Rules of the Road for Advertisers and Marketers: The Basics

As the United States cautiously emerges from the depths of the pandemic, researchers predict double-digit gains in ad spending for 2022. If you’re part of the wave of companies developing new ad campaigns, you’ll want to brush up on your knowledge. legal. requirements designed to ensure that your advertisements are truthful, fair and evidence-based. Failure to comply with these rules may result in legal action or lawsuits, damage to reputation, loss of consumer confidence, significant fines or damages and, in some cases, corrective disclosure requirements.

The Federal Trade Commission (FTC), state attorneys general, and the National Advertising Division of the Better Business Bureau have been active in enforcing legal requirements in this area, including, in some cases, against individual business leaders. Recent FTC activities, in particular, provide important guidance to advertisers:

  • Justify your assertions: Make sure your claims are supported by competent and reliable evidence. Failure to adequately substantiate your claims in advance may result in your claims being automatically considered unsubstantiated. The FTC, the US Department of Justice (DOJ) and the US Food and Drug Administration (FDA) have recently filed a complaint alleging that the makers of a product called Earth Tea falsely claimed that the product prevented or treated COVID-19. Even though the defendants cited a 15-person study conducted in India to support their claims, the FTC noted that the results fall short of providing “competent and reliable scientific evidence” to support the health claims. In another action involving the multinational BASF and its distributor DIEM Labs, which colonized with an agreement to pay consumers $416,914 in damages, the FTC alleged that the company’s post-hoc analyzes following failed clinical trials did not support its claims that its fish oil supplements would reduce liver fat. As is standard practice in many recent FTC enforcement actions, the FTC has named the co-owner/CEO of DIEM Labs and its sales manager, alleging he was directly involved in identifying alternative analytics of the clinical trial. Given the FTC’s recent findings on individual liability, it’s especially important to pay close attention to advertising claims.
  • If you use influencers, ask them to reveal their link to you: The FTC comes announcement that it brought in nearly a million dollars to users of teas and skincare products marketed by companies that made dubious health claims. The FTC also alleged that the companies paid influencers like CardiB to promote the product in Instagram posts, without requiring them to adequately disclose their material connection to the companies. Although influencers disclosed that the endorsements were chargeable, the disclosures only appeared when consumers clicked the “more” option. The FTC also sent warning letters to influencers themselves. Although the U.S. Supreme Court last year restricted the FTC’s ability to reimburse consumers for these types of cases, the FTC is exploring other avenues to seek money from violators, as we described in a previous guest. advisory.
  • If you offer a subscription service with a negative option, obtain consumers’ informed consent to recurring charges and provide an easy mechanism to stop these charges. The term “negative option marketing” generally refers to transactions in which sellers interpret a consumer’s failure to reject an offer or rescind an agreement as consent to be charged for goods or services. The Restore Online Shoppers Confidence Act (ROSCA) allows the FTC to seek civil penalties if a merchant uses this technique without the consumer’s informed consent or without providing the consumer with a simple mechanism to stop recurring charges. The FTC has alleged violations of ROSCA in numerous recent cases and won millions of dollars in penalties under this law. Of note, in its recent settlement with Moviepass, the FTC alleged no issue with the negative option feature itself, but alleged a violation of ROSCA based on overall misleading advertising of the underlying product. The FTC also announced a new Negative Option Marketing Enforcement Policy Statement, warning companies against “deploying illegal dark schemes that mislead or entrap consumers in subscription services”, and noting that it is stepping up efforts to application in this field. Companies implementing a subscription service with negative option functionality should proceed with caution.
