Avoid Unlawful Advertising: Seven Rules for Your Business

Learn what you can and cannot say when advertising your product or service.

Who Decides What Is Unlawful Advertising?

The federal government and states regulate advertising. On the federal side, the Federal Trade Commission (FTC) is the main agency that enforces unlawful advertising laws passed by Congress (and signed by the President). The FTC also proposes regulations, which the public may comment on, that implement Congressional law. The FTC enforces Truth in Advertising laws that apply to all businesses, and it's responsible for regulations specific to certain industries, such as alcohol and tobacco and nutritional supplements. General and industry-specific regulations are published on the FTC website.

States also set rules and can take enforcement action, usually through their attorney general's office, a consumer protection agency, and the local district (or prosecuting) attorney.

Companies that make false advertising claims can face lawsuits from more than just government watchdogs--competitors and consumers can also bring private lawsuits.

How the FTC Enforces Unlawful Advertising Laws

The FTC mostly relies on consumers and competitors to report unlawful advertising. It typically follows a series of steps when enforcing false advertising claims. When its investigation finds that an ad is deceptive, the FTC sends a warning letter to the advertiser. If that doesn't work, the FTC can issue a cease-and-desist order (which is a stronger demand to stop the false advertising) and, if that doesn't work, it can go to court and ask for an injunction against the company (a judge's order to stop the advertising). The FTC also has the authority to issue fines up to $43,792 per day to companies that violate advertising laws.

The FTC has historically been able to collect large amounts of damages on behalf of consumers, but that ability was sharply curtailed by the U.S. Supreme Court in 2021 ( AMG Capital Management, LLC et al. v. Federal Trade Commission, No. 19-508, 593 U.S. ___ (2021).) Although the FTC retains the ability to collect some restitution on behalf of consumers, the process will be slower and more difficult. Observers predict that aggressive action will shift to those states whose laws explicitly give their agencies broad abilities to seek damages.

How States Enforce Unlawful Advertising Laws

State and local officials can also usually seek court orders to stop unlawful advertising, and they can bring civil suits to compensate consumers. Consumers also have the right to sue advertisers under state consumer protection laws, in which they can seek refunds and other compensation. Lawsuits brought by a large group of consumers (called a class action) are particularly potent, because the combined damages of the class members are likely to be very high, prompting the target companies to take these suits very seriously.

What Is False, Misleading, or Unfair Advertising?

The terms "false," "misleading", or "unfair advertising" distinguish different instances of unlawful advertising, but they each refer to advertising that is false in some way.

The law requires you to be truthful when you advertise a product or service. What you say in your ad shouldn't deceive or mislead customers into thinking your product or service can do something it can't. Unlawful advertising can be an outright falsehood, such as-"Big Health herbal supplements cure the common cold," or it can mislead customers by implying something is true when it's not. It would be unlawful to advertise that "Big Health herbal supplements kill the germs that cause common colds," because you are implying that the supplements cure colds even though you don't expressly say so.

When advertising makes a false or misleading claim about a competitor, it is considered unfair advertising.

Where you advertise -- in print, on the Internet, TV, radio and even in your store—doesn't matter. Importantly, it also does not matter whether you intended to deceive. In practice, these requirements boil down to seven rules:

  1. Be accurate. Your advertising should tell readers or viewers exactly what they are purchasing.

For example, you can use terms "organic," "certified organic," or "100% organic" only if the product has been certified organic by the U.S. Department of Agriculture (USDA), and all of the ingredients in the product are also certified by the USDA. Let's say you manufacture and market dog treats using USDA certified organic beef, but your recipe also includes molasses that is not organic. You can say your treats are made using organic beef, but you cannot call your dog treats organic, because they include non-organic ingredients.

  1. Back up claims. If you are advertising the benefits of a product, especially healthcare or wellness products for weight loss, improving memory, reducing wrinkles, and the like, you must be able to support your claims with valid research or studies.

For example, you can advertise that a facial cream will reduce the appearance of wrinkles, but you can't say that the cream will get rid of wrinkles unless you can back up your claim with research or clinical trials conducted by a reputable organization, such as a university or hospital.

