledge deception and state the truth.
State and local governments also have laws that regulate advertising. The state’s attorney general is usually charged with monitoring and prosecuting violations.
If customers feel that they have been misled by an advertiser, do they have the right to sue?
Yes, states have enacted consumer protection laws that give individuals the right to sue. Competitors can also sue if they believe an ad is misleading. Plaintiffs can also seek punitive damages that far exceed the value of the advertised item in question.
What are some advertising guidelines that I should keep in mind?
Here are some tips for keeping your ads within legal limits.
Be truthful. Neither words nor pictures should mislead consumers. Promises made in the ad should be kept, and language should be accurate. Fire-resistant is not the same as fireproof. Illustrations, whether they are photos or drawings, should be accurate.
Be fair with competition. Comparing your service or product with a competitor’s can open up potential problems. Make very sure you have all the facts before running the ad.
Pricing claims must be accurate. If you are promoting a sale or savings, be careful when you compare with a base or standard price. You can get in trouble by artificially raising a price in order to lower it for a “sale.”
Be cautious with the word “free.” If the offer has a qualification—for example, you must buy one item for the other to be “free”—then you must clearly state the condition.
Get permission for quotes and illustrations. If your ad includes language that you have “borrowed” from someone, be sure that you are not violating copyright laws. A short, limited quotation is usually considered fair use under today’s copyright laws, but you would be wise to get permission in advance if there is any doubt. Likewise, permission should be obtained to use a photo or other image.
Deliver the goods. If you have ever made a special trip to the store for an advertised item and found that it is out of stock, you know the reason behind this rule. The advertiser should be sure to stock enough product to meet anticipated demand. If you have any doubts about whether you will have enough, the ad should state that “limited quantities” are available.
Do not mislead on offers to extend credit. In the spirit of honest advertising, offers to extend credit should not be misleading. An example: Your ad claims that you will extend credit to anyone and then you fail to extend credit to buyers with bad credit ratings (or you charge a higher interest rate). Buried details in the credit terms and overly aggressive collection efforts can also lead to false advertising charges.