Frequently Asked Advertising
Questions:A Guide for Small
Business
GENERAL
ADVERTISING POLICIES
What
truth-in-advertising rules apply to advertisers?
Under the Federal
Trade Commission Act:
- advertising must be truthful and
non-deceptive;
- advertisers must have evidence
to back up their claims; and
- advertisements cannot be unfair.
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:
- is likely to mislead consumers
acting reasonably under the circumstances; and
- is "material" - that
is, important to a consumer's decision to buy or use
the product.
What
makes an advertisement unfair?
According to the Federal
Trade Commission Act and the FTC's Unfairness
Policy Statement, an ad or business practice
is unfair if:
- it causes or is likely to cause
substantial consumer injury which a consumer could
not reasonably avoid; and
- it is not outweighed by the benefit
to consumers.
How
does the FTC determine if an ad is deceptive?
A typical inquiry follows these steps:
-
The FTC looks at
the ad from the point of view of the "reasonable
consumer" - the typical person looking at the
ad. Rather than focusing on certain words, the FTC
looks at the ad in context - words, phrases, and
pictures -˙to determine what it conveys to consumers.
-
The FTC looks at
both "express" and "implied"
claims. An express claim is literally made in the
ad. For example, "ABC Mouthwash prevents colds"
is an express claim that the product will prevent
colds. An implied claim is one made indirectly
or by inference. "ABC Mouthwash kills the germs
that cause colds" contains an implied
claim that the product will prevent colds. Although
the ad doesn't literally say that the product prevents
colds, it would be reasonable for a consumer to
conclude from the statement "kills the germs
that cause colds" that the product will prevent
colds. Under the law, advertisers must have proof
to back up express and implied claims that
consumers take from an ad.
-
The FTC looks at
what the ad does not say - that is, if
the failure to include information leaves
consumers with a misimpression about the product.
For example, if a company advertised a collection
of books, the ad would be deceptive if it did not
disclose that consumers actually would receive abridged
versions of the books.
-
The FTC looks at
whether the claim would be "material"
- that is, important to a consumer's decision to
buy or use the product. Examples of material claims
are representations about a product's performance,
features, safety, price, or effectiveness.
- The FTC looks at whether the advertiser
has sufficient evidence to support the claims in the
ad. The law requires that advertisers have proof before
the ad runs.
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 claims about health
or safety, such as:
ABC Sunscreen will reduce the
risk of skin cancer.
ABC Water Filters remove harmful chemicals from
tap water.
ABC Chainsaw's safety latch reduces the risk of
injury.
- ads that make claims that consumers
would have trouble evaluating for themselves, such
as:
ABC Refrigerators will reduce
your energy costs by 25%.
ABC Gasoline decreases engine wear.
ABC Hairspray is safe for the ozone.
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:
-
FTC jurisdiction. Although
the FTC has jurisdiction over ads for most products
and services, Congress has given other government
agencies the authority to investigate advertising
by airlines, banks, insurance companies, common
carriers, and companies that sell securities and
commodities.
-
The geographic
scope of the advertising campaign. The FTC concentrates
on national advertising and usually refers local
matters to state, county, or city agencies.
-
The extent to
which an ad represents a pattern of deception, rather
than an individual dispute between a consumer and
a business or a dispute between two competitors.
State or local consumer protection agencies or private
groups such as the Better
Business Bureau (BBB) often are in a better
position to resolve disputes involving local businesses
or local advertising. To get the address and phone
number of your state Attorney General's office,
your local consumer agency, or the nearest BBB,
check your telephone directory.
-
The amount of
injury - to consumers' health, safety, or wallets
- that could result if consumers rely on the deceptive
claim. The FTC concentrates on cases that could
affect consumers' health or safety (for example,
deceptive health claims for foods or over-the-counter
drugs) or cases that result in widespread economic
injury.
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:
-
Cease and desist
orders. These legally-binding orders require
companies to stop running the deceptive ad or engaging
in the deceptive practice, to have substantiation
for claims in future ads, to report periodically
to FTC staff about the substantiation they have
for claims in new ads, and to pay a fine of $11,000
per day per ad if the company violates the law in
the future.
-
Civil penalties,
consumer redress and other monetary remedies.
Civil penalties range from thousands of dollars
to millions of dollars, depending on the nature
of the violation. Sometimes advertisers have been
ordered to give full or partial refunds to all consumers
who bought the product.
-
Corrective advertising,
disclosures and other informational remedies.
