Under the FTC Act, advertising must be truthful and non-deceptive, advertisers must have evidence to back up their claims and advertisements cannot be unfair. Ad content is deceptive if it misleads reasonable consumers and is material to a consumer’s decision to purchase a product. An advertisement is unfair if it causes substantial unavoidable injury that is not outweighed by its benefit to consumers.
Below, we discuss seven points to consider when making or reviewing advertising materials or claims.
1. The Primary Objective: Truth in Advertising
A determination of the truthfulness and non-deceptiveness of an ad is determined based on the entire impression that the advertisement conveys.
Express and implied marketing claims are equally important, and even implications made by advertisers must be truthful, non-deceptive, substantiated and not unfair. The FTC provides examples of express and implied advertising claims:
- Express: “ABC Mouthwash prevents colds” is an express claim that the product will prevent colds.
- Implied: “ABC Mouthwash kills the germs that cause colds” contains an implied claim that the product will prevent colds.
In the examples above, both claims require the same substantiation.
Importantly, an advertiser cannot cure a false claim by use of a disclaimer. Generally speaking, a disclaimer cannot contradict other statements made in the ad. Instead, any qualifying information needed to prevent deception “should be presented clearly and conspicuously so that consumers can actually notice and understand it.”
Moreover, the FTC provided guidance to marketers on how to present information in ads to prevent an advertisement from being deceptive:
- advertisers should use clear and unambiguous language,
- advertisers should place any qualifying information close to the claim being qualified, and
- advertisers should avoid using small type or any distracting elements that could undercut the disclosure.
2. Marketers Need Reasonable Substantiation for Material Claims
A marketer must have reasonable substantiation for any material claim made in an advertisement, and such substantiation must be available when making the claim. Developing substantiation after making a claim may not be sufficient.
Appropriate substantiation requires objective evidence to support the claim, but the amount and type of evidence depends on the claim made.
At a minimum, if an advertisement claims a particular level of substantiation (for example, “two out of three doctors recommend” or “tests prove”), an advertiser must have that level of substantiation. If the advertisement does not specify a level of support, reasonable substantiation may be based on a number of factors, including input from experts in the field.
3. Claims Regarding Health Benefits Require Heightened Substantiation
Some ads, such as those that make claims directed to health or safety, require a higher level of substantiation. The FTC has provided examples of health or safety claims:
- ABC Sunscreen will reduce the risk of skin cancer.
- ABC Water Filters remove harmful chemicals from tap water.
- ABC Chainsaw's safety latch reduces the risk of injury.
In addition, courts have found that marketing claims directed to “pain” relief require a heightened level of substantiation.
Regarding the level of substantiation required, the FTC has stated:
Ads that make health or safety claims must be supported by "competent and reliable scientific evidence" — tests, studies or other scientific evidence that has been evaluated by people qualified to review it. In addition, any tests or studies must be conducted using methods that experts in the field accept as accurate.
In addition, at least one court has specified the heightened level of substantiation required for health-related claims: “In the instant case, with medical, health-related claims, a well-conducted, placebo-controlled, randomized, doubleblind study, the gold standard, should have been conducted.”
4. Proper Use of Trademarks
Advertising claims including trademarks generally involve two situations: (i) use of the advertiser’s own trademarks or (ii) use of third-party trademarks. When using its own trademarks, a marketer should be sure to adhere to internal guidelines for use of its trademarks. Such guidelines may instruct, for example, on consistent methods of use, on use of a trademark as an adjective and not a noun, and whether a “®” or “TM” designation should be used with the mark.
When using trademarks of third parties, pay additional attention in order to avoid consumer confusion as to origin or endorsement of the advertised products or services. Generally, a marketer can use a simple disclaimer to clarify third-party trademark ownership and non-affiliation.
An advertiser must take still more care regarding use of a third-party mark in comparative advertising. A competitor would surely examine very closely any such use and any claims associated with such use. Advertisers must not make any misrepresentations about either a competitor’s product or the advertiser’s own product.
