Five Important Legal Lessons for Advertisers from An FTC Pro
As a veteran advertising lawyer, I generally have two types of clients: those who pay me now and those who pay me later. Or, more precisely, those who pay a little upfront for preventive compliance counseling, and those who pay a lot more after they’ve learned they are in the crosshairs of the Federal Trade Commission (FTC) or a state or local consumer cop. My practice is the financial beneficiary of the second client group. However, I take far greater satisfaction in helping to ensure that those in the first never find themselves staring down the barrel of a regulator hellbent on reining in their advertising and forcing them to turn over their hard-earned money to make amends to injured consumers.
Principles of advertising law apply equally across all media, from direct mail to TV to the Internet and social media. Whether you are a digital or TV advertiser or both, you have a legal obligation to advertise truthfully, substantiate your product claims, and disclose all important details affecting a consumer’s purchasing decision before she buys. If you’re a digital advertiser considering a move to TV–a present and growing trend–or vice versa, there are a few rules of the road that are helpful to know before you start the trip. Here are five:
Any statement about a product or service, including its characteristics, attributes, or popularity, that is “objectively provable” and material to a consumer’s purchasing decision, is a legally actionable claim under federal and state truth-in advertising laws. Everything else is puffery or otherwise legally inconsequential.
A common misperception among advertisers is that only expressly false or misleading claims can get them in trouble. For example, while they may realize that a bald statement that a weight loss program will help you “lose 30 pounds in 60 days” is a claim, they may think that showing a graphic of a shrinking waist line or beautiful, slim models in bikinis that suggest the same result is not. They couldn’t be more wrong. The FTC and its state counterparts closely scrutinize advertising for implied messages or half-truths and have full legal authority to stop them if they are untrue or unsupported. And it matters not a whit if the advertiser had no intention to convey the message. If the regulator or the “reasonable consumer” believes it’s there, it’s fair game. It therefore behooves advertisers to examine their ad copy from all angles, using consumer perception experts or focus groups where useful, to help ensure that it contains no unintended claims that could come back to bite them.
Any claim that is objectively provable (not puffery) must be supported by “competent and reliable evidence,” defined by the FTC as:
“tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”
If it’s a health or safety claim, it must be supported by “competent and reliable scientific evidence” (CRSE), normally (and especially for disease treatment claims) defined as a randomized human clinical trial, or RCT. While the FDA prohibits disease treatment (drug) claims without pre-market approval, the FTC will allow any health claim so long as it’s backed by CRSE. Anecdotal evidence, fringe theories, animal studies, and shoddy clinical trials won’t cut it with the regulators. The FTC rigorously enforces its substantiation requirements, so take your substantiation obligations just as seriously and invest the necessary time and resources to be able to prove your claims. It could spare you far greater time and expense of an FTC investigation down the road. For more on claim substantiation, see the FTC’s Advertising Substantiation Principles here and the same agency’s Dietary Supplements: An Advertising Guide for the Industry found here.
A bedrock principle of advertising law is that any material information relevant to a claim, without which the claim would be misleading to a reasonable consumer, must be disclosed so the consumer can make an informed buying decision. To go back to the weight loss example, if the seller of a diet program advertises that users lost 30 pounds in 60 days, but on average they lost only 10 pounds, then to avoid leaving the misimpression that the higher amount of lost weight was typical, the average, or “generally expected,” result must be disclosed.
Further, the disclosure must be “clear and conspicuous,” which the FTC interprets as being unavoidable. The manner of complying with this requirement depends on the medium and any space constraints. A necessary disclosure can be made much more fulsomely in a newspaper advertorial or long-form infomercial than it can in a 30 to 60 second TV spot or in a still ad on Facebook or Twitter. For TV, FTC guidelines require disclosures to be made in both voiceover and text (think prescription drug commercials). Those dense, crammed fine print supers that you see in so many TV ads without voiceover aren’t technically compliant (think ads for cable TV and cell phone plans), but if it’s the best you can do given the space limitation, you at least can argue they “were there,” and then be sure to make the disclosures more clearly at point of sale. For truly space-constrained platforms, like social media, the FTC permits abbreviated forms of disclosure and has provided helpful guidance in its .comDisclosures publication you can read here.
Testimonials and Social Influencers
The same claim substantiation rules that apply to direct claims made by the advertiser apply to testimonials. For example, even if a “lost 30 pounds in 60 days” testimonial was typical for the average user in our hypothetical diet program, the advertiser would still need CRSE to corroborate that anecdotal result. Put bluntly, you can’t sneak a claim that requires scientific or other competent and reliable proof through the back door of a testimonial or an endorsement.
Advertisers love to use testimonials and, nowadays, social influencers, because they can be such great sellers of product. What makes them so great is that consumers believe and place trust in the independent opinions of other consumers, especially if they are influencers they admire. Their stamp of approval provides a shortcut in the purchasing process. But that trust is abused when the testimonial or endorsement is not impartial but is compensated or sponsored by the advertiser. Therefore, to prevent consumer deception from paid or sponsored plugs, the FTC requires that any “material connection” between a social influencer and any other type of lay endorser be clearly and conspicuously disclosed. For more guidance on this and other testimonial requirements, see The FTC’s Endorsement Guidelines: What People Are Asking here.
Much of commerce, and e-commerce in particular, is moving toward a subscription model of selling because of the twin benefits of a recurring revenue stream and the flexibility and convenience it offers to the consumer. Amazon Prime and streaming services such as Netflix are prime examples. With all subscription offers, and particularly ones that include a free introductory trial, it is critically important that the terms of the offer (i.e., length of trial period, amount and frequency of recurring charges, and option and method of cancellation), be clearly and conspicuously disclosed so that the consumer won’t be misled about, and can provide express informed consent to, the open-ended nature of the purchase obligation. The FTC polices the marketplace like a hawk for deceptive cases of so-called “negative option” or continuity programs, and has the authority, which it eagerly uses, to shut down and seize the assets of the worst offenders.
The key to commercially successful, legally compliant advertising is to know the rules of the road and find the right balance – the sweet spot – between what sells and what crosses the legal line. It is an art, not a science. Advertising compliance counsel can often help in threading the needle.
William I. Rothbard
Rothbard@FTCAdLaw.com (310) 453-8713 www.ftcadlaw.com
Author: William Rothbard is a seasoned FTC advertising lawyer. He counsels advertisers, online sellers, direct response marketers, affiliate marketers and telemarketers on their FTC, TCPA and privacy compliance duties and represents clients in federal and state deceptive advertising investigations and enforcement actions. He has litigated and negotiated settlements in dozens of FTC and state Attorney General cases. Bill is a regular speaker at ad industry conferences, was a regular contributor for years to the Direct Response Marketing Alliance (DRMA) newsletter, and is author of FTCAdLaw Alert, an FTC blog published at www.FTCAdLaw.com. Bill received his law degree from the University of California, Hastings College of Law, in 1976. From 1977 to 1984, Bill was an attorney with the FTC, holding positions as an enforcement attorney and Attorney-Advisor to the FTC Chairman. Bill has practiced law since 1984, except for a two-year appointment as Counsel to the United States Senate Judiciary Committee in 1987-88. He is based in Los Angeles and can be reached at (310) 453-8713, Rothbard@FTCAdLaw.com, and www.ftcadlaw.com.