LEGAL REVIEW OF ADVERTISING CLAIMS: A Ten Minute Overview

LEGAL REVIEW OF ADVERTISING CLAIMS: A Ten Minute Overview

By D. John Hendrickson

Setting the Stage

From the ad agency “war room” to the advertiser’s boardroom, the driving force behind almost every advertising campaign is a set of product claims approved for inclusion in the creative executions. These claims may be boldly asserted or subtly suggested.  They may be highlighted in clearly informative copy, or softly delivered in sentimental music from the listener’s past.   They may be packaged in content reflecting studio quality, high production values, or economically delivered in rapid-paced voice-over dialogue.  But regardless of the style, format, or venue, the object of advertising remains constant: to convince the viewer or listener to buy the product.

In creating effective messaging to accomplish this result, the need to assure legal compliance of all advertising claims may seem counterintuitive.  After all, how can statutes, rules and regulations possibly reflect the creative sensibilities and marketing needs of the responsible advertiser and its advertising agency?  But the fact is that the legal structure underlying the advertising business is generally well intended, being designed to protect the unwary customer and restrain the unscrupulous marketer.

The challenge is that, in between these two extremes, there are advertising scenarios in which the proper legal approach is not always so clear.  How thorough must the honest marketer be in disclosing shortcomings about its product?  What kind of dramatic license may be taken in showing how a product works?  Must every statement in a commercial be literally true?  While every advertisement is unique, the approach to reviewing marketing materials for legal compliance is not.  The goal of this article is to give you an efficient tool for the initial review of all campaign materials–hopefully at a very early stage in the creative process before production has commenced and substantial funds have been spent.

  1. Assessing the Product Category

From an advertising law perspective, all products are not created equal.  Some may be advertised with little concern for regulatory scrutiny, while others fall within categories that are clearly “high risk” – meaning that special care must be taken to comply with specific legal requirements unique to that product group.  Accordingly, it makes sense at the outset of any creative development to assess the general regulatory landscape for the product.  Heavily regulated industries include securities, banking, real estate (including time share promotions), food, drugs, alcohol and telecommunications, and special care must be taken to comply with statutory and regulatory schemes prescribing acceptable advertising practices in these areas.  Other products, while not subject to the same type of regulatory schemes, are nonetheless similarly high risk due to historical enforcement activity by the Federal Trade Commission (“FTC”), state attorneys general, and local law enforcement bodies. These high risk categories include dietary supplements, any health-related products (including weight loss programs and fitness products), cosmetics, home business opportunity programs, and any materials directed toward children, including educational products.  In addition, some industries have implemented comprehensive self-regulatory practices in order to avoid increased governmental oversight.  Products with a substantial product liability risk – by way of example, any health-related products, food and drugs, fitness equipment, automobiles, and off-road/sports vehicles – generally carry a higher burden of disclosure in advertising copy, too. Knowing where a product sits in the continuum of legal risks is critical to designing a compliant campaign.

  1. The Basics of Claims Substantiation

The FTC exercises jurisdiction over “deceptive” advertising claims.  A deceptive claim is a “misrepresentation, omission, or other practice that misleads the consumer acting reasonably in the circumstances, to the consumer’s detriment” (FTC Policy Statement on Deception 1983).  Simply put, all advertising claims–both express and implied– must be truthful and substantiated, and the substantiation must exist before the claim is made in advertising.  Much of the time spent in the legal review of advertising focuses on these issues.

Substantiation is evaluated using a “reasonable basis” test, and the level of substantiation that will suffice to establish a reasonable basis is determined based upon the following factors: (i) the type of product; (ii) the type of claim; (iii) the benefits of a truthful claim; (iv) the cost of developing substantiation for the claim; (v) the consequences of a false claim; and (vi) the amount of substantiation that experts in the field believe is reasonable.  Viewing these factors as a type of sliding scale, it is easy to see that certain claims, e.g., how smoothly a pen writes, will generally require a lower level of substantiation than others, such as health claims, where the consequences of falsity could be grave for the consumer.