Advertisers have been required to take out new ads
to correct the misinformation conveyed in the original
ad, notify purchasers about deceptive claims in
ads, include specific disclosures in future ads,
or provide other information to consumers.
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?
You can:
-
Explore your legal
options under federal and state statutes that protect
businesses from unfair competition. For example,
the Lanham Act gives companies the right to sue
their competitors for making deceptive claims in
ads.
-
File a complaint
with the National Advertising
Division (NAD) of the Council of Better Business
Bureaus, if your competitor's ad is running nationally
or regionally. The NAD is a private, self-regulatory
group affiliated with the BBB. It investigates allegations
of deceptive advertising and gives advertisers a
mechanism for resolving disputes voluntarily.
-
Call your local BBB
or file an online complaint with the Better Business Bureau if the ad is local.
Many BBBs have procedures for resolving disputes
between businesses.
-
Contact the radio
station, television station, or publication where
the ad ran. Let them know that they're running an
ad you think may be deceptive.
-
Contact your state
Attorney General's Office or your city, county,
or state Office of Consumer Affairs. To get their
phone numbers, check your telephone directory.
-
Contact the FTC.
By mail: Federal Trade Commission, Consumer Response
Center, 600 Pennsylvania Avenue, NW, Washington,
DC 20580; by telephone: toll-free 1-877-FTC-HELP.
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
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, DC 20580
Toll-free 1-877-FTC-HELP (382-4357)
Online Complaint Form
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).
OTHER
ADVERTISING ISSUES
Advertising
Agencies
Are
advertising agencies subject to the FTC Act?
Yes. In addition to the advertiser, the advertising
agency also may be held legally responsible for misleading
claims in ads. Advertising agencies have a duty to make
an independent check on the information used to substantiate
ad claims. They may not rely on an advertiser's assurance
that the claims are substantiated. In determining whether
an ad agency should be held liable, the FTC looks at:
Alcohol Advertising
Does
the FTC regulate ads for alcoholic beverages?
The FTC can take action if an alcohol ad is deceptive
or unfair. The Bureau of Alcohol, Tobacco and Firearms
(ATF) also has jurisdiction over deceptive or misleading
alcohol labeling and advertising.
Is
it legal to advertise distilled spirits on TV?
Until 1996, there was a voluntary policy within
the distilled spirits industry not to advertise on television.
Many broadcasters still do not accept ads for distilled
spirits.
Are
there limits on where ads for alcoholic beverages can
run and what they can say?
Like ads for all other products, ads for alcoholic
beverages must be truthful and any claims must be substantiated.
In addition, alcohol ads by their content or placement
may not be directed to underage consumers. Some broadcasters
and publishers place additional restrictions on where
or when alcohol ads can run. For more information about
voluntary codes, self-regulatory programs, and industry
"best practices" in the area of alcohol advertising,
ask the FTC for its Report to Congress, Self-Regulation
in the Alcohol Industry: A Review of Industry Efforts
to Avoid Promoting Alcohol to Underage Consumers.
Bait and
Switch
How
does the FTC define "bait and switch" advertising?
It's illegal to advertise a product when the
company has no intention of selling that item, but instead
plans to sell a consumer something else, usually at
a higher price. For more information, ask the FTC for
its Guides Against Bait Advertising.
Catalogs
My
company distributes a catalog of products manufactured
by other companies. What's our responsibility for ensuring
the accuracy of what's in the catalog?
Rather than just repeating what the manufacturer says
about a product, catalog marketers - including companies
with online catalogs - should ask for material to back
up the claims. If the manufacturer doesn't come forward
with proof or turns over questionable material, a catalog
marketer should see a yellow "caution light."
This is especially true for products with extravagant
performance claims, health or weight loss promises,
earnings guarantees, and the like. In writing ad copy,
catalogers should stick to the claims that can be supported
and avoid embellishing manufacturers' representations.
Most importantly, catalog marketers should trust their
instincts when a product sounds too good to be true.
For more information about selling merchandise by catalog
or through direct marketing, ask the FTC for the Business
Guide to the Federal Trade Commission's Mail or Telephone
Order Merchandise Rule and Business Checklist
for Direct Marketers.
Children's
Advertising
What
standards does the FTC apply when evaluating claims
in ads aimed at children?
