What is False/Deceptive Advertising According to the FTC?
The U.S. Federal Trade Commission (FTC) Targets All Forms of False and Deceptive Advertising
Combatting false and deceptive advertising is a top priority for the U.S. Federal Trade Commission (FTC). The FTC is committed to ensuring that misleading marketing campaigns do not cause harm to consumers, and its Division of Advertising Practices focuses exclusively on uncovering campaigns that raise health and safety concerns or cause economic injury.
With this in mind, companies of all sizes and in all industries need to address FTC compliance in their marketing efforts. But, this raises a fundamental question: What does it take for an advertisement to be considered “false” or “deceptive” according to the FTC?
False and Deceptive Advertising Claims
To begin, it is important to clarify that “false” and “deceptive” are not redundant. A false advertisement does not necessarily need to be deceptive, and a deceptive advertisement does not necessarily need to be false. There is a lot of grey area; and, while this is the case, the FTC expects companies to walk the line and maintain compliance in their marketing efforts at all times.
False Advertising According to the FTC
There are two types of false advertising claims according to the FTC: (i) claims that can be disproven, and (ii) claims that cannot be proven with available information.
1. Advertising Claims that Can Be Disproven
An advertising claim is considered false if it is untrue. For example, if a company claims that it has developed a medicine that cures COVID-19 and its product does not in fact cure COVID-19, then its claim is false. These types of patently false claims frequently lead to FTC enforcement action—particularly when they present a health risk for consumers.
An image or video can also constitute a false advertising claim. The FTC gives the example of a toy helicopter in a Fact Sheet on truth-in-advertising. While a television commercial for the toy shows it flying in the air, the toy does not actually fly on its own. Even though the commercial does not include a verbal or written statement that the helicopter flies, the commercial is nonetheless false as a result of its visual depiction.
There are numerous other examples, and the FTC’s Division of Advertising Practices routinely pursues enforcement actions against companies accused of making false marketing claims. When a marketing claim can be disproven, there is often very little room for interpretation, and the FTC will take advertisers to task for misleading consumers.
2. Advertising Claims that Cannot Be Proven
An advertising claim can also be considered false if it cannot be proven. This is where the FTC’s substantiation requirement comes into play. If an advertising claim cannot be substantiated, then it cannot lawfully be made. The following are all examples of advertising claims that would be considered false under the circumstances presented:
- “Our pills help people lose weight.” Prior to making this type of claim, a company must perform a scientific study to confirm it. Without test results showing that the company’s pills do in fact help people lose weight, this claim would be considered false for truth-in-advertising purposes.
- “Customers prefer Brand A over Brand B.” Here, too, actual measurement is required. A company could not make this type of statement based on anecdotal evidence alone. Instead, it would need to conduct a valid survey; and, depending on the results of the survey, it may need to provide clarification as to the specific regard in which customers prefer Brand A.
- “Brand A pet food is the #1 choice for dogs.” There are a couple of issues that would likely lead to the FTC classifying this statement as false. First, while it may be possible to conduct a valid taste test, dogs are not capable of making informed choices about one type of food over another. Even if one food tastes better, it could be worse for dogs’ health, but this is a fact that dogs would have no way of knowing. Second, even assuming that it was possible to conduct a valid study, how could the advertiser confirm that its food was “#1”? This would require a comprehensive market survey and a comparison test of all available foods. This simply isn’t possible, and thus the advertiser’s claim of being “#1” would likely be considered false.
Again, these are just a few examples. Judging whether an advertising claim is false requires a detailed assessment of the contents of the advertisement as well as the relevant surrounding circumstances. If a company can prove that its pills help people lose weight, then a carefully crafted statement to this effect would be lawful. The key question is whether a claim can be proven with information that is available. If it cannot, then the claim will generally be considered false according to the FTC.
Deceptive Advertising According to the FTC
There are also multiple ways in which an advertisement can be deemed deceptive. Most commonly, however, the FTC deems advertisements deceptive because they exclude relevant information.
When telling the truth, advertisers must tell the whole truth. If they fail to do so, and if this failure is misleading to consumers, then their advertisements will be deemed deceptive. With this in mind, here are some examples of deceptive advertising practices:
- Excluding Unfavorable Reviews or Testimonials. While reviews and testimonials can be powerful marketing tools, companies must be careful not to exclude unfavorable reviews and testimonials to the extent that it creates a false impression for consumers. If a bad review is unjustified, it does not need to be published. However, if a company gets a mix of bad reviews and good reviews, then exclusively publishing the good reviews could be considered deceptive advertising.
- Selectively Publishing Test or Survey Results. Similar principles apply to test and survey results. If a test shows that a company’s product works 51% of the time for a particular purpose, then simply claiming that the product is “effective” for that purpose would likely be considered deceptive. Likewise, if a survey shows that consumers only prefer a company’s product in certain respects, then a claim that the product is “preferred” would likely be considered deceptive as well.
- Omitting Necessary Disclosures. The Federal Trade Commission Act and FTC regulations require advertisers to make disclosures under various circumstances. Sponsored content is one notable example. If an influencer publishes sponsored content without disclosing the existence of a financial relationship, this is considered a form of deceptive advertising under federal law. Disclosure requirements apply to environmental claims, health and fitness claims, and various other specific types of advertising claims as well.
- Omitting Other Material Information. In addition to omitting necessary disclosures, omitting other material information can also make an advertisement deceptive. For example, if an advertiser claims to have “spoken at Harvard” when the advertiser paid to record a commercial on school grounds, this claim would likely be considered deceptive because of the information it leaves out.
There are countless additional examples of deceptive advertising claims; and, here too, context is extremely important. A statement that might be appropriate under one set of circumstances could be deceptive under another. As a result, prior to publishing advertisements, companies, agencies, and influencers need to carefully consider any implications consumers are likely to draw; and, if these implications require clarification in order to avoid confusion, then clarification most likely needs to be made.
FAQs: What are the Consequences of False and Deceptive Advertising?
What Happens if the FTC Deems an Advertisement False or Deceptive?
If the FTC deems an advertisement false or deceptive, it can take action against the entity or individual that published the ad. Depending on the circumstances involved, the FTC can seek remedies including injunctive relief (requiring the ad to be taken down and/or prohibiting similar advertising practices in the future), a freeze of the advertiser’s assets, and monetary penalties.
What Should I Do if the FTC has Contacted Me about False or Deceptive Advertising?
If the FTC has contacted you about false or deceptive advertising, you should consult with a lawyer promptly. Allegations of false and deceptive advertising can have severe consequences, but advertisers will have defenses available in many cases. Even if an ad is false or deceptive, an experienced FTC defense lawyer may be able to help you negotiate a resolution that avoids unnecessary penalties.
How Can Companies, Advertising Agencies, and Influencers Determine if Ads are Likely to Be Deemed False or Deceptive?
If you have questions or concerns about whether the FTC is likely to consider an advertisement to be false or deceptive, you should consult with a lawyer in this scenario as well. An experienced federal advertising compliance lawyer will be able to review the ad in light of all pertinent federal statutes and regulations, and will be able to assist you with publishing an advertisement that complies with the law.
Speak with a Federal Advertising Compliance Lawyer at Oberheiden P.C.
If you have questions about federal advertising compliance or any matter involving the FTC, the lawyers at Oberheiden P.C. can help. To schedule a complimentary consultation at your convenience, please call 888-680-1745 or tell us how we can help online today.