US advertising is regulated by the Federal Trade Commission, the Food and Drug Administration, the US Dept. of Agriculture, and the Securities and Exchange Commission.
The regulations and guidelines can be complex, but they require that advertisers avoid deception and back up (substantiate) their advertising claims.
Kim Kardashian
The regulations tend to be strong for securities and financial products, but relatively weak for product advertising and diet supplements. For example, American celebrity Kim Kardashian constantly promotes diet supplements and “hair care” products, but it was considered deceptive for her to promote a crypto-currency product without disclosing that she had received a payment of $250,000 for the promotion. The SEC fined Kardashian $1.3 million in 2022.
If you are involved in an advertising campaign, you have a legal and ethical responsibility to research the regulatory history of your product and comply with the regulations in order to protect yourself, your agency and your clients.
Major issue areas include:
- Truth in Advertising — Advertising laws are aimed at protecting consumers by requiring advertisers to be truthful about their products and to be able to substantiate their claims. All businesses must comply with advertising and marketing laws (From SBA web site)
- Product labeling — Claims made on product packaging must comply with some basic truth-in-packaging and labeling rules. These claims include descriptions of ingredients, package size and volume, and discount or lower price labeling. Under the Fair Packaging and Labeling Act (FPLA), the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) issue regulations requiring all consumer commodities be labeled to disclose net contents, identity of the product, and the name and place of business of the product’s manufacturer, packer or distributor. (From SBA web site)
- Special product advertising — Automobiles, computers and internet services, health and fitness products, housing and real estate, telephone services, andenvironmental or green marketing claims . For alcohol and children’s advertising, see below.
The FTC issues guidelines which help advertisers understand regulations in areas such as price claims, use of the word “free,” endorsements, diet plans, food advertising and so on. For example, the FTC says:
- Agencies, publishers and web sites are themselves responsible for ensuring that their advertisers claims are substantiated. It is not enough to take the claims at face value.
- Disclaimers and disclosures must be clear and conspicuous.
- Demonstrations must show how the product will perform under normal use.
- “Bait and switch” advertising is not permitted.
FTC’s Green guides for example, explain how to avoid deceptive practices such as some of these shown in a recent video:
An example, provided by the FTC, is this: Suppose a package once made from 2 percent recycled fibers is now being made from 3 percent recycled fibers. Clearly, would be false to say the package is 100 percent recycled. But could a company say: “Now with 50 percent more recycled fibers” ? No, according to the FTC’s guidelines on environmental advertising, such a claim would be deceptive even though it is literally true.
FTC “Green guides” video
The green guides have their own video.
Enforcement
When the FTC learns of a deceptive practice, it may meet informally with a company and propose a cease and desist order. If the company agrees, and a consent order can be worked out, no further action is taken. However, companies may challenge proposed orders before an administrative law judge and appeal any decisions in federal court.
The FTC may order fines, corrective advertising or other remedies in cases of misleading advertising. For instance, some companies have been forced to advertise that their product doesn’t really cure “tired blood” after all, or that there may be substantial penalties for early withdrawel from certain types of bank accounts.
Class action lawsuits on behalf of the victims of deceptive advertising have been another mechanism by which enforcement of fair trade laws take place. For instance, in March, 2006, a lawsuit against makers of sun screen products was filed claiming false and deceptive advertising, even though the Federal TradeCommission has warned consumers that sun block is not very effective or that certain debt relief services do not relieve debt. Here’s an example of a 2017 FTC enforcement action with respect to the “Indoor Tanning Association.”
Another important area of advertising regulation is the Food and Drug Administration’s regulations about prescription drug advertising. See these links for FDA prescription advertising guidelines — and other advertising advisories.