The FTC pays particular attention to ads aimed at children
because children may be more vulnerable to certain kinds
of deception. Advertising directed to children is evaluated
from a child's point of view, not an adult's. The FTC
also works with the Children's Advertising
Review Unit (CARU) of the Council of Better Business
Bureaus. CARU is a private, self-regulatory group affiliated
with the BBB that publishes self-regulatory guides for
children's advertising.
My
company is thinking about doing a website for kids.
Are there any issues involving children and the Internet
that we should be aware of?
The Children's Online Privacy Protection Act, a federal
law that requires websites to obtain verifiable parental
consent before collecting, using, or disclosing personal
information from children, including their names, home
addresses, email addresses, or hobbies. The FTC has
issued a rule outlining the procedures for
commercial websites to use in obtaining parental consent.
The rule applies to operators of commercial websites
and online services directed to children under 13, and
general audience sites that know that they are collecting
personal information from a child. For more information,
ask the FTC for How
to Comply with the Children's Online Privacy Protection
Rule. Visit the FTC's website (www.ftc.gov/kidzprivacy) for more
information about how to protect kids' privacy online.
Clothing
and Textiles
Are
there any requirements for advertising clothing or other
textiles?
The labeling and advertising of clothing and textiles
are governed by special statutes and regulations. For
example, mail order catalogs and websites must disclose
the fiber content of clothing and whether the fabric
was imported or made in the United States. For more
information, ask the FTC for the Rules under the Wool Products
Act, the
Fur Products Labeling Act, and the
Textile Fiber Products Identification Act,
and Threading
Your Way Through the Labeling Requirements Under the
Textile and Wool Acts. Visit the FTC's website
(www.ftc.gov) for information
about the FTC's Registered
Identification Number (RN) system for companies
that manufacture, import, or sell textiles.
Comparative
Advertising
Is
it legal for a company to compare its product to another
company's product in an ad?
Comparative advertising is legal as long as it is truthful.
For more information, ask the FTC for the Comparative
Advertising Policy Statement.
Contests
and Sweepstakes
Are
there any rules about ads for contests or sweepstakes?
Sweepstakes-type promotions that require a purchase
by participants are illegal in the United States. Other
agencies, including the United States Postal Service
(USPS) and the Federal Communications Commission (FCC),
also enforce federal laws governing contests and prize
promotions. And each state has laws that may require
promoters to make disclosures, seek licensing, or post
a bond. Since state laws vary, check with the Attorney
General's Office in the state(s) in which you plan to
advertise. If a contest or promotion involves telephone
calls, the FTC's Telemarketing Sales Rule
requires specific disclosures, such as the odds of winning
a prize, how to participate without buying anything,
and that no purchase or payment is required to win.
If pay-per-call services are involved, the FTC's 900
Number Rule requires certain disclosures. For more information,
ask the FTC for the publications Complying
with the Telemarketing Sales Rule and Complying
with the 900 Number Rule.
Credit
What
information must be included in ads for consumer credit?
According to the Truth
in Lending Act and other federal and state
laws, ads for consumer credit must include certain disclosures
about the terms and conditions of credit. These laws
specifically require the disclosures to be "clear
and conspicuous" so that reasonable consumers can
read (or hear) and understand the information. For more
information, ask the FTC for the publication How
to Advertise Consumer Credit: Complying with the Law.
Dietary Supplements
How
does the FTC evaluate claims for "health foods,"
vitamins, dietary supplements, and similar products?
Claims for dietary supplements and similar products
must be truthful and advertisers must have substantiation
for any objective product claims they make. Ask the
FTC for Dietary
Supplements: An Advertising Guide for Industry.
Disclosures
and Disclaimers
Does
FTC law specify how disclaimers or disclosures must
appear in ads?
Some laws and regulations enforced by the FTC,
such as the 900 Number Rule, the Truth in Lending Act,
and the Consumer Leasing Act, have specific requirements
that apply to advertising, including that certain information
must be "clearly and conspicuously" disclosed.
For more information, ask the FTC for the publications
Complying with the 900 Number
Rule and Advertising Consumer Leases.
You also can see the publication How to Advertise Consumer Credit:
Complying with the Law on the FTC's website.
How
prominent does a disclaimer or disclosure have to be
in other kinds of ads?
