Selling a product online? Beware of false advertisement!

Why should you care about false advertising?

Whether you are selling a game, an eBook or some other product online, you are probably under the jurisdiction of the US Federal Trade Commission’s false and deceptive advertising laws. Unless you’re not offering or advertising that product in the US, of course, these false advertising laws are something that small businesses need to pay attention to.

Outside of the US, numerous consumer protection laws also apply, so avoiding any kind of false advertising is imperative in staying out of legal hot water.

What constitutes false advertising?

The basic requirements under the Federal Trade Commission Act are that advertisements must be:

  1. truthful and non-deceptive;
  2. backed up by evidence of any claims made;
  3. fair.

Let’s dive a bit deeper in each of these.

Truthful and non-deceptive

The FTC will examine the advertisement from the perspective of a typical person who would be viewing the ad.Essentially, the ad needs to tell the truth. For those that like to stretch the truth a bit in puffing up their product, the claims must also avoid being deceptive.

Deceptive, in this case, means that a statement in the ad is meant to mislead a reasonable viewer of that advertisement in a “material” way. “Material” means that the deception must actually impact the consumer’s decision whether or not to buy.

This can also apply if information is left out of the ad, such as a limitation or danger present in the product that would have impacted the consumer’s purchasing decision.

How do they decide if something is deceptive? The FTC will examine the advertisement from the perspective of a typical person who would be viewing the ad. They take a holistic approach to the ad, looking at it in the context in which it is presented and the overall picture, rather than simply checking out the specific text.

Evidence to back up claims

The FTC requires that advertisers have a reasonable basis for the claims that they make in the ads.Any claims made in the advertisement must be backed up by facts. This can include express claims, such as “9 out of 10 people think this is the best fighting game ever,” and implied claims, such as “This toothpaste will kill the bacteria that cause tooth decay” (implying that it will, in turn, prevent tooth decay).

There was a recent case where two app developers were fined by the FTC for claiming that their app could help cure acne. It would do this by emitting a certain type of light from the phone.

According to reports, the app developers had made definitive claims based on the less-than-definitive results of a study looking at the reduction of acne based on blue and red light therapy.

The FTC requires that advertisers have a reasonable basis for the claims that they make in the ads. This reasonable basis can change depending on the type of claim being made, but generally for health-related claims it must be backed up by reliable scientific evidence.

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What makes an ad unfair?

When the FTC examines an ad to determine whether it is unfair to consumers, they generally look at three things:

  1. whether the ad could cause injury to consumers;
  2. whether the ad violates established public policy; and
  3. whether the ad is immoral or unethical.

The danger must also be greater than the benefits to consumers that the advertised product provides.The first aspect requires that the injury to consumers is substantial or has the potential to be substantial, such as false claims with health-related products. The danger must also be greater than the benefits to consumers that the advertised product provides.

The second aspect, public policy, refers to the advertisement going against some kind of established law, court decision or constitutional principle. This is usually used to provide evidence for a consumer injury claim under the first point above.

Immoral or unethical advertisements are found where generally-accepted business ethics have been violated. The FTC points out, however, that these also usually lead to consumer injury or violations of public policy, so they’re almost always covered by those standards.

Going forward

Now that you have a sense of what the government is looking for with regard to false advertisements, it’s a good idea to take a fresh look at how you’re advertising your product. It could mean the difference between smooth sailing and facing federal fines, or worse.

In my next post on false advertising, I’ll cover endorsements and testimonials, both from celebrities and otherwise. Until then, if you need assistance dealing with an advertising issue, why not contact an attorney?

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