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"Protect
Your Business From Legal Problems"
The
Federal Trade Commission regulates all forms of advertising in the United
States. They publish rules on mail order, the Internet, telephone sales,
900 numbers, gaming, deception in advertising, product labeling, consumer
credit, and much more.
This
page offers a brief overview of some of the advertising laws regulating
your print advertising. Please note that Professional
Advertising
is not offering legal advice.
For detailed information about advertising
law, please contact the Federal Trade Commission directly,
or check with your state's Attorney General’s Office about consumer
protection advertising laws. Also note that state and local laws can be
stricter than federal laws, so double check.
If
you have questions or doubts about any of your advertising, check with a
lawyer. At Professional Advertising, we like
to take the conservative approach on these matters.
Protecting
your organization from outside threats is critical to your bottom line.
Knowing how to protect your company while increasing the effectiveness of
your advertising is what Professional
Advertising
is all about.
Advertising
Law: Truth
in Advertising
According to the Federal Trade
Commission (FTC), “advertising
must be truthful and non-deceptive… advertisers must have evidence to
back up their claims… and advertisements cannot be unfair.”
Advertising
Law: Deceptive
Advertising
According to
advertising law, an advertisement is considered 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.“
So
the law basically states that your advertising cannot be misleading. You
have to tell the truth, or clearly label your ads so that no reasonable
person could mistake your intent. Advertisers
[and their advertising agencies] need to have a reasonable basis for
advertising claims before they are published.
Advertising
Law: Unfair
Advertising and Business Practices
According to the
FTC, an advertisement 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.”
In
advertising law, “substantial
consumer injury” and “material” are related things. In part,
advertising law
protects consumers from financial loss due to deceptive practices.
Advertising law
does make an exception when consumer benefits outweigh consumer injury, but you probably
don’t want to pay the expenses of explaining that in court.
Advertising
Law: Bait
and Switch Tactics
It’s
illegal to advertise a product when you have no intention of selling that
product at the advertised price. Bait and switch tactics are illegal, period. If
you advertise a product, advertising law says that you have to intend to sell it as advertised.
Advertising Law: Catalog Sales
As
a catalog retailer, you are not obligated to substantiate the claims made
by suppliers about their products. However, caution and common sense
should dictate your ad copy. Stick to the claims made by the supplier, and
do not expand or improve on them. Do not print anything that is not
reasonable.
Advertising
Law: Advertising
to Children
The
FTC pays particular attention to advertisements aimed at children. These
ads are evaluated from a child’s point of view, not an adult’s. So use
caution and common sense. No company wants the publicity that comes from
accusations about possibly misleading children.
Advertising
Law: Comparative
Advertising
If
the comparison you make is true, then it is legal to print it. If you are
better than your competitors, advertising law says that you can tell the
whole world about it.
Advertising
Law: Contests
and Sweepstakes
There
are many different advertising laws governing contests and sweepstakes. Check
with your state's Attorney General’s Office and with the FTC. And you
might want to check with your lawyer.
Advertising
Law: Consumer
Credit
All
ads offering consumer credit must include “clear and conspicuous”
disclosure terms and conditions of receiving the credit. Check with your
advertising agency, your lawyer, or the FTC if you are planning on
offering credit in your ads.
Advertising
Law: Express
Claims
An express claim is a direct claim made in an advertisement
like “our product prevents sore throats.” The claim must be true and
substantiated.
Advertising
Law: Implied
Claims
An implied claim is an indirect claim made in an
advertisement. For example, “our product kills germs that cause sore
throats” is an implied claim. The implication is that the product
prevents sore throats.
The FTC judges claims on what a reasonable consumer
would assume given the entirety of the advertisement and all of the claims
made. Advertising law says that the implied claim must be true and substantiated.
Advertising
Law: Disclosure
and Disclaimer Statements
These statements are required if an
advertisement's express or implied claims could be misleading.
A disclosure statement gives qualifying
information so that a claim is not misunderstood. The disclaimer must be
“clear and conspicuous” so that consumers can notice and understand
it.
The disclaimer needs proximity and prominence in relationship to the
claim, with little other distraction. And the disclaimer cannot correct a
false claim – that would be deceptive advertising.
Advertising
Law: Endorsements
and Testimonials
Advertising law says that endorsements and testimonials must show the honest opinion or experience of the
endorser. Claims must be truthful and substantiated.
If a celebrity claims to use a product, that claim must
be true. Consumer endorsements must reflect the typical consumers
experience with the product. Stating, “your results may vary”
doesn’t help if the typical consumer cannot expect similar results.
Expert endorsements must be supportable by scientific
methods, not by the opinion of one expert. And if there is a
”material” or financial connection between your company and the
endorser, advertising law says that you need to disclose it.
Advertising
Law: Free Products
You
can give away anything you want, unless there is a catch. If your
“free” item is tied to a second purchase, then the second item’s
price has to be the regular price. If there are any conditions on the
“free” item, advertising law says you must disclose all of the information in a
“clear and conspicuous” manner.
Advertising
Law: Rebates
Advertising
law says you
must prominently feature the before-rebate price in your ad, and the
amount of the rebate. Any additional terms of purchase must be disclosed,
and you need to indicate how long it takes to receive the rebate.