When the disclosure of qualifying information
is necessary to prevent an ad from being deceptive,
the information should be presented clearly and conspicuously
so that consumers can actually notice and understand
it. A fine-print disclosure at the bottom of a print
ad, a disclaimer buried in a body of text unrelated
to the claim being qualified, a brief video superscript
in a television ad, or a disclaimer that is easily missed
on a website are not likely to be effective. Nor can
advertisers use fine print to contradict other statements
in an ad or to clear up misimpressions that the ad would
leave otherwise. For example, if an ad for a diet product
claims "Lose 10 pounds in one week without dieting,"
the fine-print statement "Diet and exercise required"
is insufficient to remedy the deceptive claim in the
ad. To ensure that disclosures are effective, advertisers
should use clear and unambiguous language, place any
qualifying information close to the claim being qualified,
and avoid using small type or any distracting elements
that could undercut the disclosure. Although there is
no hard-and-fast rule about the size of type in a print
ad or the length of time a disclosure must appear on
TV, the FTC often has taken action when a disclaimer
or disclosure is too small, flashes across the screen
too quickly, is buried in other information, or is otherwise
hard for consumers to understand. Most importantly,
if you are concerned that a disclaimer or disclosure
may be necessary to clarify a claim, evaluate your ad
copy and substantiation carefully to ensure that you
are not misleading consumers.
What
about disclaimers and disclosures online?
Regardless of whether you advertise on TV or
radio, in print ads, through direct mail or online,
the law is the same: disclaimers and disclosures must
be "clear and conspicuous." Dot
Com Disclosures offers special guidance for
online advertisers regarding 'Net specific issues such
as banner ads, pop-up windows, scrolling, hyperlinks,
etc.
Drug Advertising
Does
the FTC have rules on advertisements for over-the-counter
(OTC) drugs?
The FTC handles most matters regarding claims in advertisements
for over-the-counter drugs. The Food
and Drug Administration (FDA) handles most matters
regarding the labeling of OTC drugs. As with
any other product, claims for OTC drugs must be truthful
and non-deceptive. Given the health and safety issues
that can arise in marketing these products, advertisers
should take care in substantiating their claims. Depending
on the claim, advertisers may be required to back up
their representations with competent and reliable scientific
evidence, including tests, studies, or other objective
data. For more information about labeling OTC
drugs, visit the FDA's website at www.fda.gov or call
the FDA Inquiry Line, 1-888-INFO-FDA.
Does the FTC have specific
rules on advertisements for prescription drugs?
No. The FDA handles most matters related to the advertising
of prescription drugs. For more information about marketing
prescription drugs, visit the FDA's website at www.fda.gov
or call the FDA Inquiry Line, 1-888-INFO-FDA.
Endorsements
and Testimonials
Are
there any rules on how endorsements may be used in ads?
The FTC's Guides
Concerning the Use of Testimonials and Endorsements
offer practical advice on endorsements by consumers,
celebrities, and experts. All endorsements must reflect
the honest experience or opinion of the endorser. Endorsements
may not contain representations that would be deceptive,
or could not be substantiated, if the advertiser made
them directly.
-
Endorsements
by consumersmust reflect the typical
experience of consumers who use the product, not
the experience of just a few satisfied customers.
If an endorsement doesn't reflect users' typical
experience, the ad must clearly disclose either
what consumers can expect their results to
be or the limited applicability of the endorser's
experience. Saying "Not all consumers will
get these results" or "Your results may
vary" is not enough.
-
Endorsements
by celebrities must reflect the celebrity's
honest experience or opinion. If the endorsement
represents that the celebrity uses the product,
that celebrity actually must use the product. Once
a celebrity (or expert) has endorsed a product,
the advertiser has an obligation to make sure the
endorsement continues to reflect the endorser's
opinion.
-
To give an expert
endorsement, a person must have sufficient
qualifications to be considered an expert in the
field. But just being an expert isn't enough.
Expert endorsements must be supported by an actual
evaluation, examination, or testing of the product
that other experts in the field normally would conduct
to support the conclusions in the endorsement.
-
Advertisers also
must disclose any material connection between
a person endorsing a product and the company selling
the product. A "material connection" is
defined as a relationship that might affect the
weight or credibility of the endorsement. For example,
if an endorser is an employee or relative of the
advertiser, that fact must be disclosed because
it is relevant to how much weight a consumer would
give to the endorsement. Similarly, an advertiser
must disclose if a consumer has been paid for giving
an endorsement.
Energy Savings
Claims
Are
there rules for making energy savings claims in ads?
The FTC's Appliance Labeling Rule
and the R-Value Rule address energy savings
claims for appliances, lighting products, and insulation.