  • Be careful how you handle consumer reviews: The FTC recently announced that the retailer Nova Fashion would pay $4.2 million to settle FTC allegations that it blocked negative product reviews. The FTC also provided advice to businesses on “Soliciting and Paying for Reviews Online: A Guide for Online Marketers” and “Feature Customer Reviews Online: A Guide for Platforms.” Among other things, the FTC warns companies to treat reviews equally (for example, don’t highlight positive reviews), solicit reviews in a neutral way (for example, don’t ask for reviews only from people who , you think will leave positives), and make sure that if you hire reputation management companies, they don’t manipulate consumer reviews. Similarly, in 2017, Congress passed the Consumer Review Fairness Act, which imposes civil penalties on companies that contractually restrict a consumer’s ability to provide honest reviews. In addition to filing multiple lawsuits to enforce the provision, the FTC said it can take action even if a company fails to follow through on its threats.
  • Review your B2B advertising claims, as well as B2C: Although the FTC has traditionally focused on advertising claims for mainstream consumer products and services, many recent FTC cases have focused on making false, misleading, or unsubstantiated claims to small businesses and industrial workers. concert economy. For example, the FTC charged Amazon with misleading income claims that were aimed at drivers; Dun & Bradstreet with misleading claims to small businesses about a product that is supposed to improve their credit; and last week, HomeAdvisor – a subsidiary of Angi (formerly Angie’s List) – with misleading claims about the quality and source of leads it sells to general contractors and small lawn care companies looking for potential customers.
  • If you engage in targeted advertising, review your privacy practices: A recent application from the FTC action targeted an ad exchange for inaccurate statements about its collection of geolocation information and information about children. Indeed, take special care if your service is directed to children: the FTC and state attorneys general enforce the Children’s Online Privacy Protection Act (COPPA), which requires parental consent before collecting information about children from under 13 years old. And as the FTC’s recent action against the company formerly known as Weight Watchers Highlights, even if a product is intended for use by parents, if it is intended for use by children, COPPA applies.
  • Pay particular attention to certain types of claims:
    • “Made in USA” Claims: Last year, the FTC announced a new to reign requiring that merchants making unqualified “Made in USA” claims on a label be able to prove that their products are “all or substantially all” made in the United States. The rule codifies an earlier rule Enforcement Policy Statement on US Origin Claims, but allows the FTC to seek a range of remedies, including remedies, damages, and penalties of up to $43,280 for each violation. Two noteworthy points: first, the rule only applies to unqualified claims, such as “assembled in the USA”, “made in the USA from imported leather”, “designed in the USA”, etc these circumstances. Second, although the statutory grant of authority to conduct such regulation is limited to “labeling”, the FTC has interpreted the term “label” broadly to cover physical and digital labels, whether on websites , on the product packaging or affixed to the product itself.
    • Energy and environmental claims: Companies are increasingly responding to consumer demand for sustainable products and environmentally friendly packaging with green marketing claims. But companies should be careful about making unqualified statements, and they should have substantiation for all claims. The FTC has filed numerous cases alleging deceptive environmental marketing claims, ranging from organic claims, to biodegradability claims, to more specific claims about particular products such as paints or LED bulbs. It should be noted that in 2020, the FTC reported that Volkswagen and Porsche reimbursed car buyers over $9.5 billion in FTC orders stemming from misleading “clean diesel” advertising. companies. Companies should review the FTC Guides for Using Environmental Marketing Claims, also known as Green Guides, for important additional guidance, before touting the environmental benefits of their products. The FTC has announced plans to launch a review of the green guides in 2022. Since many fashion brands have complained to the FTC about so-called greenwashing in the fashion industry, the FTC is sure to enter this question, among others, in any review.

An additional note: Make sure you have the necessary rights to use the content of your ad, whether it’s photographs, graphics or data, or references to people or brand names. You will want to confirm that you own the material, or have permission to use it, or that it is securely protected by fair use principles.

If you have any questions about the requirements described in this notice or publicity issues generally, please contact Aaron Hendelmann, John Slavsky, or Alyssa Worham in the brand and advertising practice, or Maneesha Mithal, Lydia Parnes, or Tracy Shapiro in the privacy and cybersecurity practice.

About Deborah Wilson

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