General Advertising Policies For Small Businesses
GENERAL ADVERTISING POLICIES
What truth-in-advertising rules apply to advertisers?
Under the Federal Trade Commission Act:
Additional laws apply to ads for specialized products like consumer leases, credit, 900 telephone numbers, and products sold through mail order or telephone sales. And every state has consumer protection laws that govern ads running in that state.
What makes an advertisement deceptive?
According to the FTC’s Deception Policy Statement, an ad is deceptive if it contains a statement – or omits information – that:
What makes an advertisement unfair?
How does the FTC determine if an ad is deceptive?
A typical inquiry follows these steps:
What kind of evidence must a company have to support the claims in its ads?
Before a company runs an ad, it has to have a \”reasonable basis\” for the claims. A \”reasonable basis\” means objective evidence that supports the claim. The kind of evidence depends on the claim. At a minimum, an advertiser must have the level of evidence that it says it has. For example, the statement \”Two out of three doctors recommend ABC Pain Reliever\” must be supported by a reliable survey to that effect. If the ad isn’t specific, the FTC looks at several factors to determine what level of proof is necessary, including what experts in the field think is needed to support the claim. In most cases, ads that make health or safety claims must be supported by \”competent and reliable scientific evidence\” – tests, studies, or other scientific evidence that has been evaluated by people qualified to review it. In addition, any tests or studies must be conducted using methods that experts in the field accept as accurate.
Are letters from satisfied customers sufficient to substantiate a claim?
No. Statements from satisfied customers usually are not sufficient to support a health or safety claim or any other claim that requires objective evaluation.
My company offers a money-back guarantee. Very few people have ever asked for their money back. Must we still have proof to support our advertising claims?
Yes. Offering a money-back guarantee is not a substitute for substantiation. Advertisers still must have proof to support their claims.
What kind of advertising claims does the FTC focus on?
The FTC pays closest attention to:
Ads that make subjective claims or claims that consumers can judge for themselves (for example, \”ABC Cola tastes great\”) receive less attention from the FTC.
How does the FTC decide what cases to bring?
The FTC weighs several factors, including:
What penalties can be imposed against a company that runs a false or deceptive ad?
The penalties depend on the nature of the violation. The remedies that the FTC or the courts have imposed include:
Will the FTC review my company’s ads before they run to make sure that we’ve complied with the law?
FTC staff cannot clear your ads in advance. However, there is guidance to help you comply with the law. Information about advertising particular kinds of products (for example, foods, dietary supplements, or \”environmentally friendly\” merchandise), advertising credit, and guidelines for advertising on the Internet is available at www.ftc.gov. For more general information on advertising policies, call the FTC’s Division of Advertising Practices at 202-326-3090.
How can I keep up-to-date on what’s going on at the FTC?
The Federal Trade Commission website (www.ftc.gov) is updated almost every day, so bookmark it for instant access to FTC news and views, including recent enforcement actions, speeches, public hearings, and other business information. Before running an ad, check out what the FTC has had to say about products or advertising claims similar to yours. From the homepage, you can search the entire FTC website using key words or phrases. For example, a search using the word \”diet\” will yield cases, reports, news releases, and other materials related to FTC policies about the advertising of diet products and services. In addition, you can visit www.consumer.gov for consumer and business information from the FTC, FDA, SEC, and other federal agencies. You also may want to check with the Better Business Bureau for tips on truthful advertising, the BBB’s voluntary Code of Advertising, and information about scams targeting small businesses.
How does the FTC address the needs of small businesses?
In its continuing commitment to regulatory reform, the FTC has repealed almost 50% of its trade regulation rules and has streamlined and simplified remaining rules. The FTC’s Small Business Compliance Assistance Policy Statement describes other forms of assistance available to small businesses to help them comply with truth-in-advertising laws. For example, the Business Guidance section of the FTC’s website (www.ftc.gov) includes an expanding library of materials written especially for small businesses. Small businesses also may contact the FTC headquarters or one of the FTC’s regional offices with specific inquiries about how to comply with the law. In addition, one of the FTC’s top law enforcement priorities is fighting fraudulent and deceptive practices aimed at small businesses. The agency has taken the lead in challenging deceptive invention promotion services, questionable franchise opportunities, bogus office supply scams, and other practices that prey on aspiring entrepreneurs.
What can my company do if a competitor is running an ad that I think is deceptive?
If my company files a complaint about a competitor with the FTC, will the FTC resolve the dispute?
The FTC is authorized to act when it appears that a company’s advertising is deceptive and when FTC action is in the public interest. Although the FTC cannot intervene in an individual dispute between two companies, the agency relies on many sources – including complaints from consumers and competitors – to find out about ads that may be deceptive. To file a complaint against a competitor who you believe has engaged in false advertising, contact:
Federal Trade Commission
If my company files a complaint against a competitor with the FTC, will we be kept informed about the status of any investigation?
No. The FTC keeps investigations confidential. Matters become public only after the FTC reaches a settlement with a company or files a lawsuit. However, you can be assured that complaints received from companies alleging that competitors are advertising deceptively are reviewed carefully.
Can I find out if the FTC already has an investigation against a company?
The FTC can tell you if it has already taken formal action (e.g., filed or settled a lawsuit) against a particular company or against similar kinds of advertisements or products. But the FTC cannot disclose whether an investigation is going on. To find out if a company or product has been the subject of a recent FTC action, search the FTC’s website (www.ftc.gov).