Indeed, in the area of health, the FTC’s current standard for substantiation is: “competent and reliable scientific evidence,” meaning: “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”  Designing a legally-compliant campaign requires a thorough understanding of the advertiser’s desired claims and an analysis of the substantiation available to support those claims.

A critical component of any advertiser’s claims review process is establishing a procedure for identifying, evaluating and confirming acceptance of claims to be used in the marketer’s advertising campaign, and for documenting that each of these steps has been taken.  While the claims development process may reflect the joint efforts of the advertiser, its advertising agency, and third party consultants, the ultimate responsibility for the claims vetting process usually resides with the advertiser.  Accordingly, the advertiser should develop a “claims bible” which catalogs all product-related advertising claims that have been vetted for use in the campaign, accompanied by all materials substantiating the claims.   The discipline of maintaining this type of database will help inform the advertiser’s creative team with regard to what claims it can include in the company’s advertisements – both for the then-current campaign as well as for future initiatives.  In addition, this database can be of tremendous assistance in the network clearance process as well as in responding to any legal challenges to the advertising.

Keep in mind, however, that the inclusion of a claim in the advertiser’s claims bible does not mean that the claim is appropriate for all uses or in all circumstances.   The context in which a claim is used is key to evaluating the corresponding legal risk of making the claim.  This is why, when reviewing advertising copy, legal counsel will want to see both the audio and video portions of a proposed script, together with storyboards, rough cuts and the final versions of all creative materials.  As mentioned above, the advertiser is liable for all express and implied claims made in its campaign; accordingly, the creative materials must be reviewed with an eye toward evaluating the interplay of all the elements contained in the advertisement and making an assessment of the ultimate message that is likely to be conveyed to the consumer.

  1. Unfair Advertising

In addition to deceptive advertising claims, the FTC exercises jurisdiction over “unfair” advertising.  Unfair advertising is an act or practice that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition” (15 U.S.C. § 45(n)). Often, the analysis in an “unfair” advertising case hinges on the issue of causation.  Is the advertising in question likely to “cause” the claimed injury, or is there instead only evidence of a correlation between the viewing of the advertising material and the injury likely to be suffered thereafter?  It is important to note that advertising may be totally truthful and yet “unfair” at the same time.  Historically, it is this prong of the FTC’s jurisdiction that has provided much of the legal basis for the agency’s enforcement activities against the tobacco and alcohol industries, and it is “unfairness” that provides the legal impetus for the recent initiative against junk food manufacturers.

One recurring theme in unfairness cases is the portrayal by the advertiser of dangerous conduct (e.g., reckless maneuvering of automobiles, driving boats while drinking alcohol, or failure to utilize safety equipment) where there is a concern that impressionable viewers may try to emulate the conduct.  A good example of this is the challenge by the FTC to a campaign, including several television commercials, launched by Beck’s Beer some years ago.  In the advertisements, young adults were positioned on a boat with most of them holding a bottle of Beck’s beer and with none of them wearing life jackets.  One of the passengers was dangerously situated on the bowsprit over the water and others were sitting on the edge of the bow.  A large bucket of ice filled with Beck’s beer was positioned on the boat’s deck.  The Commissions’ concern in this case was the portrayal of conduct that violated the boating safety laws of many states. No portion of the Commission’s challenge was directed to the truth or substantiation of any product claims made in the advertisements.  The lesson here?  FTC is concerned about more than just product claims, so it is critical to look at all advertisements from an “unfairness” perspective, too.

  1. Use of Disclaimers

All too often, the advertising lawyer is provided with footage after the commercial is shot and is asked to help clean up any “problems” with the use of legal disclaimers.  While sometimes this is possible, quite often it is not.  Disclaimers–typically in the form of superscript placed toward the bottom of the screen in commercials or as additional copy in a print advertisement–can never be used to contradict a misleading claim in the main body of the ad.  The proper use of disclaimers is to clarify and supplement the ad copy.

