All companies market their products and services to buyers. For that reason alone, in-house lawyers should have a basic understanding of the different facets of marketing law. Here is a short primer on what you need to know:
What is marketing law?
Marketing law is the set of rules and regulations that help ensure advertisers are being truthful about what their products and services can do, that comparisons to other products and services are accurate and fair, and that conflicts of interest are revealed (e.g., paid endorsements and influencers). It focuses on preventing deceptive advertising practices and otherwise ensuring that advertisements are honest, transparent, and do not mislead, deceive, or abuse consumers.
What is the legal framework?
Many different laws affect advertising. At the federal level, the Federal Trade Commission (“FTC”) enforces truth in advertising laws under Section 5 of the FTC Act, which gives it broad powers to “prevent unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce.” Each state has its own version of Section 5, usually enforced by the consumer protection division of the state attorney general’s office. The FTC also enforces special advertising laws relating to alcohol, tobacco, and nutritional supplements. The Food and Drug Administration (“FDA”) handles advertising related to pharmaceuticals. The Department of Transportation is responsible for the rules regarding the advertising of airfares. Here are just some of the additional laws that apply to other types of marketing and advertising:
- The Lanham Act (Section 43(a)) and mini-state equivalents (false advertising).
- Trademark and copyright laws and enforcement.
- State and federal data privacy laws.
- Telephone, fax, and text message marketing (e.g., TCPA).
- Marketing to children (COPPA).
- Email marketing (CAN-SPAM).
- Laws regarding contest and sweepstakes marketing.
What is the NAD?
Not all advertising disputes end up in court or before the FTC. The US advertising industry founded the National Advertising Division (NAD) (and the National Advertising Review Board) as a system of self-regulation to build consumer trust in advertising and support fair competition in the marketplace. The NAD’s staff of advertising lawyers reviews truth-in-advertising challenges from businesses, trade associations, consumers, or on their own initiative. They also review claims made in comparative advertising, endorsements, testimonials, and other promotional materials. When a complaint is filed with the NAD, it conducts a review of the advertising in question. This includes reviewing evidence provided by both the complainant (which can be a competitor) and the advertiser, and it considers relevant laws, regulations, and industry guidelines. The NAD then issues a decision on whether the challenged advertising is truthful and substantiated. If it determines that an advertisement is misleading or lacks substantiation, it will recommend that the advertiser modify or discontinue the advertising. Compliance with its recommendations is voluntary, but most advertisers comply because, if not, the NAD sends its conclusions on to the FTC. More importantly, NAD case decisions represent a large body of US advertising law, comprising an important resource for in-house lawyers.
What are the basics?
If you remember nothing else, here are the basics of advertising law:
- All advertising must be truthful and accurate. You can add “and not deceptive or misleading” to the pile here to give it a sharper point. For example, you cannot say your product is organic when it is not. Likewise, you cannot call your product “free” unless it is truly free (i.e., you are not recouping the cost through some other mechanism). The context for all of this is whether a “reasonable person” can read or see the advertisement and not be deceived or misled.
- You must be able to substantiate all the claims made in the advertisement. For example, if you say your noise-reducing headphones cut ambient noise by 50%, where are the studies and science to back up that claim? If the marketing team doesn’t have the proof, do not make the claim. When it comes to substantiation, there is a concept known as “puffery.” Puffery is typically described as “opinion” or “expressive views” that no reasonable person could take literally, i.e., statements that generally cannot be proven or disproven. Statements you feel are opinion may cross over into deception depending on the circumstances and the context. In short, you cross over the line when your puffery is no longer opinion but can be proven untrue.
- You can compare the company’s products and services to those of a competitor so long as it is truthful and not false or deceptive. Section 43(a) of the Lanham Act is helpful in understanding where the lines are drawn in comparative advertising: (a) be truthful; (b) keep things light-hearted if possible; (c) ensure you can back up every claim made; (d) clearly identify the competitor you are comparing your product or service to; (e) only compare your product or service against products and services intended for the same use and purpose, i.e., “like for like;” and (f) do not disparage your competitor’s product or service, discuss why yours is better.
White paper Be ready for anything that gets thrown your way.
How about endorsements and influencers?
One of the more recent issues in advertising and marketing law is the use of endorsements and influencers to promote products. While it is great when individuals recommend your products to others (especially on social media), you cannot hide that you are paying them or compensating them in some way in exchange for the endorsement. Transparency is critical:
- Disclose any material connection between the endorser and the advertiser that could affect the endorsement’s credibility.
- Make the disclosure clear and conspicuous, i.e., clear, prominent, and easily understandable to consumers.
- Endorsements must reflect the honest opinions, beliefs, and experiences of the influencer.
- When endorsements are integrated into content that may appear as “non-commercial,” such as advertorials or social media posts, influencers must disclose the commercial nature of the content clearly and conspicuously.
- Both advertisers and influencers share responsibility for compliance. If your influencer screws up, you are on the hook.
Above all, watch out for deception in your marketing!
The marketing landscape is littered with advertising campaigns that went wrong in a hurry due to false or deceptive claims, costing these companies millions of dollars in fines, legal fees, and damaged reputations. In 2024, it’s important to note that regulators are cracking down hard on so-called “dark patterns,” i.e., using manipulative and deceptive techniques online to influence user behavior or specific actions that may not be in the user’s best interest. For example: (a) use of pre-selected checkboxes or misleading wording; (b) hiding or obfuscating additional charges, fees, or subscription terms during the purchasing process, leading users to unknowingly spend more than they intended; (c) manipulating the user’s attention or focus to distract them from important information or to steer them towards a particular option. This is one place where the legal department can provide immediate, cutting-edge value to the marketing department as the rules are fuzzy but the consequences painful.
________________________________________________________________________
Helping ensure that the company is compliant with advertising laws is a simple way to prevent much bigger problems and headaches (and protect the company’s brand and reputation too). If you have access to Practical Law, you have a plethora of marketing law resources at your disposal at the click of a mouse.
STERLING MILLER, HILGERS GRABEN PLLC
Sterling Miller is currently CEO and Senior Counsel at Hilgers Graben PLLC. He is a three-time General Counsel who spent almost 25 years in-house. He is the author of five books and writes the award-winning legal blog, Ten Things You Need to Know as In-House Counsel. Sterling is a regular contributor to Thomson Reuters as well as a sought-after speaker. He regularly consults with legal departments and coaches in-house lawyers. Sterling received his J.D., with honors, from Washington University in St. Louis.
