Most, if not all, businesses do not set out to intentionally deceive consumers about their product or service. However, deception oftentimes creeps in unknowingly in an entrepreneur’s pursuit to make his or her product stand out. Businesses must be alert and cautious when “stretching-the-truth” about their products and services.
This article is not a comprehensive treatment of advertising law as a whole, but rather, it will give you, as a business owner, an introductory overview of one of the most important arenas in advertising law: truth in advertising.
The federal government has put forth truth-in-advertising rules to protect the public from false advertising. These rules generally require that (i) all advertising be truthful and non-deceptive, (ii) advertisers must have evidence to back up their claims, and (iii) advertisements cannot be unfair.
With respect to whether an advertisement is truthful and non-deceptive, businesses need to determine whether their advertisements contain statements that are false or misleading or omit information needed to prevent it from being false or misleading. Businesses should ask themselves if there is a representation, omission, or practice that is likely to mislead the consumer to the consumer’s detriment. If there is doubt as to whether your businesses’ advertisement is likely to mislead consumers, you should consult with independent third parties and get their opinion on whether they believe your advertisement is truly misleading.
It is important to note that when evaluating whether an advertisement is deceptive, the governmental agencies will look at it from the point of view of the “reasonable consumer” (i.e., a consumer acting reasonably in the circumstances). Therefore, entrepreneurs do not need to worry about every conceivable interpretation of their advertisements, but rather, the proper evaluation should be made with respect to the reasonable consumer.
The sanctions for violating truth-in-advertising laws is broad, but potentially significant. The government may issue cease and desist orders requiring your business to immediately stop running the deceptive advertisement, and it is possible that they may order your business to pay fines up to $11,000 per day for future violations. In addition, consumers who are affected by the deceptive advertisement may be awarded refunds and other monetary remedies for products they purchase as a result of the deceptive advertisement.
Advertisers are not the only parties who should pay attention to these truth-in-advertising rules. Advertising agencies need to be aware that they may be liable along with an advertiser for misleading claims included in advertisements. Advertising agencies have an independent duty to conduct an independent inquiry into the information used to substantiate claims in advertisements and may not simply rely on an advertiser’s assurance that the claims are substantiated.
The key takeaway for entrepreneurs and startups is that with every advertisement you publish, do not ask yourself if you could theoretically argue that everything is factually correct. Rather, ask yourself if a reasonable consumer would feel mislead by the manner in which you are advertising your product, even if the information communicated is technically truthful. This is certainly more of an art than a science.