In all cases, disclaimers must be clear and conspicuous and situated close in proximity to the triggering claim.  They should be placed against a contrasting color of sufficient size so that the viewer can actually read the text.  Network guidelines for commercials generally require that the font be at least 22 scan lines in height and be exhibited for at least three seconds for the first line of text and one second for each additional line.   But note that the FTC considers these guidelines to be minimum standards and that more prominent disclosure may be required depending on the context.  Also, if the advertisement is directed toward children, the presumption is that children, in general, do not (and young children cannot) read disclaimers.  As a result, there are special guidelines for children’s advertising that require, among other things, full visual disclosure of the contents of products being advertised. Ironically, two studies recently commissioned by the Federal Trade Commission reach almost the same conclusion about adults – they generally do not read disclaimers very carefully.  So, the best advice is that, if the information is important enough to include in a disclaimer, consider including it in the main body of the advertisement instead.  There are many creative ways to accomplish this that can help convey a positive message to the viewer.

Just in case the reader is inclined to think that disclaimers are not an important issue, take note that the topic is specifically addressed in the published standards and practices of the major television networks, the FTC’s dot.com disclosures (How to Make Effective Disclosures in Digital Advertising), and the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.  See Chapter 8 (The Use of Disclosures in Advertising) for a more in-depth discussion of this topic.

  1. Comparative Advertising Claims

Before the 1970s, comparative advertising was generally disfavored in the United States.  Today, it is widely accepted, extremely effective, and totally legal.  But it is also one of the riskiest forms of advertising from a legal perspective.  Since the advertiser is singling out either a single competitor or a class of competitors, it must be assumed that every comparative claim set forth in the ad copy will be viewed under a legal microscope – with the indignant competitor searching for any and all evidence of vulnerability.  Moreover, the legal downside to the advertiser who missteps can be significant.  Not only might it be subject to potential regulatory enforcement activity and industry self-regulatory actions, but it might also face a competitor’s lawsuit in which the injunctive relief or monetary damages could be significant.

Accordingly, the advertiser needs to carefully scrutinize each comparative claim it makes.  Implied claims are particularly troublesome in this arena, with some courts having determined that a false impression rate among viewers of as little as 15% to 20% may be sufficient to state a false comparative advertising claim under Section 43(a) of the federal Lanham Act.  Surveys used to measure consumer responses to a product should be conducted over a geographic area representative of the market territory and should otherwise conform to scientific survey principles.  Any limitations to the findings of the surveys should be clearly set forth in the ad copy.  All claims should be “apples to apples.”  For instance, don’t compare a current year’s product to a competitor’s outdated model without express disclosure.  And while showing a competitor’s product in an advertisement is generally acceptable as a “fair use” of the material, modifying or misrepresenting it in any way is not.  Doing so is an open invitation to the competitor to challenge the campaign.

While a party aggrieved by a false or misleading comparative advertisement may be initially inclined to consider litigation as the preferred forum for dispute resolution, serious consideration should also be given to alternative strategies, such as preparing a well-documented demand letter directed to the offending advertiser seeking immediate modification or take-down of the advertisements at issue, or initiating a claim with the National Advertising Division of the Council of Better Business Bureaus.  See Chapter 10 (Industry Self-Regulation) for a further discussion on industry self-regulatory options for resolution of advertising disputes.

  1. Puffery

If all material claims in advertising must be truthful and substantiated, is there still room for “puffery?”  The answer is yes.  While drafters of the Uniform Commercial Code have tried on several occasions to close the door on this form of claim, these attempts have been rebuffed.  Accordingly, it is still acceptable to speak of one’s concert as the “greatest show in town” and of an individual’s singing talent as being “truly a gift from heaven.”

What is puffery?  It is usually described as an advertising claim that is so subjective – with such a high degree of hyperbole – that a reasonable consumer would not expect it to be literally true.  Expressed another way, puffery is a claim that, on its face, appears to be immune from objective verification.  But be careful.  A claim that may, in isolation, appear to be mere puffery may rise to the level of an objective claim in the context of the surrounding ad copy.  A classic example is the common claim, “Best [fill in the noun].”  By itself, “best” often qualifies as puffery.  However, the moment that objective elements are inserted in the ad copy (for example, survey results supporting the “best” claim), it may rise to the level of an objective claim – in which case it must be truthful and adequately substantiated.  So when it comes to legal review of this type of claim, the advertiser is well advised to provide the advertising lawyer with the headline and the surrounding copy so the claim can be evaluated in context.

