Whether it’s a billboard, a social media post, a page in the local newspaper, or an email, business owners must ensure that their marketing complies with various federal and state laws and regulations. Generally, the same laws and regulations that apply to traditional advertising and marketing forms also apply to online and social media practices. As such, businesses should understand and comply with these laws to protect their brand and reputation and avoid potential litigation or government action. This article highlights a few common legal issues and corresponding laws that businesses should consider when developing their marketing materials.
MISREPRESENTATION/FALSE ADVERTISING
The Federal Trade Commission (FTC) is the primary consumer protection agency at the federal level and is responsible for regulating advertising and marketing to protect consumers from fraud and deception in the marketplace. Section 5 of the Federal Trade Commission Act (FTC Act) prohibits unfair or deceptive acts or practices in commerce. Under the federal law, when consumers encounter an advertisement, whether through the internet, radio, television, or other mediums, it is essential that the advertisement is truthful, not deceptive, and, when relevant, supported by scientific evidence. These laws commonly are referred to as “truth-in-advertising” laws. For example, these laws target businesses that misrepresent a product’s features or benefits or use images or videos that misrepresent the actual product.
The FTC enforces these truth-in-advertising laws and applies the same standards to any type of advertising, regardless of the method or means by which the advertisement appears. In particular, the FTC focuses on advertising claims that could impact people’s health or finances, such as those related to food, over-the-counter medications, supplements, alcohol, and tobacco, as well as claims related to technology products, services, and the internet. Additionally, every state has consumer protection laws that govern advertisements targeted at residents of that state. As such, companies should review their advertising or marketing materials to ensure they are free from any material representation, omission, or practice that is likely to mislead a consumer.
TESTIMONIALS
One very effective means of advertising products and services in today’s marketplace is by sharing the testimonials or endorsements of customers. However, before engaging any individuals, such as influencers, bloggers, or celebrities, to share their testimonials or endorsements ofproducts or services, companies should ensure that such testimonials or endorsements comply with the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising.
Here are a few of the general considerations companies should keep in mind when it comes to testimonials and endorsements:
• They must reflect the honest opinions, findings, beliefs, or experiences of the endorser, however, they cannot make any representation which would be deceptive if made directly by the company.
• They do not need to be phrased as an exact quote of the endorser, however, the endorsement may not be presented out of context or reworded to distort the endorser’s opinion or experience with the product.
• When there is a representation that the endorser uses the endorsed product, the endorser must have been a bona fide user of the product at the time the endorsement was given.
• Companies are subject to liability for false or unsubstantiated statements made through endorsements.
• Companies also are subject to liability for failing to disclose any material connections between themselves and their endorsers, such as compensation or incentives provided in exchange for endorsements or testimonials.
COPYRIGHT/TRADEMARK INFRINGEMENT
When it comes to intellectual property, companies should be aware of infringing on the rights of other brands, particularly those regarding copyright and trademarks. Copyright is a type of intellectual property that protects original works of authorship as soon as an author fixes the work in a tangible form of expression. A trademark is any word, phrase, symbol, design, or combination of these things that identifies a business’s goods or services. The unauthorized use of another company’s intellectual property, such as its brand name, logo, slogan, design, or creative content, could potentially mislead consumers into believing they are associated with that company’s brand and also can subject the business to significant financial liability for infringement claims.
If a company must use another company’s intellectual property in its advertising or marketing, it should ensure that it has obtained permission from the company – preferably in writing. Use of a trademark or copyright license agreement is an effective means to document such permission. Such agreements should address the various terms of use of the intellectual property, including the permissible scope, duration, and geographic area, as well as any compensation the other company will receive in consideration for its right to use the intellectual property.
Email is a widely used advertising channel, allowing businesses to reach a large customer base with minimal effort. However, companies should ensure their email marketing follows applicable laws and regulations. The FTC also enforces the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act), which is a law that outlines guidelines for commercial emails, sets requirements for such messages, provides recipients with the right to unsubscribe from communications, and specifies significant penalties for any violations. The CAN-SPAM Act requires that certain information be included in all unsolicited commercial email, which is any commercial email sent to a recipient who has not explicitly given their consent to receive marketing messages from the sender.
An unsolicited message must:
• Be clearly and conspicuously identified as an advertisement or solicitation somewhere in the body of the message.
• Include a clear and conspicuous electronic opt-out mechanism.
• Provide the sender’s valid physical postal address.
Companies should be aware that the CAN-SPAM Act also prohibits using deceptive subject lines and false header information, such as creating a false sense of urgency or implying important information that isn’t actually in the email content. Each individual email violating the CAN-SPAM Act may incur penalties of up to $51,744, thus non-compliance could lead to significant financial consequences.
TEXT MESSAGING
Like email, text messaging provides an effective channel for companies to interact directly with customers. The Federal Communications Commission (FCC) enforces the Telephone Consumer Protection Act (TCPA), which regulates telemarketing calls and text messages, as well as the use of automatic telephone dialing systems and artificial or prerecorded voice messages.
Depending on the technology used to send the text message and the type of telephone line (land or mobile) contacted, companies must satisfy notice and express advance-consent requirements before sending a commercial text message. Additionally, regardless of the technology used or type of telephone line contacted, companies must ensure that they are not sending text messages to numbers on the National Do Not Call Registry, which is managed by the FTC and allows consumers to register their phone numbers to limit unwanted telemarketing. TCPA violations have led to many class-action lawsuits, resulting in millions of dollars in settlements paid by advertisers that failed to comply fully.
Technology has transformed how businesses engage with consumers in previously unimaginable ways. While this evolution can offer advantages for businesses and consumers, it also presents genuine risks and challenges for companies to navigate. So, whether using traditional or online marketing and advertising, it is important to consult with legal counsel to help navigate the legal and regulatory risks.
Iqra Mushtaq is a corporate attorney at Barnes & Thornburg, LLP, in Chicago, Illinois. With a unique background in law, policy, and business, Iqra provides her clients with dedicated preparation, outside-of-the-box thinking, and a dynamic approach to problem solving. She can be reached at iqra.mushtaq@btlaw.com.