Is Your Ad Deceptive?

I. Introduction   

Small business owners often take out an advertisement in a local
paper or, more in line with the times, advertise on a website.  The
advertisement, however, can sometimes create liability for the business
owner if the ad is found to be deceptive. [1]  This article will
discuss the different sources of the law regarding deceptive
advertising and then generally describe what makes an advertisement
deceptive.  It will then explore the trends and adaptation of the law
regarding web logs and advertising.  In conclusion, this article will
present considerations that a small business owner should take into
account when deciding to post an advertisement.

II.  Sources of Deceptive Advertisement Regulation

Laws regulating deceptive advertising exist at both the state and
federal levels.  Modern advertisement law was shaped in the early
twentieth century with the intention of encouraging the dissemination
of truthful information and sanctioning the spread of false
information. [2]  The Federal Trade Commission Act allows this federal
action and specifically states that the agency is empowered to prevent
the use of unfair or deceptive practices in commerce. [3]  The Lantham
Act also provides a federal cause of action for false advertising. [4] 
Although the Lantham Act primarily focuses on trademarks, unfair
competition is addressed in section 43(a), and creates civil liability
for the use of deceptive advertising in commerce. [5]

Most states have passed their own deceptive trade practices laws.
[6]  These laws are usually similar to their federal counterparts and
are called little FTC (Federal Trade Commission) acts. [7]  The little
FTC acts allow for the state to intervene in situation of unfair trade
practices but unlike the FTC Act, often allow individuals to bring
actions for violations of the state's deceptive trade practice law. [8]

Individuals and business also have avenues to challenge or dispute
deceptive advertising outside of the state or federal government.  The
FTC has stated that local organizations may be in a better position to
resolve local disputes. [9]  The Better Business Bureau is an example
of such an organization that creates incentives for small business
owners to refrain from unfair trade practices.  The National Division
of the Council of Better Business Bureaus offers a forum for both
consumers and competitors to bring claims regarding deceptive
advertising. [10]  The availability of information from organizations
such as the Better Business Bureau provides market incentives for fair
trade practices.  The market often corrects for deceptive
advertisements through lower sales from duped consumers and the
resulting skeptical consumer base. [11]

III.  What is Deceptive Advertising?

The FTC has described its analysis of deceptive advertising to
consist of three elements. [12]  The first element is that the
deception must be a representation, omission, or practice that is
likely to mislead the customer. [13]  In the most obvious situations, a
statement or representation that expresses a claim that is simply
untrue is deceptive advertising.  It is important to note, however,
that the FTC has found an advertisement deceptive through an implied
claim as well. [14]  An implied claim is one that a consumer would
reach when reading the advertisement even if it is not explicitly
stated. [15]  Both express and implied claims require proof that the
claim is true in the order to prevail if the advertisement is
challenged. [16]

The second characteristic that the FTC uses to analyze a deceptive
advertising claim is that of the reasonable consumer. [17]  The
characteristics of the consumer group is considered when judging if an
advertisement is deceptive. [18]  The advertisement is viewed in the
circumstances where it was placed to determine if a consumer would
reasonably reach a conclusion that is false or misleading. [19]  The
advertiser is not liable for any conclusion reached by an extreme
viewpoint or wild train of thought.

The third and final characteristic used in the analysis is to
determine if the representation, omission, or practice is material.
[20]  The question of materiality basically hinges on whether the
representation would affect the consumer's decision regarding the
product. [21]  Statements or omissions on the part of a business that
affect health or safety are also considered to be automatically
material. [22]  The overall aim of this part of the analysis is to
determine if an injury has occurred of if the potential for injury
(economic or health) exists. [23]  Although the characteristics above
do not fully describe all the factors regarding liability for a
deceptive advertisement, this framework generally describes the
characteristics used by the FTC.

IV. Web Logs and Deceptive Advertising

Information advertising is the type of advertising that asserts
factual claims to a wide audience. [24]  It is only when the factual
claims are unproven or simply untrue that the advertiser may be liable
for deceptive advertising. [25]  When the advertisement is not in a
traditional medium, or the advertisement does not specifically endorse
a product, the traditional analysis becomes more difficult.  The
internet has given rise to web logs or 'blogs' that convey information
on everything from consumer products to philosophy.  This type of
information is just as likely to create misleading or untrue
conclusions in the mind of consumers yet is the creator liable for
deceptive advertising?  A pure weblog is unlikely to lead to liability
for deceptive advertising because it does not propose a commercial
transaction.  If the blog only conveys information it is likely not to
be considered commercial speech and not subject to the restrictions of
federal law such as the Lantham Act or the FTC Act. [26]  When blogs
become sponsored, the distinction between non-commercial and commercial
speech becomes more unclear.  If a blog is completely sponsored and is
no longer only disseminating information or entertaining, it becomes
very similar to a traditional advertising campaign. [27]  Regulation
preventing deception of the public should apply here as well. [28] 
Overall, a balancing act must be employed in middle ground situations. 
Courts and regulatory bodies must balance the suppression of speech
against the potential harm to consumers from deceptive messages.

V. Conclusion

The discussion above has a few lessons and implications for the
small business owner.  First, deceptive advertising is regulated on a
variety of levels.  Federal, state, unofficial, and market forces all
regulate advertising.  Despite this myriad of regulation, the framework
for determination of deceptive advertising remains somewhat similar
across these groups.  If an advertisement does not mislead a reasonable
consumer, then the representation, omission, or practice is unlikely to
raise any eyebrows.   Fortunately for the small business owner, the
framework can be applied across regulatory bodies as well as across
media.

Sources:

[1] – Federal Trade Comm'n, Advertising Practices, Answers for Small Business, 3 (2001).

[2] – Ellen P. Goodman, Commercial Speech in an Age of Emerging Technology and Corporate Scandal, 58 S.C.L. Rev. 683, 688 (2007).

[3] – Id.

[4] – Kevin M. Lemley, Resolving the Circuit Split on Standing
in False Advertising Claims and Incorporation of Prudential Standing in
State Deceptive Trade Practices Law: The Quest for Optimal Levels of
Accurate Information in the Marketplace
, 29 U. Ark. Little Rock L. Rev. 283, 285 (2007).

[5] – Goodman, supra note [2] at 689.

[6] – Lemley, supra note [4] at 319.

[7] – Id.

[8] – Id.

[9] – Federal Trade Comm'n, supra note [1] at 4.

[10] – Lemley, supra note [4] at 319.

[11] – Id.

[12] – FTC Policy Statement on Deception, 103 F.T.C. 110, 174 (1984).

[13] – Id.

[14] – Id.

[15] – Federal Trade Comm'n, supra note [1] at 4.

[16] – Id.

[17] – Supra note [12] at 174.

[18] – Id.

[19] – Id.

[20] – Id.

[21] – Id.

[22] – Id.

[23] – Id.

[24] – Goodman, supra note [2] at 700.

[25] – Supra note [12] at 174

[26] – Goodman, supra note [2] at 700.

[27] – Id. at 701.

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