  1. Dietary Supplements

While reference has been made above to the overall high risk of advertisements in the health industry, dietary supplements deserve special attention, in large part because the FTC has published a separate guide (Dietary Supplements: An Advertising Guide for Industry) on the issues surrounding the marketing of these products.  The Food and Drug Administration (“FDA”) and the FTC exercise shared responsibility over dietary supplements, with the FDA having primary responsibility over claims in product labeling and the FTC overseeing claims in advertising for dietary supplements (including in broadcast and print media).

With respect to claims, the Dietary Supplements Health and Education Act of 1994 (“DSHEA”) sets forth three types of claims that can be made about dietary supplements: (i) health claims specifically authorized by the FDA; (ii) nutrient content claims as defined by FDA regulations; and (iii) “structure/function” claims, which are representations about a dietary supplements effect on the structure or function of the body for maintenance of good health and nutrition.  Further, under DSHEA, all statements of nutritional support must be accompanied by a two-part disclaimer on the product label: that the statement has not been evaluated by FDA, and that the product is not intended to “diagnose, treat, cure or prevent any disease.”

Although not required by DSHEA, there are situations where the disclosure should be used in advertising in order to prevent consumers from being misled about the nature, efficacy, and status of regulatory review of a product.  With the above elements in mind, all of the truth-in advertising requirements discussed above apply to dietary supplement advertising; namely, that all material advertising claims must be truthful and must be substantiated by “competent and reliable scientific evidence.”  Given the potential harm to consumers that can result from deceptive advertising claims in this category of product, this is an area of continuing careful scrutiny by the FTC.  For additional information regarding dietary supplements, please see Chapter 14 (FDA Regulated Products).

  1. Production of Commercials

As Volvo and its ad agency learned in 1990, truth is not a defense where undisclosed production techniques are involved.  In a well-known commercial in which a truck drove over a line of cars and all but the Volvo caved in, the Texas attorney general took exception to the undisclosed reinforcement of the Volvo roof. Although the case settled with payment of a substantial sum and publication of a corrective statement (and loss by the ad agency of the marquee account), it serves as a classic reminder that deceptive production techniques are another form of advertising misrepresentation and can expose the advertiser and its agency to a substantial risk of regulatory action or private litigation.  It is also noteworthy that Volvo and its ad agency also faced a FTC investigation and eventual consent order arising out of the same commercial.

The FTC’s investigation of the Campbell Soup Company for a vegetable soup commercial is another reminder (In re Campbell Soup Co., 77 F.T.C. 664 1970).  In that case, the production team elected to place marbles in the bottom of the soup bowl in order to force the vegetables to the top of the bowl.  As with Volvo, this alteration in the presentation of the product was not disclosed anywhere in the advertisement.

Commercials for tasty foods, slimming diet products, cosmetics and glossy paint – each of these has provided opportunities for legal challenges based on alleged negligent or intentional misuse of production techniques.  Accordingly, it is extremely wise to include in any production agreement a specific clause whereby the production company acknowledges its awareness of the FTC’s prohibition on undisclosed mock-ups and agrees not to engage in such conduct.  In addition, it is customary to obtain a producer’s affidavit after the shoot is complete attesting to the accuracy of all pictorial representations in the commercial and the absence of any undisclosed mock-ups.  Finally, the advertiser should have a representative present at all production sessions to ensure for itself that this is the case.

  1. Continuity Marketing

A structure often used for consumer offers involves the sale of a core product featured in the advertisement, accompanied by the sale of a “club” or “home delivery program” in which the consumer continues to receive automatic product shipments and is billed at fixed intervals for these shipments.  Also known as “advance consent marketing,” these arrangements are commonplace in such diverse categories as home newspaper delivery, magazine subscriptions, and drinking water, and they are important because they generate ongoing revenue for the marketer without the necessity of spending additional media dollars to maintain the sales volume, and they can also serve as a convenience to the consumer.  But, as routine as they are, continuity offers are sometimes hidden in confusing legal “mouse type” found at the bottom of an ad or in wordy and quickly-read telemarketing scripts, with the consumer not realizing that he or she has enrolled in a club.

