Regulation of Marketing and Advertising Activities

Marketing and advertising activities are subject to a wide variety of federal and state laws and regulations focusing on ensuring that consumers receive full and accurate disclosures and are protected against deceptive advertising practices.  Regulators also have specific concerns about advertising relating to specialized products such as consumer leases, credit, 900 telephone numbers, and products sold through mail order or telephone sales.  In order to understand the legal landscape in this area a review should be made of the "truth-in-advertising" rules enforced by the Federal Trade Commission ("FTC"); other FTC rules and regulations pertaining to advertising practices; state and local advertising statutes and regulations; private advertising and marketing guidelines; and remedies for consumers through private litigation.  I’ll be covering each of these areas in the next few postings.

By the way, other legal areas will also have a bearing on activities relating to advertising and marketing.  For example, a portfolio of trademarks will be created to identify and distinguish the unique brand of the advertiser and those trademarks will be included in advertising materials and on the packaging used for the advertiser’s products.  In addition, the content used in advertising materials will be subject to the copyright laws, and trademark and copyright law, as well as the common law of unfair competition, will be relevant to advertising on the Internet and specific practices such as metataging, framing, and linking.  Finally, regulation of advertising and other disclosures to consumers are a significant part of a greater area of regulation referred to as consumer protection law. 

Let’s begin today by introducing the truth-in-advertising rules included in the Federal Trade Commission Act ("FTC Act"), which generally requires that (i) advertising must be truthful and non-deceptive; (ii) advertisers must have evidence to back up their claims; and (iii) advertisements cannot be unfair.  Specifically, Section 5 of the FTC Act declares unfair or deceptive acts or practices unlawful, Section 12 prohibits false ads likely to induce the purchase of food, drugs, devices or cosmetics, and Section 15 defines a false ad for purposes of Section 12 as one which is "misleading in a material respect." In determining whether an ad is misleading, Section 15 requires that the FTC take into account "representations made or suggested" as well as "the extent to which the advertisement fails to reveal facts material in light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual."

There have been a number of judicial decisions and decisions by the FTC that have attempted to define and elaborate on the phrase "deceptive acts or practices" under both Sections 5 and 12 of the FTC Act.  In addition, the FTC has attempted to provide a concrete indication of the manner in which it will enforce its deception mandate by promulgating the FTC Policy Statement on Deception as an appendix to Cliffdale Associates, Inc., 103 F.T.C. 110, 174 (1984). Also of interest is the FTC Policy Statement on Unfairness, which was prepared as an appendix to International Harvester Co., 104 F.T.C. 949, 1070 (1984).

The content in this post has been adapted from material that will appear in Business Transactions Solutions (February 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

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