Marketing and Advertising Laws
Marketing and advertising are the lifeblood of small businesses. Without an effective marketing plan, startups would vanish almost as fast as they sprout. Advertising allows small business owners to find new customers. It also helps them inform existing customers about new products. The only difference between today's advertising and 100 years ago is the presence of social media marketing channels.
Laws regulating marketing and advertising have not changed much. Existing rules about deceptive advertising, direct mail marketing, and special offers are the same whether you have print or electronic coupons. This article is about the modern take on small business marketing laws and how to follow FTC requirements.
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Legal Considerations for Advertising
The Federal Trade Commission (FTC) regulates advertising and marketing for all types of businesses. It is particularly concerned with truthful advertising and preventing scams on both sides of the business relationship. The government wants companies to be honest with customers, but it also wants to protect businesses from scammers and cyber thieves.
The FTC enforces rules about the content and style of advertising, online and old-school. Understand these rules before creating your ad campaign, and you can avoid most legal pitfalls.
Truth in Advertising
"Truth-in-advertising" laws state that unfair and deceptive acts or practices affecting commerce are illegal. And yet, "everybody knows" that advertising is fake, right? Not really. Advertising must follow some guidelines.
- Children. Advertising directed toward children must follow the Children's Online Privacy Protection Act (COPPA). You must know how to protect children's identities if they access your site and how to get parental consent. The FTC has separate food content guidance for marketing efforts directed toward children and adolescents.
- Health, nutrition, and safety. The FTC shares enforcement responsibility with the Food and Drug Administration (FDA) for content marketing of any food, drug, and nutrition product. Advertising making any health claims must include solid research and substantive proof.
- Sales, discounts, and price cuts. Prices must be legitimate. The well-known "bait-and-switch" scam still nets thousands of customers every year. If you only have a few items at a special markdown price — a common tactic during Black Friday sales — your ad must clearly state the number available.
- Endorsements and disclosures. The new trend in online marketing is the influencer. Online celebrities with social media accounts and podcasts promote products to their followers. It's a new take on the infomercial. Like infomercials, the FTC has placed guidelines on how influencers can endorse products and what disclosures they must include.
Legal Considerations for Marketing
The same rules that cover advertising cover marketing. A small business marketing strategy must avoid making false claims or violating the privacy of your target audience. As e-commerce has become a significant marketplace, more federal and state laws have focused on regulating marketing.
Everyone knows the irritation of an email inbox full of spam. Yet the first substantial email marketing law, the CAN-SPAM Act, was not enacted until 2003. Like direct mail advertising, email marketing is a method of looking for potential customers. Since it is relatively low-cost, small businesses use it as a marketing tactic along with other tools.
The CAN-SPAM Act regulates unsolicited commercial emails, regardless of content. The FTC divides emails into commercial, transactional, and "other." A commercial email advertises or promotes a product or service. These emails must obey FTC guidelines.
Compliance with marketing emails is not difficult. Your marketing emails must include:
- Clear header information. Your routing information should make it plain who sent the email and who should receive it — no deceptive names or URLs.
- The subject line must describe the purpose of the email.
- You must identify the message as an ad. How you do this is up to you, but you must state somewhere that your email is an advertisement.
- Your email must contain a physical address. This can be a street address or a P.O. box, but customers must have another way of reaching you.
- There must be an opt-out option on the email. You must regularly remove customers from your email list and cannot assign this duty to another company. Even if a marketing firm handles email marketing, you must maintain your opt-out list.
A transactional email may contain most of the same information but completes a relationship the recipient has agreed to. For instance, your website may ask for email addresses via a contact page. If you respond to these requests with a standard advertisement, it may not be a commercial ad under FTC rules. You should still follow the regulations just to be safe.
Social Media Platforms
Social media sites have become the billboards of the 21st century. Local businesses can use social media posts to raise brand awareness in a way previously unavailable to small companies. The best-known social media platforms are private companies: Facebook, TikTok, and X (Twitter).
The same laws that apply to advertising also apply to marketing. Social media marketing has become the focus of state laws concerned with data privacy. As of 2022, at least five states have many data collection and privacy laws. These laws cover websites, Facebook pages, and mobile apps.
It is no secret that businesses collect information on their customers. Names, addresses, and other demographic material is an essential marketing tool. There are two general types of data collection:
- Anonymous collection gathers data from "unknown" users, first-time visitors to the site, or click-throughs.
- "Known" user collection comes from existing customers, previous buyers, and other intentional visitors.
Businesses collated the data for use in targeted advertising. Marketing experts use this information to locate target markets and ideal customers and develop strategic marketing campaigns. There's nothing wrong with market research. In today's online culture, ads that target customers can become intrusive unless the customer has the right to control them.
Digital marketing has become more sophisticated. Users have become uneasy at how much information companies collect and share. Five states, California, Colorado, Connecticut, Virginia, and Utah, have enacted privacy laws. These laws demand social media and websites to let users keep their personal information private.
Any new or existing business trying to draw more customers needs a marketing budget to go with its marketing plan. Marketing must conform to FTC and state regulations and give businesses a good return on investment. It must be cost-effective and direct users to your website or storefront.
The modern version of direct mail is the pay-per-click ad. Pay-per-click, or PPC, resembles bulk mail of times past. Businesses place ads on other websites, such as Google, and wait. They only pay if or when someone clicks on the ad. The advantage of PPC advertising is you can tell very quickly which ads are working and which aren't.
Marketing tips are available from the FTC and other reliable sources such as FindLaw. Small business owners and entrepreneurs should do their homework when creating a new product or service marketing plan.
Ask for Legal Help
Internet regulations are complex and unforgiving. Be sure your ad campaign complies with all the federal and state laws by talking with a business law attorney in your area.
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