In light of the growing abuse of this type of marketing, federal and state laws now require clear disclosure in advertising of the material terms of any continuity program, including the approximate dates of product shipments, the method and interval of all billings, and the method of cancellation.  Depending upon the advertising channel involved, complete disclosure of these terms may be made in the principal advertisement itself or, in some cases, partly in the advertisement and then the balance in an inbound telemarketing call or on a website prior to processing the order. The key is to be aware of the issue and to create ad copy that puts the consumer on clear notice of the material terms of the offer.  For additional help with this issue, see the Advance Consent Marketing Guidelines published by the Electronic Retailing Association (www.retailing.org).

  1. Online Marketing

With the advent of the Internet and the growth of online advertising, the FTC found itself faced, at the end of the 20th Century, with the challenge of applying its traditional principles of advertising law to a wholly new medium in which the visual page extended beyond the fold of visibility (thanks to scrolling) and wasn’t limited to its four corners (thanks to hyperlinks).  But rather than recreate the wheel, the FTC chose instead to confirm that the legal rules of the road had not really changed after all, and it offered written guidance regarding how to apply these rules to the new virtual medium.

In the year 2000, the FTC issued its first set of such guidelines.  The Commission restated the overarching requirements that advertisers must make only truthful claims and that these claims must be substantiated.  Further, where a claim, express or implied, might be misleading without the inclusion of certain qualifying information, the advertiser was required to disclose this information.  These advertising disclosures were to be placed in close proximity to the triggering claim – on the same website page, if possible.  If the disclosure needed to be placed beneath the fold (meaning that the consumer would need to scroll down to see it), visual clues were required to be included that encouraged the viewer to scroll down the page.  And where, due to limitations of space, a disclosure was placed on a separate page, a hyperlink placed near the triggering claim was to be used which contained conspicuous wording, or had an appearance that attracted the consumer’s attention to it, and indicated the importance of clicking on the button.  With regard to banner ads, if required disclosures couldn’t be made within the ad itself, they were to be clearly set forth on the landing page to which the consumer was taken after clicking on the advertisement.  In virtually all situations, key disclosures were required to be made before the consumer was led to the “order now” or “add to shopping cart” buttons.

Thirteen years later, the Commission decided that it was time to update its guidance for making adequate disclosures in new media.  While the focus in 2000 had been on proximity and placement of disclosures, the updated guidance revealed a new focus on screen size and the need to ensure that disclosures were adequate regardless of how large or small the screen might be.  From the FTC’s perspective, size matters.  If the advertiser can’t find enough room to make a required disclosure, then it shouldn’t make the triggering claim in the first place.   See Chapter 8 (The Use of Disclosures in Advertising) for more information about the FTC’s online marketing guidelines.

  1. Free Offers

Perhaps no marketing strategy entices the casual shopper more than the “free” offer.  If there is nothing to lose and no strings attached, why not try something that costs nothing?  While free offers are perfectly legal, the overriding legal principles governing these offers are: (i) the product must, in fact, be free; and (ii) any conditions to the free offer must be clearly and conspicuously disclosed.  The FTC takes the matter so seriously that is has generated a “Guide” on the topic which is available at www.ftc.gov.  If the product’s “regular” price is advertised in connection with the free offer, it must generally be the price actually charged for the product during the prior 30-day period.  If the free product is sold with a companion product (e.g., “buy one, get one free”), no portion of the cost of the free good may be included in the price charged for the purchased good.  There is a six-month limitation on free offers, and a 30-day cooling-off period between the offers.