For example, under these rules, energy efficiency claims
in ads must be based on specific standardized tests.
If you advertise appliances online, ask the FTC for
Disclosing
Energy Efficiency Information: A Guide for Online Sellers
of Appliances.
Environmental
Advertising
Are
there rules for using environmental claims like "recycled"
or "ozone-friendly"?
The FTC's Guides
for the Use of Environmental Claims cover how
words like biodegradable, recyclable,
and environmentally friendly can be used in
ads. In addition, some states have laws governing environmental
claims. Check with the Attorney General's office of
the state(s) where you plan to advertise. If you make
environmental claims or use environmental symbols on
your direct mail advertising, ask the FTC for Making Environmental Marketing
Claims on Mail.
Food Advertising
What
kind of health claims can be made in food ads? When
can advertisers use words like "lite," "low
fat" or "high fiber"?
The FTC handles most matters regarding claims
in food advertisements. The FDA handles most
matters regarding food labels. For guidance on
how the FTC evaluates claims made in food ads, ask the
FTC for the Enforcement Policy Statement on Food Advertising.
For information about product labeling, visit the FDA's
website at www.fda.gov or call the FDA Inquiry Line, 1-888-INFO-FDA.
For information about meat and poultry, visit the Department
of Agriculture (USDA) website, www.usda.gov,
or call the USDA's Center for Nutrition Policy and Promotion,
202-418-2312.
Food and
Drug Administration
When
are claims regulated by the Federal Trade Commission
and when are they regulated by the Food and Drug Administration?
The FTC and the FDA have a long-standing liaison
agreement to allocate their efforts efficiently. As
a general rule, advertising for foods, over-the-counter
drugs, dietary supplements, medical devices, and cosmetics
is regulated by the FTC. Labeling for these products
is regulated by the FDA. In addition, the FDA handles
most matters related to prescription drug advertising
and labeling. For more information about marketing a
product within the FDA's jurisdiction, visit the FDA's
website at www.fda.gov or call the FDA Inquiries Line,
1-888-INFO-FDA.
Franchises
and Business Opportunities
What
rules apply to ads for franchises or business opportunities?
The FTC's Trade
Regulation Rule on Franchises and Business Opportunities
("Franchise Rule") governs the sale of franchises
and business opportunities. The law requires sellers
to make specific disclosures, give prospective buyers
a document containing certain key information about
the business opportunity, and be able to substantiate
any earnings claims. For more information about buying
or selling a franchise, ask the FTC for the Franchise
Rule and Your Legal Rights: A Guide To The FTC Franchise
Rule. In addition, visit the FTC website (www.ftc.gov/bizop/index.html)
for information on what entrepreneurs need to know before
buying any kind of business opportunity and alerting
them to the latest "bizop" scams. Many states
also have laws governing these transactions. Check with
the Attorney General's office in the state(s) where
you plan to advertise.
"Free"
Claims and Rebate Offers
When
can a company advertise something as "free"?
When a "free" offer is tied to the
purchase of another product, the price of the purchased
product should not be increased from its regular price.
For more information, ask the FTC for the Guides
Concerning Use of the Word "Free" and Other
Representations and the Guides Against Deceptive Pricing.
In addition, if you're advertising a product as "free"
or offering it at a low cost in conjunction with the
purchase of another item, the ad should clearly and
conspicuously disclose the terms and conditions of the
offer. Disclose the most important information - like
the terms affecting the cost of the offer - near the
advertised price. For more information, ask the FTC
for Big
Print. Little Print. What's the Deal? You also
may want to check with the Attorney General's office
in the state(s) where you plan to advertise. In addition,
the Better Business Bureau
has voluntary standards for when something can be advertised
as "free."
What
are the rules on advertising rebates to consumers?
Ads that include rebate promotions should prominently
state the before-rebate cost, as well as the amount
of the rebate. Only then will consumers know their actual
out-of-pocket cost and have the information they need
to comparison shop. Rebate promotions also should clearly
disclose any additional terms and conditions that consumers
need to know, including the key terms of any purchase
requirements, additional fees, and when consumers can
expect to receive their rebate. The FTC's brochure Big Print. Little Print. What's
the Deal? outlines other factors advertisers
should bear in mind when making rebate promotions.
Guarantees
When
a company advertises that products are sold with a guarantee
or warranty, what information about the terms and conditions
must be included in the ads?
