Be Careful with Drafting Marketing Claims for Internet Advertising

The FTC has well-established guidelines for claims made in marketing to consumers. Companies need to be very attentive to the language used in their advertising and marketing programs. Most of the rules that govern offline advertising apply to the online marketplace, but the FTC has provided a great amount of additional guidance for when marketing is conducted online.

Consider these cases:

In 2014, Snapchat agreed to settle FTC charges that the company deceived consumers with “multiple misrepresentations about its product,” including the ways its messages were handled and that a user’s snaps would “disappear forever.” It was also held responsible for a data breach of 4.6 million users and for misrepresenting the way it collected user data.

In 2015, distributors of the dietary supplement Procera AVH were fined $150 million in an FTC lawsuit for falsely advertising that its product could improve brain function and restore memory.

In 2012, the shoe company Skechers USA, Inc. agreed to pay $40 million to settle FTC claims alleging the company deceived customers with unfounded claims that its Shape-up shoes would help people strengthen muscles and lose weight. Reebok also faced similar FTC claims and agreed to settle for $25 million.

The risks are high. So you need to know what the FTC expects.

The FTC Has Straightforward Guidance Concerning Claims Made in Consumer Advertising

The FTC website makes clear that:

Under federal law, “ads must be truthful, not misleading, and when appropriate, backed by scientific evidence.”

The agency looks closely at claims involving consumer health, food, diet supplements, and over-the-counter drugs.

The agency also maintains a keen focus on internet products and services, and on high tech products.

When the FTC discovers violations or fraud, it often files its cases in federal court to stop and prevent scams from continuing.

The agency has the power to freeze assets at the outset of a case. In its lawsuits, it can demand substantial monetary damages, restitution, and penalties, including reimbursing customers. It can also require the company to run ads to correct misstatements about its previous false or deceptive advertising.

The FTC’s guidelines on marketing online explain that advertising is deceptive if it is “likely to mislead consumers and affect consumers’ behavior or decisions.”

Who’s at Risk?

Advertisers of products are responsible for the claims in their internet advertising. Third parties, such as advertising and marketing agencies, website creators, and other content creators can also be liable for creating and disseminating deceptive statements and claims.

Suggestions For Your Advertising Programs

Be truthful. Be accurate. Don’t make unrealistic claims. Words like “polar” can suggest that winter gear can withstand sub-zero temperatures when in fact it’s meant for just chilly weather. Waterproof and fireproof are not the same as water resistant and fire resistant.

When using the words “free,” or “at no charge,” make sure there are no hidden charges or even special financial conditions associated with the offer. Disclose all limitations, terms and conditions.

Sales and savings claims need to be completely truthful. Price comparisons can mislead the consumer with incomplete information. So make sure the comparisons are fair and clearly presented.

Offers of credit need to be carefully stated. For example, offers of easy credit to people with high credit risk can easily lead to FTC charges of deceptive or unfair practices.

References to competitors can be tricky, especially if they aren’t factually true. Unsubstantiated claims that criticize a competitor can put your firm at substantial risk under state and federal laws.

Paid endorsements and testimonials must be disclosed as such. And, if the testimonial depicts a product in use, it must be under normal use, and not in conditions where it is not intended.

States and Local Jurisdiction

It’s not only the FTC that can take action against deceptive advertising. A state can also go after marketers that violate advertising regulations. In many states, the state attorney general’s office, local district attorneys, and state consumer protection bureaus have jurisdictional authority.

Summary

When in doubt, apply common sense. More importantly, know the basic guidelines provided by the FTC.

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There are some gray areas, and your business might be in one. Get expert advice and contact Kronenberger Rosenfeld today.