Why Does The Federal Trade Commission Care About Marketing?
People talk about the Federal Trade Commission (FTC) a lot, but what does the FTC really do? Well, I’m glad you asked!
The FTC’s main job is to protect consumers — if you buy stuff, that’s you! The FTC protects consumers by doing three main things:
1. making rules,
2. investigating suspected rule violations, and
3. bringing lawsuits against people who break the rules.
When it comes to consumers and marketing or advertising, the FTC makes clear that “[u]nder the law, claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence based.” (FTC Business Center – Advertising and Marketing, https://www.ftc.gov/tips-advice/business-center/advertising-and-marketing).
In this blog post, we are going to peel back one layer of the onion and consider how the FTC Act protects consumers by prohibiting marketeers from engaging in “unfair or deceptive acts or practices.”
In today’s online world, it is important to note that the Commission applies the same rigor and measure to determine whether online marketing and advertising is unfair or deceptive as it does for any other kind of marketing or advertising activity. So, no surprise, if you are marketing or advertising online, you have to follow the same rules as if you were distributing a flyer, or taking out a print, television, or radio ad.
At this point, you might be scratching your head and thinking, “ok, I hear you, but how do I know if an advertisement is unfair? Also, how do I know if an advertisement is deceptive?” Good questions!
First, an advertisement is unfair if it:
- confuses consumers and because of that confusion, the consumer is harmed,
- offends public policy,
- is immoral, unethical, or unscrupulous, or
- uses information obtained unethically or unfairly.
The question of whether an advertisement is deceptive may sound a bit more straightforward than the question of whether it is unfair — though is anything really straightforward when it comes to marketing and advertising?
The FTC Act tells us that an advertisement is deceptive if it:
- contains a false statement,
- omits material information, or
- misleads a reasonable customer.
Practices that could be considered unfair or deceptive include things that most of you have experience or observed, like:
- Lying about anything, e.g., “returns cheerfully accepted,” but returns are difficult to make.
- Making misleading price claims, e.g., “$0 down at signing,” but there are high fees charged at signing.
- False or misleading ingredient claims, e.g., “our hamburgers contain 100% pure beef,” but they also contain weird fillers.
- Misleading quality or performance claims, e.g., “this car gets 50 miles per gallon,” but it really gets 35 miles per gallon in normal use.
- Use of bait and switch techniques, e.g., “eyeliner for sale for $10,” but when you go to buy it, they “just ran out” then offer you a similar product at a higher price.
- Failure to perform promised services, e.g., you paid for a service, but it was either not performed, or not performed to a reasonable standard.
- Failure to meet warranty obligations, e.g., you paid for the extended warranty on your expensive phone, but when it failed and you took it in for warranty service, the service was refused with the claim that this service was not under warranty because you got the phone wet – but you didn’t (do I sound bitter?).
Marketeers who engage in unfair or deceptive marketing or advertising practices could find themselves being investigated by the FTC. If the FTC finds their practices in fact violate the rules, then things could get worse and the marketeer could find itself on the wrong side of a lawsuit with the FTC. My advice is to follow the rules!
References: See www.FTC.gov, and in particular, https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road and https://www.ftc.gov/tips-advice/business-center/advertising-and-marketing