Marketing on the Internet: Legal Rules of the Road
The Internet is connecting advertisers and marketers to customers from Boston to Bali. If you're thinking about advertising on the Internet, remember that many of the same rules that apply to other forms of advertising apply to electronic marketing.
The Federal Trade Commission Act allows the FTC to act in the interest of all consumers to prevent deceptive and unfair acts or practices. The FTC has determined that a representation, omission or practice is deceptive if it is likely to:
1. Mislead consumers and
2. Affect consumers' behavior or decisions about the product or service.
In addition, an act or practice is unfair if the injury it causes is:
1. Substantial
2. Not outweighed by other benefits and
3. Not reasonably avoidable.
The FTC prohibits unfair or deceptive advertising in any medium. That is, advertising must tell the truth and not mislead consumers. A claim can be misleading if relevant information is left out or if the claim implies something that's not true. For example, a lease advertisement for an automobile that promotes "$0 Down" may be misleading if significant and undisclosed charges are due at lease signing.
In addition, claims must be substantiated, especially when they concern health, safety, or performance. The type of evidence may depend on the product, the claims, and what experts believe necessary. If your ad specifies a certain level of support for a claim - "tests show X" - you must have at least that level of support.
Other points to consider:
Disclaimers and disclosures must be clear and conspicuous. That is, consumers must be able to notice, read or hear, and understand the information. Still, a disclaimer or disclosure alone usually is not enough to remedy a false or deceptive claim.
Testimonials and endorsements must reflect the typical experiences of consumers, unless the ad clearly and conspicuously states otherwise. A statement that not all consumers will get the same results is not enough to qualify a claim. Testimonials and endorsements can't be used to make a claim that the advertiser itself cannot substantiate.
If your ad uses phrases like "satisfaction guaranteed" or "money-back guarantee," you must be willing to give full refunds for any reason. You also must tell the consumer the terms of the offer.
Non-Compliance
If you fail to follow these rules, you run the risk of being prosecuted by the FTC. Successful prosecutions typically result in injunctions against your site and damages awarded in the amount of $11,000 PER VIOLATION.
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Richard A. Chapo is a San Diego business lawyer with www.sandiegobusinesslawfirm.com - providing legal services and legal advice to businesses in San Diego, California.