Fair Advertising Guide for Small Businesses
It is easy for small businesses to push too far in their claims about their product or services (or those of a competitor) to attract new customers. This is particularly true for small businesses embarking on a self-made social media campaign. While these can be effective, some understanding of advertising rules is required. Otherwise, businesses risk running afoul of federal regulators or lawsuits from competitors and customers. Before starting an advertising campaign, small business owners should remind themselves about the basics of unfair and deceptive advertising rules.
Types of Advertising
There are so many ways to advertise these days and increase brand awareness with a target audience. In the past, most advertising was in a newspaper or magazine, through direct mail, or maybe a television commercial or billboard ad campaign. Now, social media dominates the advertising world along with other online advertising and influencers with social media channels. When companies put together their marketing strategy, they worry about where they will land in a Google search or Google ads (known as search engine optimization, or SEO) because it all affects their website traffic. Local businesses are further concerned about what will happen if they receive a negative Yelp review because it may keep local customers away.
Small businesses need to be careful as they are tasked with creating an advertising strategy and content marketing that creates a buzz with their customer base but does not mislead them at the same time. But where do you draw the line to make sure your marketing materials and social media marketing don’t make false claims about your products or services?
FTC Requirements
As explained by the Federal Trade Commission (FTC) in its Advertising FAQ for small businesses, the Federal Trade Commission Act mandates that advertisements must:
- be truthful (and non-deceptive);
- have evidence to back their claims; and
- not be unfair.
Truth and evidence seem simple enough, but what does it mean for an ad to be "deceptive" or "unfair"? According to the FTC, an ad is unfair if it "causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid" and this cost is not outweighed by other consumer benefits.
An ad is deceptive if it contains a statement, or omits information, that is likely to mislead reasonable consumers and is "material" (important) to the consumer's purchasing decision. Sometimes that deception can come through an endorsement by a celebrity or other person a consumer listens to. This is why all marketing campaigns need to be properly reviewed and prepared.
Key in FTC analysis of deceptiveness is whether the advertiser has evidence to back any express or implied claims within the advertisement. Some ads draw particular attention from the FTC, namely those that make claims regarding health or safety, and those making claims a potential customer would have trouble proving themselves.
For more information about how the FTC analyzes advertising claims, and about advertising issues in particular industries, see the full FTC Advertising FAQ.
If you are a small business owner and you have any questions about what you can do with your marketing plan and advertising ideas but still stay in line with fair advertising requirements, you should speak to a local attorney who is familiar with business development and the requirements of the FTC and local laws.
Related Resources:
- Essential Advertising Rules for Your Businesses (FindLaw’s Learn About the Law)
- Advertising Mistakes: Lessons Learned the Hard Way (FindLaw)
- Marketing Your Business: 7 Important Considerations (FindLaw’s Learn About the Law)