Not too many years ago, a number of Internet service providers attracted the attention of the FTC due to their full-page advertisements offering “free” computers.  It was only in the small legal type at the bottom of the page that the sellers disclosed that a fixed term service contract was a condition of the offer and that the computers had to be returned at the end of the term.  While there was nothing illegal about the terms of the offer, the manner of their disclosure violated the FTC guide.  Clear and conspicuous disclosure would have meant placing these terms in close proximity to the bold-typed “free” claim and in type font easily read by the consumer.  Much of this area of advertising law really comes down to common sense.  What should the consumer be told in order to help him or her make an intelligent buying decision?  When reviewing advertising copy, if it looks like a material term of the free offer is missing, it probably is.

  1. Right of Publicity

In most states, both celebrities and non-celebrities alike enjoy the right to control the use of their names and likeness in advertising, meaning that permission must generally be obtained in advance before using or referencing an individual in a commercial or other form of advertisement.  Advertisers and their agencies are very much aware of this, and there is rarely an issue with documenting written permission from actors, experts and testimonialists in connection with producing advertising materials.  However, over the course of the past few decades, the right of publicity has undergone substantial expansion in scope –primarily through court decisions –so that the circumstances giving rise to a right of publicity issue may not always be apparent at first blush.

In 1988, for instance, a federal court determined that “[D]eliberately” imitating the “distinctive voice of a professional singer [that] is widely known” (in that case, Bette Midler) infringed the artist’s right of publicity.  Midler v. Ford Motor Co., 849 F.2d 460 (9th Cir.1988).  Thus, the practice of impersonating a famous individual’s voice in a commercial and then disclosing in superscript “celebrity voice impersonated” became largely obsolete and the “Midler Tort” was borne.  Then, in 1992, the same federal court determined that Vanna White had properly stated a cause of action against electronics manufacturer Samsung for an advertisement that featured a robot dressed as White standing in front of a set intended to imitate the “Wheel of Fortune.” White v. Samsung Electronics America, Inc., 971 F. 2d 1395 (9th Cir. 1992).  The court found that, while it was clear to any viewer that Vanna White’s name, image, photograph or likeness were not being used in the commercial (infringements that would have been covered by the applicable California statute), it was also clear that the commercial would not have worked creatively were it not for the suggestion of the “identity” of Vanna White accomplished through the use of the robot.  The right of publicity was further expanded in Wendt v. Host Int’l, Inc., 125 F.3d 806 (9th Cir. 1997), in which the court found that the use of creative elements that exhibit merely an indicia of resemblance to an individual may be sufficient to support a right of publicity claim (in that case, animatronic figures based on the characters from the “Cheers” television program).

From a practical perspective, the key is avoid the use of any creative elements that may suggest the identity of a recognizable individual (e.g., a “white glove” could suggest Michael Jackson, or a candelabra on a piano could suggest Liberace) unless consent is obtained, and to be aware that even the use of a properly licensed character may give rise to a right of publicity claim by an actor who portrayed the character where the character and the actor are closely aligned in the public’s mind.

In addition, it should be noted that, in a number of states, the right of publicity survives death, so a careful analysis must be performed for any proposed use of the identity of a deceased individual.

  1. Testimonials

It is not uncommon to have an advertiser inquire whether it can rely upon its testimonials as substantiation for its product claims.  The answer is, “no.”  Testimonials – whether expert, celebrity or consumer – are nothing more than a form of advertising claim, so they must be substantiated by independent evidence that meets the “reasonable basis” standards discussed in Section 2, above.  While the public generally expects that experts and celebrities may be compensated for their statements, they do not expect that this will be the case with consumers.  Hence, if consumers are offered compensation of any kind in connection with their testimonials, this fact must be disclosed in the advertisement.

What about testimonial statements that do not reflect the likely results of users of the product?  In the past, many marketers relied upon so-called “typicality disclaimers” to qualify these claims and, thereby, avoid allegations of deceptive advertising (e.g., “Results not typical. Your results will vary.”).  Effective December 2009, the FTC updated its Endorsement and Testimonial guidelines.  Now, consumer endorsements and testimonials must generally reflect the typical experience of consumers who use the product, not the experience of just a few satisfied customers.  And if an endorsement doesn’t reflect what a majority of consumers can expect to experience, the ad must clearly disclose what consumers can expect their results to be, or the limited applicability of the endorser’s experience. Saying that “Not all consumers will get these results” or “Your results may vary” is not enough.