If an ad mentions that a product comes with a
guarantee or warranty, the ad should clearly disclose
how consumers can get the details. Any conditions or
limits on the guarantee or warranty (such as a time
limit or a requirement that the consumer return the
product) also must be clearly disclosed in the ad. Finally,
the law requires companies to make copies of any warranties
available to consumers before the sale. This applies
to retail sales, sales by phone or mail, and online
transactions. For more information, ask the FTC for
the Guides for the Advertising of Warranties and
Guarantees.
Infomercials
Does
the FTC have any special policies relating to infomercials?
Infomercial advertisers must have proof to back
up all express and implied claims that reasonable consumers
would take from an ad. In addition, advertisers should
make sure that the infomercial doesn't deceptively mimic
the format of news reports, talk shows, or other independent
programming. FTC cases have required companies to clearly
disclose that "THE PROGRAM YOU ARE WATCHING IS
A PAID ADVERTISEMENT FOR [NAME OF PRODUCT]" at
the beginning of an infomercial and before ordering
information is given. Since many infomercials feature
endorsements from consumers, celebrities, or experts,
ask the FTC for the Guides
Concerning the Use of Testimonials and Endorsements
for more information.
My
company produces infomercials for other businesses.
What responsibility do we have to make sure that the
claims are truthful?
The Commission looks at the facts of each case
to determine whether the infomercial producers' role
in the promotion makes them liable for deceptive claims
in the ad. In many instances, the FTC has taken action
against both the manufacturer or marketer of a product
and the company that produced the infomercial.
Therefore, infomercial producers should ask for materials
to back up the claims in the ad. The bottom line: no
one involved in the promotion of a product or the dissemination
of an ad - whether it's an infomercial, print ad, catalog,
or broadcast spot - should look the other way when the
claims seem questionable.
Internet
Advertising
Is
advertising on the Internet subject to the same laws
as other advertising?
Yes. Ad claims on the Internet must be truthful
and substantiated. Ask the FTC for a copy of Advertising
and Marketing on the Internet: The Rules of the Road
for more information. Dot
Com Disclosures offers special guidance for
online advertisers regarding how to make sure that any
disclaimers and disclosures in online ads are clear
and conspicuous. It addresses 'Net specific issues such
as banner ads, pop-up windows, scrolling, hyperlinks,
etc. Internet marketers also should be aware that the
FTC's Mail or Telephone Order Merchandise Rule ("Mail
Order Rule") applies to online transactions. For
specific guidance on complying with the Mail Order Rule
online, ask the FTC for a copy of Selling on the Internet: Prompt
Delivery Rules, as well as A
Business Guide to the Federal Trade Commission's Mail
or Telephone Order Merchandise Rule.
My
website is attracting visitors from outside the United
States. What do I need to know?
Because the World Wide Web is, as its name implies,
worldwide, even small online businesses can reach customers
around the globe. Electronic
Commerce: Selling Internationally - A Guide for Business
discusses some online commerce guidelines endorsed by
the United States government and 28 other countries.
What
do I need to know about consumer privacy online?
Advertisers should be aware of the privacy issues
raised by Internet marketing. For more information about
recent FTC Reports to Congress on consumer privacy on
the Internet, visit the FTC's website (www.ftc.gov).
Basically, the FTC strongly encourages companies to
implement four fair information practices: giving consumers
notice of a website's information practices; offering
consumers choice as to how their personally identifying
information is used; providing consumers with access
to the information collected about them; and ensuring
the security of the information collected. In addition,
companies need to know about the Children's Online Privacy
Protection Act and the rule that implements it. The
law requires websites to obtain verifiable parental
consent before collecting, using, or disclosing personal
information from children, including their names, home
addresses, email addresses, or hobbies. For more information,
ask the FTC for How
to Comply with the Children's Online Privacy Protection
Rule.
Jewelry
Are
there special guides for advertising jewelry?
The FTC's Jewelry
Guides cover claims made for gold, silver,
platinum, pewter, diamonds, gemstones, and pearls and
define how certain common terms may be used in ads.
For example, the Guides explain when a product can be
called "gold plated" or when a diamond can
be called "flawless." For more information,
ask the FTC for the Guides for the Jewelry, Precious Metals, and
Pewter Industries and In
The Loupe: Advertising Diamonds, Gemstones and Pearls.
Leasing
What
information must a company include when advertising
leases for cars, household goods, or other products?
