The laws surrounding advertising rules may differ by region and according to the kind of product or service being advertised. Generally speaking, the following may be considered standard types of advertising violations:
- Copyright Infringement: Using another organization’s copyrighted material in an ad without their consent may result in a legal infraction
- False Advertising: This involves advertised claims that are not valid in connection with the product or service. In addition, it usually must be established that the company or business intended to deceive the public with its advertising.
- Deceptive Advertisement: Involves statements that are not necessarily untrue but meant to deceive or mislead the consumer.
- Trademark Counterfeiting: Using or reproducing another business’s trademark or logo without their consent in an advertisement can lead to a civil lawsuit.
While fraudulent and misleading advertising is generally prohibited, “puffery” is typical in business advertising and is usually not illegal. Puffery is generally acknowledged as an exaggerated claim or opinion, such as “the Best Drinks in Town.”
What Are the Legal Penalties for Advertising Violations?
Some advertising infractions can result in criminal penalties. These typically result in misdemeanor penalties, including criminal fees or time in jail for up to one year. In more severe offenses, felony charges can be involved, resulting in higher penalties and jail time of greater than one year.
In addition to potential criminal penalties, many advertising infringements lead to private lawsuits in a civil court of law. These are usually between the advertiser and another business or between the advertiser and a group of customers. Civil lawsuits typically result in a monetary damages award to compensate the non-violating party for their losses.
Defenses are often available to the defendant in an advertising infringement lawsuit. These can include lack of evidence, mistake, and “unclean hands” (i.e., the plaintiff has engaged in a similar type of wrong).
Where Advertising Regulations Come From
The advertising regulations that dictate what companies can and can’t express in ads come from state and federal laws. Generally, these regulations concentrate on truth in advertising, misleading advertising practices, and unfair advertising. State and federal laws and agencies strive to restrain these advertising methods, require companies to be honest about their products or services, and substantiate claims in advertisements.
There is a fine but clear line between a company making unfounded claims (which break the law) and merely making impressionistic boasts about their product. For instance, you can swear to have the best-tasting coffee, but you cannot advertise that everyone who drinks your coffee loves it or that drinking it will help you live longer.
Overview of Federal & State Law and Enforcement
The Federal Trade Commission (FTC) implements advertising regulations at the federal level, and every state also has a consumer protection agency that enforces state advertising regulations. Further, the state attorney general and the district attorney can prosecute against businesses whose advertising damages citizens within their jurisdiction.
The FTC designs, reviews, and enforces federal consumer protection laws and has the ability to prosecute claims through its Division of Advertising Practices.
General FTC Advertising Rules
Under the vigilant eye of the FTC, the following general advertising rules must be obeyed:
- Ads must be honest and non-deceptive
- Companies must have evidence to back up their claims
- Ads can’t be one-sided, meaning the advertisement can’t cause substantial injury to clients that clients can’t reasonably bypass. For instance, ads cannot assert health benefits that will lead reasonable consumers to purchase a product, who only find out later that the product is dangerous.
The FTC exerts tremendous influence in enforcement and will first try to work out claims privately with the advertiser. If the advertiser doesn’t relent, the FTC can sue the business on behalf of injured customers and compel the advertiser to run new ads that correct statements or implications of previously fraudulent, misleading, or unfair ads.
For instance, television ads for Yaz birth control pills make mention of a prior ad that “may” have deceived customers. This corrective ad campaign resulted from the FTC and FDA winning a court action and forcing the drugmaker to run corrective ads (which cost the drug maker $20 million and fines levied by the FTC and FDA).
What Is the Lanham Act?
While the FTC implements consumer protection regulations on behalf of consumers, the Lanham Act allows business competitors to sue advertisers for false advertising privately. The Lanham Act primarily involves violating trademark regulations, but competitors can also file lawsuits for false advertising. To sue under the Lanham Act, you must establish the following:
- An advertiser made factually incorrect claims about the product
- The advertisement did or could mislead a considerable segment of the target population
- The deceit was an essential part of the ad
- The product was sold across state lines
- The competitor (plaintiff) was likely to be damaged by the deception
While the Lanham Act shields consumers (from trademark confusion and false advertising), only competitors can sue under the act.
Each state also has consumer protection regulations that protect customers against unfair competition and deceptive advertising practices. Whereas consumers have minimal rights to sue under federal law, under state laws, consumers typically have more power to sue companies for false or deceptive advertising privately.
For instance, if you own a company and think a competitor is using a misleading ad that could lead consumers to believe that the product they are selling is coming from your company, you have several options. You could report the ad to the FTC, and they could deal with it, you could sue under the Lanham Act (either for fraudulent advertising or trademark infringement, or both), or you could sue under your state’s unfair competition laws. However, you can only sue in state court if you’re a consumer, assuming you bought the product based on a misleading advertisement.
The Policy of Truth
Slight embellishments and puffing (“the best coffee!”) are expected and, for the most part, permitted in promotions, but don’t get too thorny with your wording or rely on technicalities to stay truthful. For instance, you might be able to say that your tent is great in rainy conditions truthfully, but don’t spread the assertion to wind if you haven’t tested it or it just stands up to a slight breeze.
Also, if you’re a blogger or communicate using Twitter and are being paid by a business to promote their goods, you must reveal the relationship. It is an honorable, ethical thing to do, and the FTC has ruled that not doing so amounts to misleading online advertising.
What Is Deceptive Pricing?
All bargain ads trumpet extra-low sale prices, which is, of course, allowed. Just be sure that the sale price is lower than the item’s regular price. If you’re selling a shirt for $50, it had better be the sale price and not the regular price. Making up a fictional stock price to tout a “lower” sale price is misleading, and you risk being sued and losing your clients’ faith.
Do I Need a Lawyer If I’ve Been Involved in an Advertising Violation?
Advertising violations can often be severe, primarily if they affect many consumers. In such circumstances, a costly class-action suit can often result. In most instances, a lawyer is needed for help with claims involving advertising violations.
If you face legal problems with an advertising violation, you may wish to speak with a qualified business lawyer for advice and representation. Your lawyer can help advise you on the advertising laws in your area and can represent you in court if necessary.