Your product must also be the single reason that the results you claim were achieved. Let's say you've put your weight loss supplement through the expense of clinical trials, and the tests showed that subjects lost weight on your product. If the test subjects also followed a restricted diet and an exercise program, your advertising will have to clearly state that exercise and diet played a role in the results.

  1. Be fair to competitors. If your advertising compares your product or service to a competitor, you must compare all the features and benefits, not just the ones that compare favorably to your competitors.

For example, let's say your cleaning service, Rosie Sunshine, charges fees based on a sliding scale for the size of the home, and your competitor charges a flat fee. You can't say Rosie Sunshine is less expensive than your competitor if the lesser charges apply only to homes of a certain size.

  1. Make sure advertised products are available. When you advertise an item on sale, you'll need to have sufficient inventory of the item or clearly state in your ad that supply is limited. Grocers in some states must issue rain checks allowing consumers to purchase an item at the advertised price at a later date if supply runs out during the sale period. If you're selling a close-out item you'll never carry again, your advertising should say that supply is limited.
  1. Be truthful about pricing. Don't advertise a discounted price unless you have actually sold the item at the full price. Don't offer an item that is not actually in stock at a lower price and then try to sell a different, more expensive item to the shopper. (This tactic is commonly called ‘bait and switch.')

Let's say you own a clothing store, and you got a great deal on a supply of dresses from your wholesaler. The wholesaler previously sold the dresses for $50 but gave you a 25% discount on the price, and you decided to pass along the discount to your customers. You can't advertise that your dresses are discounted 25% because you never sold those dresses at a higher price.

  1. Be upfront about testimonials and endorsements. Get permission before using testimonials, endorsements, or published reviews of your company, product or service in your advertising and marketing. If your local newspaper published a glowing review of your restaurant, for example, get permission to use it before putting it on your website or including it in your ad.
  1. Use the term "free" only when it truly is. If you offer a gift or a second item free with a purchase, you cannot mark up the price to include the cost of that gift or second item. When you offer a buy-one-get-one-free promotion, clearly state the terms, such as the second item must be of equal or lesser value than the first.

Advertising Your Credit Terms

The way you describe your company's credit terms is subject to the same rules about truthfulness as the products you advertise. You should include details in your advertising about your credit terms, including interest rates, down payment requirements, and terms of repayment. Don't advertise that you offer "easy credit" if you:

  • refuse credit to those who don't have a good credit rating, or offer them harsher terms than those you extend to customers with better ratings, or
  • employ very aggressive collection techniques when buyers fall behind in payments.

Additional Rules Apply to Some Industries

The FTC revises regulations to adapt to emerging industries and new products. For example, the agency issued a guide to the use of environmental claims when terms like "green" and "eco-friendly" came into use. It places additional restrictions on advertising for certain industries (such as alcohol and tobacco); and on advertising for certain markets, such as ads aimed at children.

Advertising for some products and services might fall under the jurisdiction of other government agencies in addition to the FTC and state laws. For example, while the FTC handles advertising of over-the-counter medications, the Food and Drug Administration (FDA) oversees how manufacturers label these products. Separate government agencies also oversee advertising for airlines, banks, insurance companies, financial services, and other industries.

When Your Ad Doesn't Look Like an Ad

As companies try to break through the clutter and stand apart, many are using newer marketing tactics like social media influencers, advertorials, and other types of content that don't look like traditional ads. These types of ads, known as native advertising, usually run online, but they can also be found in traditional print publications. Because these ads look similar to the informational content available from journalists and experts, consumers can be misled into thinking they were produced by objective third parties. When you offer these types of ads, you must disclose that you paid for or contributed to the content. Here are some examples:

  • A software company produces a YouTube video featuring an interviewer and a company executive, who answers questions about the product as if being interviewed on a news show.
  • A fashion manufacturer pays an e-magazine to run an article about fashion trends, featuring only the manufacturer's products.
  • A cosmetics manufacturer pays a social media influencer to demonstrate and endorse its new makeup online, or
  • A real estate company buys ad space in a local newspaper and uses it to publish a how-to article about home buying that also points out the company's experience and success.

Talk to a Lawyer

Need help? Start here.

How it Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you
Get Professional Help

Talk to a Business Law attorney.

How It Works

  1. Briefly tell us about your case
  2. Provide your contact information
  3. Choose attorneys to contact you