The Consumer
Leasing Act and Regulation M include specific
rules that apply to ads for consumer leases. For example,
if a lease advertisement includes certain terms - such
as the amount of any payment due before or at lease
inception - the ad also must make other clear and conspicuous
mandatory disclosures about the terms of the lease.
These rules also apply if the ad contains phrases like
"no money down" or "no down payment."
For more information, ask the FTC for a copy of Advertising
Consumer Leases.
Made in the
U.S.A.
When
can my company advertise that our product is "Made
in the U.S.A."?
A product has to be "all or virtually all
made in the United States" for it to be advertised
or labeled as "Made in the U.S.A." For more
information, ask the FTC for the Enforcement
Policy Statement on U.S. Origin Claims.
Mail Order
Advertising
What
rules must a company follow if it sells products via
mail order?
Truth-in-advertising standards - including that companies
must have proof to back up express and implied claims
made about its products - apply to mail order marketers.
In addition, the FTC's Mail or Telephone Order Merchandise
Rule ("Mail Order Rule") applies
when a consumer places an order by mail, telephone,
fax, or computer. Under the Rule, a company must have
a reasonable basis for believing that it can ship the
product within the time period stated in the ad. If
the ad doesn't specify a time period, the company must
have a reasonable basis for believing that it can ship
within 30 days. The Mail Order Rule applies equally
to online marketers. For more information, ask the FTC
for A Business Guide to the Federal
Trade Commission's Mail or Telephone Order Merchandise
Rule and A Business Checklist for Direct Marketers.
Companies that advertise online also should get a copy
of Selling on the Internet: Prompt Delivery Rules. In
addition, the Direct
Marketing Association, a trade group for members
of the direct marketing industry, has voluntary guidelines
on ethical business practices.
Is
it okay for a company to "dry test" a product?
"Dry testing" describes the practice
of placing an ad for a product to see if there is sufficient
consumer interest before actually going to the expense
of manufacturing the item. Although the Mail Order Rule
doesn't specifically deal with this situation, the FTC
has issued an advisory opinion that such ads must clearly
disclose to consumers the fact that the merchandise
is only planned and may not ever be shipped. For more
information, ask the FTC for A
Business Guide to the Federal Trade Commission's Mail
or Telephone Order Merchandise Rule.
Negative
Option Offers
Are
there any rules regarding ads for "negative option"
plans?
The FTC's Negative Option Rule applies to sellers
of subscription plans who ship merchandise like books
or compact discs to consumers who have agreed in advance
to become subscribers. The Rule requires that ads clearly
and conspicuously disclose material information about
the terms of the plan. Further, once consumers agree
to enroll, the company must notify them before
shipping to allow them to decline the merchandise. Even
if an automatic shipment or continuity program doesn't
fall within the specifics of the Negative Option Rule,
companies should be careful to clearly disclose the
terms and conditions of the plan before billing
consumers or charging their credit cards. For more information,
ask the FTC for the Negative Option Rule.
"New"
Claims
When
can a company advertise a product as "new"?
The answer depends on how the ad uses the word "new."
For example, under the rules governing the identification
of textiles, fabric cannot be advertised as "new"
if it has been reclaimed or respun. The rules governing
advertising claims for tires prohibit the use of the
word "new" to describe retreads. However,
when no specific regulation applies, each case must
be considered within the context of the ad. At least
one FTC advisory opinion has suggested a six-month limit
on the use of the word when advertising the introduction
of a "new" product not previously on the market.
Pricing
Are
there any standards governing the advertising of prices?
The same standards for truthfulness apply when
companies make claims about price comparisons, "sale"
prices, and the like. For more information, ask the
FTC for the Guides
Against Deceptive Pricing. Since many pricing
issues involve local practices, you also may want to
contact the Attorney General's office in the state(s)
where you plan to advertise.
What
responsibility does a company have to make sure that
prices are accurate?
In many jurisdictions, companies are legally
required to charge no more than the advertised or shelf
price for a product, so good pricing practices are important
for both customer satisfaction and a company's bottom
line. For tips on accurate pricing practices in advertising
and in retail stores, ask the FTC for Good
Pricing Practices? SCAN DO.
Rainchecks
How
much of an advertised product is a retail store required
to stock?
According to the FTC's Retail Food Store Rule, grocers
must offer rainchecks or product substitutes of comparable
value when they run out of advertised items. They also
can comply by ordering quantities of the item sufficient
to meet reasonably anticipated demand or by disclosing
in ads that items are available only in limited quantities
or only at some stores. Although the specific terms
of the Rule apply only to retail food stores, other
companies advertising products available in limited
quantity or only at some stores may want to make similar
disclosures to reduce the risk of deception. For more
information, ask the FTC for a copy of Retail Food Store
Advertising and Marketing Practices.