Advertising
Law: Guarantees
and Warrantees
If you want to mention your guarantee in your ad, you
must tell consumers how to get all of the details on that guarantee. Any
conditions or limits must also be disclosed in the ad. A complete copy of
the guarantee must be made available to consumers before any sale. This
also covers phone, catalog, mail, and online sales transactions.
Advertising
Law: Advertising
on the Internet
All
of the other truth in advertising laws apply to the Internet.
The FTC is particularly concerned with disclosure statements and false
advertising claims. All ads must be truthful and substantiated. Contact
the FTC for more information.
Advertising
Law: Mail
Order Advertising
All of the other truth in advertising
laws also apply to mail order advertising. Any orders received by phone, fax,
online, or by mail should ship within 30 days, or within the timeframe
stated in the ad.
Advertising
Law: Telemarketing
All
claims must be true and substantiated, and all of other advertising laws
apply.
Advertising
Law: New
Products
As
long as it really is new, you are probably okay for six months. Check with
the FTC for specific claims about new products by product category. There
are limits on what you can refer to as new.
Advertising
Law: Price
All
of the truth in advertising laws apply to advertising price. If you are
making a comparison, it needs to be truthful. If you say that the product
is being sold for "$xx" elsewhere, then in fact, other representative
retailers must be selling at that price.
A
few small retailers selling at the higher price elsewhere are not
representative of the market. Media publishers may require you to
substantiate your claims before they will print your ad. Contact the FTC
for more.
Advertising
Law: Sale
Your
sale price must be a reduction from the actual, bona fide former asking
price that was offered on a regular basis to the public for a reasonably
substantial time period.
If
you didn’t sell a substantial amount of product at the higher price, you
can’t say “formerly sold at "$xx", because it is not really true.
Inflating a price only to reduce it to its regular selling price and claim
that it is on sale is not legal.
Advertising
Law: Mis-marked
Price
If
a product is marked or advertised at a certain price, your state laws may
require you to sell it at that price. Check with your state's Attorney
General’s Office.
Advertising
Law: Rain checks
Only
food retailers must offer rain checks or comparable substitute products.
However, it is good business practice for all retailers to offer rain checks,
because the public expects it. Protect yourself by stating, “quantities
are limited,” or “not available in all stores.”
Advertising
Law: Going
Out of Business Sale
You can make this claim only if it is true. The FTC watches for perpetual
going out of business sales.
Advertising
Law: Standards
for Proving Claims
If you make a claim about your product or service, the FTC expects that
you can substantiate that claim, and that you have the ability to fulfill
your promises. Advertising law states that substantiation must be based on fact and objective
evaluation, not opinion.
Advertising
Law: Deception
Deception
comes from a representation, practice, or omission that may mislead the
public. The claim can be written or oral. And the entire sales transaction
is considered – not just a single statement.
Whether
the representation, practice, or omission is deceptive is based on what a
reasonable consumer would infer from the information.
And the deceptive practice must have a negative material or
financial cost to the consumer.
Understanding Terms Advertising Design Firms Commonly Use
The creation of art [advertisements,
illustrations, photos, logos, etc.] carries with it automatic copyright
protection. The creator of the art owns it, until 50 years after death,
unless specific contractual terms transfer that ownership.
In addition, each artist has copyright
protection for his or her component of a given piece of work – the
photographer, the illustrator, the graphic designer, etc. Each artist must
sign a release. With artwork, it is important to understand the terms.
For example, it is common industry practice to
license the use of artwork for a limited amount of time, with limited
media usage, and a limited number of exposures.
Clients are normally charged 50% - 100% of the
original price for reuse of the materials, including minor changes to the
work [like updates]. An outright transfer of ownership of the rights to
the artwork may cost 100% - 200% more. The following is a description of
terms commonly used on graphic design or advertising contracts.
Warranty of Originality - Included in the terms
should be a statement from the artist that all of the work is original or
is being used with permission for the intended purpose.
Payment
- Payment is usually made in thirds, with 1/3 due upon signing of the
contract, 1/3 upon approval of the layouts, and 1/3 due upon completion of
the work.
Usage Rights
- Contracts normally describe how, when, where, and how long the work will
be used. Additional usage and revision, and their related costs, are
covered.
Expenses
- Additional related expenses are normally the responsibility of the
client. Sales tax is collected. Consultation fees are normally charged
separately from the contract fees. When jobs are billed hourly, it is
common practice to put a cap on the total billable amount.
Client Responsibilities - Normally the client is responsible for copywriting and proofreading.
All original artwork, digital media, files, and mechanicals are the
property of the artist and are returned to the advertising firm.
Cancellation And Rejection Fees - These fees should be outlined in the terms section.
Job Modifications
- Charges
are normally incurred for job modifications. For example, if three layouts
are rejected, and three more are required, the client would be billed for
the additional work.
Ask
For Help
As
always, Professional Advertising is here
to help you. We strongly recommend that you run your work past a marketing
professional for assistance or a second opinion. And our professional
advertising design services are also available to help you succeed.
Remember,
you are responsible for the content of all of your published materials. If you have any doubt about what to
print, ask your lawyer, and check with the FTC and your state's Attorney
General’s Office.
If
you have legal questions, please contact an attorney. It’s a cheap investment for something that is as
important as your entire advertising program. Please contact Professional
Advertising for additional help.
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