Mark Twain wrote that “many a small thing has been made large by the right kind of advertising.” And it’s true. Smart advertising can make a relatively unknown brand or product famous.
Yet it’s also a legal minefield. Whether on TV, radio, online, email, print or social media, small businesses must be careful that their promotional efforts don’t overstep legal boundaries.
Business liability insurance can protect your business financially if a lawsuit arises from advertising. But it’s wise to prevent such problems from happening in the first place. Here are seven best practices for avoiding advertising’s legal risks:
1. Focus on accuracy and avoid exaggeration.
Federal truth-in-advertising laws require ads be honest, not misleading or deceptive. All objective product claims must have “adequate substantiation,” though what’s considered adequate differs by industry. Regulators have stricter rules for certain products, especially if they’re considered to be high-risk, like dietary supplements.
Verify every individual claim or statement before including it in your advertising or on social media. And consider the ad in it’s entirety to detect if it comes off as misleading. Avoid language that may overstate the benefits of your products or services. And don’t mention your competitors in ads to make product comparisons unless you have evidence from a reputable source, such as tests conducted by an independent product testing company.
The Federal Trade Commission enforces advertising regulations and often focuses on ads related to products that affect consumers’ health and finances. In 2016, the FTC brought charges against five companies that claimed their hair- or skin-care products were “all natural” or “100 percent natural” although they contained synthetic ingredients.
2. Get permission to use others’ work or endorsements.
If you use someone’s copyrighted photography, music, art or writing, you need the copyright owner’s explicit permission. And even if it’s not copyrighted, you should get permission just to be safe. Depending on the copyrighted materials, you may need to either pay for a license or just obtain their written permission. Either way, get the copyright owner to sign a release form granting you permission to use the material. The release, which a lawyer can draft, typically prevents the signer from being able to sue you over your use of that material.
You should also get permission to use a customer endorsement or testimonial in your advertising—even if they left the endorsement on, say, a public customer-review site or your company website. Many review sites’ terms of service say the reviews are the property of the individuals who wrote them. An email from the person’s email address that clearly grants you permission to use the endorsement is generally considered enough. Also keep in mind that consumer endorsements are held to the same standards as other statements made in an ad. They must be truthful and not misleading, and any claims must be substantiated.
3. Steer clear of celebrities and well-known brands—unless you have permission.
Don’t mention high-profile brands and celebrities in your advertising unless they have clearly granted permission. They often have lawyers on the lookout for companies illegally using their likeness and name for marketing efforts.
In 2014, actress Katherine Heigl sued the New York drugstore chain Duane Reade for $6 million in damages after the company’s Twitter account tweeted a photo of her exiting one of its stores, with a caption that suggested she liked shopping there. The suit was settled out of court.
4. Make sure “deals” are actual deals.
Advertising sales, coupons or other promotions may seem tempting, but make sure any deals you promote are truly deals. For example, if you advertise a sale price on a product or service, make sure that pre- and/or post sale, customers are charged the full regular price so it doesn’t appear that you’re artificially inflating your regular prices just so customers who get the sales price can feel good about it.
Four major retailers were sued by the city of Los Angeles in 2016 for advertising sale prices on particular items that city prosecutors claimed were never actually sold for their purported higher “original” prices.
5. Be careful using the word “free.”
Don’t promote offers that may come off as preying on consumers’ wallets—especially those that suggest something is free when it’s actually not. Be transparent and upfront about your cost structure to avoid claims that you misled customers about the price of something. This includes hiding pricing terms in fine print that consumers won’t likely see.
The Federal Trade Commission recently charged several online marketers whose TV infomercials, websites and emails promoted “free” and “risk-free” trial offers of kitchen gadgets and golf equipment. The companies collected customers’ credit card information to allegedly charge for shipping and handling, but then charged them for additional products without their consent, the FTC said. Plus, the return, refund and cancellation policies were buried in lengthy fine-print disclosures that were hard for consumers to find and read.
6. Don’t discriminate.
Ads that suggest only certain types of people are welcome at your business or eligible for offers can land you in legal hot water.
A Los Angeles-area barbershop was sued for sexual discrimination by someone who was refused service. As part of a settlement, the shop agreed to change language on its website promoting it as a “men’s sanctuary.”
7. Don’t hide that you’re advertising.
Trying to make your advertising look like it’s not advertising can cause problems. If an ad does not blatantly look like an ad—such as a paid-for article designed to look like a typical news article, or paying consumers to leave glowing reviews—make sure the promotional nature is revealed. For example, putting a disclaimer at the bottom or top of a sponsored article that clearly states it is advertising will likely prevent legal issues.
Department store chain Lord & Taylor was charged by the FTC in 2016 for paying for a native article on the online publication Nylon and not disclosing that the article was paid for. The retailer also allegedly paid 50 online “fashion influencers” to post Instagram photos of themselves wearing a particular dress from a new Lord & Taylor collection without disclosing that it had paid those influencers thousands of dollars for those posts.
Advertising can greatly bolster your business’s image and potentially your profits if done correctly. If done irresponsibly, however, it can also cause you legal and financial nightmares.
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View Comments (1)
This might apply to markets with big profiles, but I have to say, in my industry, high end audio, all the infractions mentioned above are simply normal. I wish the FTC would home in, but snake oil and sheep dip people are dominant. Companies charge thousands for power cords, for instance, and get away with pretending they make difference, never mind an improvement. This is demoralizing for the rest of us.