Advertising and Marketing Law for Small Businesses in California
The U.S. Federal Trade Commission (FTC) monitors a wide range of advertising and promotion activities, including digital marketing — i.e., advertising goods or services on the internet – in order to protect consumers by preventing anticompetitive, deceptive, and unfair business practices. For a list of the advertising behaviors the FTC monitors, see: https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road. State and local consumer protection agencies do as well. Further, failure to meet these requirements can result in lawsuits directly from consumers.
This article provides some tips on compliance with digital marketing rules. Always keep in mind the golden rule: be truthful and don’t deceive potential customers.
Note: These FAQs provide some general guidance on the advertising and marketing law information available for California small businesses and their owners. This document does not constitute legal advice and cannot substitute for expert consultation. If you have specific questions that are related to your business, it is best to consult an attorney.
BASIC PRINCIPLES OF ADVERTISING LAW FOR SMALL BUSINESSES
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Q: Are there federal guidelines to be aware of? |
Yes — the FTC Act § 5A.
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| Q: Are there state guidelines to be aware of? |
Many states have consumer protection laws that are also applicable to advertising, covering areas such as:
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COMPLEX SUBSTANTIATION AND ENHANCED DISCLOSURE
| Q: What are the basic principles of substantiation? |
| All advertising claims must be truthful, accurate and adequately substantiated. Additionally, both express and implied claims must be supported. Substantiation for advertising claims must exist before the advertising is disseminated.
The Net Impression test is used to determine whether a appears to be misleading. This test looks at what impression an advertisement gives a consumer. The following are factors that are considered in the test:
What might a reasonable consumer conclude is the claim? |
| Q: How do I determine the level of substantiation required? |
The reasonable basis standard is used to determine the level of substantiation. What constitutes a reasonable basis depends on:
Amount of substantiation experts in the field believe is reasonable |
| Q: What is the importance of including material information? |
| Ads may be considered misleading if material information is omitted. Good disclosures of additional materials information may prevent inaccurate impressions. All material information must be clearly and conspicuously disclosed proximate to the claim or offer
Definitions: “Material”
“Clear and Conspicuous” Disclosure
Must be communicated to consumer before purchase process begins |
| Q: Do different claims require different levels of substantiation? |
Yes.
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POTENTIAL CLAIMS AND ACTIONS
*The National Advertising Division (NAD) of the Better Business Bureaus is a self-regulatory organization that acts on complaints by consumers and between businesses, and also monitors advertising and sales practices and brings cases on its own initiative. Compliance with NAD decisions is voluntary, but failure to do so typically results in case referrals to the FTC and/or State Attorneys General.
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