Endorsements by celebrities must reflect the celebrity’s honest experience or opinion.  If the endorsement represents that the celebrity uses the product, that celebrity must actually use the product.  Further, if a paid celebrity promotes the product in media outside of a traditional advertisement (e.g., during an unrelated talk show interview or in social media), the celebrity must disclose that a material relationship exists between the celebrity and the advertiser.

With regard to experts, care must be taken to ensure that they are, in fact, qualified to speak on the relevant topic.  A careful look at the expert’s resume and a thorough examination of prior endorsement activities can go a long way toward avoiding a legal embarrassment down the road.

Once a consumer, celebrity, or expert endorses a product, the advertiser has an obligation to ensure the endorsement continues to reflect the endorser’s opinion for as long as the endorsement is used in the campaign.

Finally, for online bloggers, word-of-mouth marketers, affiliates, and other so-called “brand ambassadors,” who write, post, or otherwise communicate positive reviews or experiences regarding a product and receive free products or other compensation for doing so, this “material connection” must be disclosed within the communication itself.

  1. Use of the Word “New”

To the surprise of many people, the word “new” is a defined term of art in advertising, and its use should never be casual.  Because of the strategic marketing advantage it may lend to a product and the impact it may have on a consumer’s buying decisions, there are well-established parameters for its proper use.  From a fundamental perspective, the product must, in fact, be “new” in some material respect.  For example, simple changes in the logo for a product, the design of a package, or the shape of the box will not qualify as being “new.”  In addition, similar to “free” claims, a “new” campaign is generally limited to six months in duration.  Why?  The thought is that, if the product is advertised as being new for a prolonged period of time, at some point the claim becomes inaccurate and, therefore, misleading.  Usually excluded from this time period is any limited market testing that precedes general distribution of the product.  Perhaps most importantly, the marketer should keep in mind that “new” claims may be carefully scrutinized by the competition, so their use should at all times be accurate and within the time limits mentioned above.

  1. Shared Liability for Advertising Claims

No discussion of advertising claims would be complete without mentioning the legal principle of “shared liability.”  From the FTC’s perspective, the advertiser is strictly liable for all deceptive advertising claims made in its advertising materials.  More significantly, any party who knew or should have known that the claims were false and who participated in any way in the creation of the advertisement may also be liable for these claims.  This includes advertising agencies, production companies, spokespersons and testimonialists, and potentially even retailers.  In addition, liability may in certain cases extend beyond the offending company itself to the principals of the company.  And it is not a defense in these actions to claim that another party “upstream” in the creative stream should have undertaken proper due diligence.  The downstream party should, therefore, be vigilant to confirm the truthfulness and substantiation of all material advertising claims.  This is not to say that, from a contract standpoint, one party cannot be financially indemnified by another party involved in the creation of the marketing materials; however, such agreements in no way limit the power of the FTC to pursue all parties involved in the creation and dissemination of the material.  For these reasons, it should be incumbent upon all parties to a campaign to candidly discuss and resolve claims issues before proceeding to distribution of any advertisement.  The extra time spent addressing these issues in advance may serve to save money, time, and professional relationships down the road.

In the End

The goal of the discussion above has been to describe, in a simple format, the legal landscape surrounding the creation of advertising claims.  If it has heightened the reader’s concern, that’s a good thing.  The consequences of deceptive or unfair advertising can be legally and financially significant. But it is important to put all of this in perspective.  The federal and state governments have limited resources and their mandates are to protect consumers from deceptive and dangerous advertising practices.  Accordingly, they will be inclined to pursue the more egregious violators of their respective statutes, rules and regulations.  This is not to say, however, that a minor misstep or error in judgment – even if consumers aren’t harmed and the marketer takes immediate steps to remedy the oversight – won’t end up as the subject of a formal investigation.  In light of this, there is no excuse for failing to implement clear and consistent policies that encourage identifying, addressing, and resolving all claims issues in advance of any airing or placement of the advertising materials.