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If you’ve ever hired an attorney to do business consulting, you know they charge by the hour so the answer is usually long-winded. Once you do get advice, it is either so theoretical or riddled with caveats that it’s generally unusable. Despite that, if you’re going to conduct digital advertising, whether it be banner ads, PR releases, SEO, PPC, or anything else you actually need to know the laws that apply, how they apply, and how you can best navigate them on behalf of your company.
Four issues you need to be familiar with before engaging in digital advertising are:
If you’re going to give a free item or free add-on as an incentive for the potential customer to make a purchase you have to comply with FTC (Federal Trade Commission) rules about deceptive advertising. Rather, “Free” offers must be “special and meaningful” according to the FTC which means the freebie can’t always be offered as a permanent part of the offer. Specifically that means that if you offer something free, you can’t do so for more than 6 months in a row, and 30 days must pass before you offer that same free incentive. You can see this rule in practice if you go to buy a mattress. When you do, typically you’ll see two mattresses next to one another that seem virtually identical in everything but name. One will be on special discount or offer free incentives, while the other will be regular price. If you came back to the same store 6 months later, you’d see the one that was on sale now at regular price, and the other one now on sale with free incentives. That is, they get around the FTC’s rule on deceptive discounts and freebies by rotating which one is discounted so that they go 6 months on, 6 months off.
Most business owners know that deceptive advertising is illegal, because many rules that apply to print and television advertising also apply to advertising online. This basic principle – not lying about products or services – helps to keep the marketplace credible and safe for consumers and for businesses. What you may not know, however, is that if you advertise on behalf of a deceptive product, even unknowingly, you become responsible for deceptive advertising. So, it’s important that if you’re going to act as a marketer on behalf of a product, a drop shipper, or take on any other role in the marketing of a product, that you understand that you’re potentially liable if that product is deceptive in a similar way if you were personally selling that product.
Saying your company has the “best customer service” isn’t a verifiable fact, and even if it’s probably not true, it falls under the category of “legal puffery”. Things like saying you’re the best, greatest, etc. are all examples of puffery. Puffing isn’t regarded as legally misleading unless you claim that some authority supports the statement, which actually isn’t true. To use an example that’s close to home for me, if in a company’s advertising they claimed that their credit card processing company was rated the “Best Small Business Processor” by MerchantNegotiators.com, this would be illegal if MerchantNegotiators.com didn’t actually say that. But if the rating agency or cited source did say it, then it’s legal to mention it, even if the methodology is suspect. And in any case, if they just said they were the “best for small business” without citing a source, that would be mere puffery, so they’d be protected there as well.
“Lose 20 pounds in one week!” “Make yourself instantly more attractive!” We’ve all seen TV, print, and online advertising touting results that anybody with common sense knows can’t actually be true. So how do they get away with it? The answer is that these are usually illegal, but enforcement is spotty. The primary law governing false advertising is the Lanham Act. To bring a lawsuit under the act you need: (1) to be a competitor, (2) for the ad to be done in a commercial setting, (3) contain a false or misleading statement, description or representation, and (4) the misleading portion must be material to the customer’s buying decision. The important things to note here are that the lawsuit can only be brought by a competitor and that the misleading part must be proved to be a significant part of the consumer’s buying decision. So, in practice, a competitor has to waste their own time and money to pursue a lawsuit, which many don’t want to do, and then they have to prove that the misleading part was a significant part of the buying decision. In sum, the enforcement mechanism under the Lanham Act for misleading advertising is really limited, which means a lot of folks get away with it, just because nobody wants to spend the time, money, and effort to enforce it.
For non-lawyers, trying to translate the sort of legal jargon you’ll get if you ask your attorney for advice on digital advertising can be frustrating and daunting. For many businesses, the fact that they cannot get practical actionable advice often freezes the organization from participating in advertising at all. But by understanding the four issues above, you’ll have a baseline of understanding of the regulations and laws that govern how your company can legally engage in digital advertising.
Rich McIver is a contributor to the Salesforce Blog. A licensed attorney and 2008 graduate of the University of Chicago Law School, Rich regularly writes about legal issues facing business owners and their businesses. After law school Rich founded and had successful exits from three tech startups that were each acquired through private equity, private sales and a merger, respectively. He is the founder of Merchant Negotiators, a web startup in the credit card processing space, and can be reached via his company Twitter and Google+ pages.
Disclaimer: The purpose of this article is to promote awareness of legal issues that may affect business owners that wish to engage in advertising, and is not intended to provide either legal or professional advice. Business owners are encouraged to consult directly with a properly qualified attorney admitted to practice in their jurisdiction for appropriate legal or professional advice, as specific laws and their applications can differ depending on the industry and jurisdiction in which your business operates.
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