5. Regulation of ‘Green’ or Environmental Claims
The FTC has published detailed “guides” on claims regarding purported environmental benefits of products. These guides:
Apply to claims about the environmental attributes of a product, package or service in connection with the marketing, offering for sale, or sale of such item or service to individuals. . . . The guides apply to environmental claims in labeling, advertising, promotional materials and all other forms of marketing in any medium, whether asserted directly or by implication, through words, symbols, logos, depictions, product brand names or any other means.
In particular, the FTC “Green” guides focus on the following types of environmental claims:
- Carbon offsets
- Certifications and seals of approval
- Compostable claims
- Degradable claims
- Free-of claims
- Non-toxic claims
- Ozone-safe and ozone-friendly claims
- Recyclable claims
- Recycled content claims
- Refillable claims
- Renewable energy claims
- Renewable materials claims
- Source reduction claims
In general, the FTC “Green” guides discourage general environmental claims: “It is deceptive to misrepresent, directly or by implication, that a product, package or service offers a general environmental benefit.” Instead, advertisers should seek to “qualify general environmental benefit claims to prevent deception about the nature of the environmental benefit being asserted.”
According to the FTC, any qualification made to avoid deceptive advertising “should be clear, prominent and understandable,” using “plain language and sufficiently large type” in “close proximity to the qualified claim.” Advertisers should also “avoid making inconsistent statements or using distracting elements that could undercut or contradict the disclosure.”
6. ‘Made in USA’ Claims: When Appropriate, Substantiation Required
With some products, such as automobiles, and textile, wool and fur products, a marketer must disclose U.S. content; with other products, an advertiser may choose to make a “Made in U.S.A.” claim. As with other claims, origin claims may be either express or implied:
- Express: “Made in U.S.A.”; "American-made"; "USA."
- Implied: Use of U.S. symbols or geographic references (such as U.S. flags, outlines of U.S. maps, or references to U.S. locations of headquarters or factories).
In any case, a product advertised as made in the United States must be "all or virtually all" made in the United States. According to the FTC, “‘[a]ll or virtually all’ means that all significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no — or negligible — foreign content.”
The FTC looks at a number of factors in determining whether a product is “all or virtually all” made in the United States. At minimum, the final assembly or processing of the product must take place in the United States. Other factors may include the amount of manufacturing costs allocated to the United States and whether any foreign content is integral to — or far removed from — the finished product.
In some cases, an advertiser may make a qualified “Made in U.S.A.” claim, such as “60% U.S. content,” “Made in USA of U.S. and imported parts,” or “Couch assembled in USA from Italian Leather and Mexican Frame.”
In any case, as with other advertising, a marketer must have a "reasonable basis," including competent and reliable evidence, to support the claim at the time of making the claim.
Lastly, all products of foreign origin imported into the United States must designate the name of the country of origin.
7. Guarantees and Warranties Must Meet Certain Requirements
The Magnuson-Moss Warranty/FTC Improvement Act includes provisions governing guarantees and warranties.
For example, materials providing warranties or guarantees, such as by use of the terms “Satisfaction Guarantee,” “Money-Back Guarantee,” or “Free Trial Offer,” should disclose, “with such clarity and prominence as will be noticed and understood by prospective purchasers,” any material limitations or conditions that apply to the “guaranteed” representation. For example: “If not completely satisfied with the product, return the product within 30 days for a full refund.”
In addition, prior to sale of the product, at the place where the product is sold, prospective purchasers should be able to see the written warranty or guarantee for complete details of the warranty coverage.
Moreover, the term “guarantee” has a particular legal meaning, which generally requires the seller to refund the full purchase price of the advertised product at the purchaser’s request.
The above points are not exhaustive of all potential issues that could arise when preparing or reviewing advertising materials. A general rule of thumb, however, emerges: Would a reasonable consumer (or your closest competitor) find an ad objectively misleading or unfair? If so, strongly consider revising.
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