Advertising can be vital to the success of your product. Many companies focus so hard on creating a catchy, creative ad that they forget that it also cannot violate false advertising laws. Too often people find themselves embroiled in a false advertising lawsuit without even realizing that the claims they are making are untrue according to the standards of truth-in-advertising laws. Connect with a Priori advertising lawyer before advertising your product to avoid problems down the line.
Defining False Advertising
U.S. laws make false advertising illegal. In the Trademark Act, false advertising was defined as “any advertising or promotion that misrepresents the nature, characteristics, qualities, or geographic origin of goods, services or commercial activities.” All advertising must therefore be, if not proven true, at least impossible to prove untrue.
False advertising laws are enforced in conjunction with truth-in-advertising laws in the United States. These laws apply to ads no matter where they are found, be it in newspapers and magazines, online, through direct mail campaigns, or on billboards or buses.
Under truth-in-advertising laws and Federal Trade Commission ("FTC") truth-in-advertising guidelines, all ads must be “truthful, not misleading, and, when appropriate, backed by scientific evidence.” This means that claims must be true according to empirical data or scientific consensus, especially if they involve health, effectiveness, popularity or any other measurable claim. While vague claims, like “the taste Americans love” are subject to little scrutiny under truth-in-advertising guidelines, any specific, measurable statements will be looked at carefully. The burden of proof is particularly high if such claims disparage a competitor.
The FTC is particularly strict about adherence with truth-in-advertising laws when making the following types of claims:
- Health Claims. Health claims about beauty products, foods, diet products, weight loss drugs, pharmaceuticals, anti-aging products, supplements, and other health-related products must be scientifically verified using valid scientific methods with significant results.
- Environmental Impact. Claims regarding the environmental impact or benefits of a product must be independently assessed and adhere to specific threshold guidelines. For example, the content of recycled material required for a product to be called “recycled” is defined in FTC advertising guidelines.
- Safety. Claims of safety must be verified through testing as appropriate in the industry and endorsed by authorities where possible.
- Product Endorsements. Any celebrity or individual making an endorsement must really use the product. The opinions shared also should be honest and independent. If the endorsement has been compensated, it has to be labeled as such.
- Emotionally-Trying Choices. Advertising for hospitals, funeral homes, nursing homes and other emotionally-charged or trying choices is held to a higher standard to ensure that it does not take advantage of customers’ fragile emotional state.
- “Made in the USA." FTC and industry guidelines dictate how much of a product must be created in the United States to make such claims.
False Advertising Lawsuits
If your company is accused of false advertising, you can face both civil lawsuits and FTC prosecution. Consumers who feel they have lost money can individually or as a class file a lawsuit for damages under false advertising laws. Competitors can similarly sue in cases where their profits were hurt because of consumers falling for false advertising claims. This is especially true if they are mentioned by name or alluded to in the ad in question. Most commonly, however, the FTC brings false advertising lawsuits, which can cost companies millions in punitive damages.
If the following conditions are fulfilled, the FTC, consumers, or competitors can bring lawsuits against violators of false advertising laws:
- A false statement was made about the advertiser's own offerings or another person's goods, services, or commercial activities.
- This statement either deceives or has the potential to deceive a substantial portion of its target audience.
- The deception is likely to affect the purchasing decisions of its audience.
- The false advertising has the potential to cause or caused injury, damage, or losses to the plaintiff (or the public).
Generally, these false advertising lawsuits focus heavily on the last condition, which can make countering these lawsuits a challenge. For many companies that are sued under false advertising laws, the damages can reach millions of dollars.
Depending on your needs, the cost of hiring an advertising and marketing lawyer through Priori's marketplace will vary. Hourly rates for advertising and marketing lawyers typically range from $200 per hour to $500 per hour. In order to get a better sense of cost for your particular situation, put in a request to schedule a complimentary consultation and receive a free price quote from one of our lawyers.
How high are standards for deciding whether or not an ad is false advertising?
The FTC uses the "reasonable basis" standard to assess whether or not advertising claims are false. A "reasonable basis" requires objective evidence that supports the claim, such as surveys, expert opinion, tests, studies or other scientific evidence. What is considered “reasonable” depends largely on the type of claim; a claim like “people love our soda” requires much less proof than “50% less fat than the average yogurt,” for example.
What is “failure to disclose” in terms of false advertising?
A company can be prosecuted for false advertising not just for making an outright lie, but also for failing to tell the whole truth. If an ad fails to disclose something important about a claim, such as a qualifier or condition, they can be prosecuted for false advertising by failure to disclose. For example, a company that sells face cream could be sued for claims that the product reduces wrinkles by 50 percent in two weeks, if they fail to disclose that is only true if men use the cream or only if someone under 30 uses the product.