Sales
When
may a company advertise that a product is "on sale"?
The same standards for truthfulness apply when a company
makes advertising claims about sale prices or products
being "on sale." For more information, ask
the FTC for the Guides
Against Deceptive Pricing. Since this issue
often involves local practices, you may also want to
contact the Attorney General's office in the state(s)
where you plan to advertise.
When
can a company advertise a "going out of business
sale"?
The short answer is: only when a store is going out
of business. It would be deceptive to advertise a "going
out of business sale" when a store is not going
out of business. If a store in your area is advertising
what looks to be a bogus "going out of business
sale," contact your state Attorney General's office.
Subliminal
Advertising
Is
it legal to use subliminal advertising techniques?
It would be deceptive for marketers to embed
ads with so-called subliminal messages that could affect
consumer behavior. However, most consumer behavior experts
have concluded that such methods aren't effective.
Telemarketing
What
rules must a company follow if it sells goods or services
over the telephone?
As with any other form of advertising or promotion,
claims made through telemarketing must be truthful and
substantiated. In addition, the FTC's Telemarketing Sales Rule
applies to transactions involving the use of interstate
telephone calls to sell goods or services. The Rule
requires companies to make specified disclosures in
their telephone calls and prohibits misrepresentations.
For more information, ask the FTC for a copy of Complying
with the Telemarketing Sales Rule.
Telephone
Services
What
rules apply to the advertising of long-distance services,
including long-distance calling plans, dial-around (or
"10-10" numbers), and pre-paid phone cards?
The FTC and the Federal
Communications Commission work together to ensure
that ads for long-distance services are truthful. If
ads tout price, companies should make sure that the
ads clearly and conspicuously disclose the actual cost
to consumers, including monthly fees or per-call surcharges,
not just a per-minute rate. In addition, ads should
clearly and conspicuously disclose any limitations on
the advertised service, including time, day, or geographic
restrictions. Ask the FTC for the Joint FTC-FCC Policy Statement on the Advertising
of Dial-Around and Other Long-Distance Services to Consumers.
In addition, advertisers should visit the FCC's web
page (www.fcc.gov) and check out any state laws in the
jurisdictions they plan to advertise in.
What
information must be included in ads for 900 numbers
or "pay-per-call" services?
The FTC's 900 Number Rule requires that ads for
these services "clearly and conspicuously"
disclose the cost of the call. The law is very specific
about what "clear and conspicuous" means,
depending on whether the ad appears on radio, TV, or
in print. The rule also requires that 900 number ads
directed at consumers under age 18 disclose that parental
permission is required before calling. The rule prohibits
900 number services directed at children under 12, unless
it is a "bona fide educational service." In
addition, 900 number ads that promote sweepstakes must
state the odds of winning or, if the odds cannot be
determined, the factors that determine the odds. Ads
for 900 number services that provide information on
federal programs, but are not affiliated with the government,
also must contain certain disclosures. For more information,
ask the FTC for a copy of Complying
with the 900 Number Rule.
Tobacco Advertising
How
does the FTC regulate ads for cigarettes, cigars, and
smokeless tobacco?
The FTC can take action if an ad for cigarettes,
cigars, or a smokeless tobacco product is deceptive
or unfair. In addition, federal law prohibits the advertising
of cigarettes, smokeless tobacco, and little cigars
on radio, TV, or other forms of electronic media regulated
by the Federal Communications
Commission. The FTC also enforces various federal
requirements mandating health warnings on advertising,
point-of-purchase displays, and packaging of tobacco
products. For more information, ask the FTC for a copy
of the brochures Tobacco Products and Cigars: No Such Thing as a Safe
Smoke, and the Memorandum to Potential Cigarette
Manufacturers and Importers.
Weight Loss
Products
The FTC has taken action
against hundreds of advertisers who have falsely promised
easy weight loss. Marketers who promote diet products
or services or who make representations about fat loss,
weight loss, calorie burning, or the loss of inches
or cellulite must make sure that their claims are backed
up by sound scientific evidence. The FTC is a member
of the Partnership for Healthy Management and supports
its Voluntary Guidelines for Providers
of Weight Loss Products or Services (for more
information visit www.consumer.gov/weightloss).
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