The phrase, “truth in advertising,” is often used mockingly, perhaps arising from the days when advertising was something only quack remedies relied on to sell products. In those bad old days, hyperbole, exaggeration and bare-faced lying were common. But as advertising became the driver of commerce, the federal government enacted guidelines to protect consumers from less-than-truthful advertising.
This job fell to the Federal Trade Commission, under its purview of preventing fraud, deception and unfair practices, providing some protections for consumers and ensuring a competitive marketplace. While today’s advertising industry likes to claim it is self-regulating, the FTC has established guidelines in some areas to ensure deceptive advertising can be punished, and ultimately discouraged.
Advertising agencies need to refer to FTC advertising guidelines when creating ads for clients, because the FTC will hold agencies liable for false or misleading claims by their clients.
“Advertising agencies have a duty to independently check on the information used to substantiate ad claims. They may not rely on an advertiser’s assurance that the claims are substantiated. In determining whether an ad agency should be held liable, the FTC looks at:
- The extent of the agency’s participation in the preparation of the challenged ad; and
- Whether the agency knew or should have known that the ad included false or deceptive claims.”
In other words, our job is to push clients to toe the line on deceptive claims; failing that, if we air or print those claims, we can be held liable by the FTC. So let’s review the guidelines.
How does the FTC determine if an ad is deceptive?
A typical inquiry follows these steps:
Taking the point of view of the “reasonable consumer,” the FTC looks at the ad in context, examining its words, phrases, and images to determine what it conveys to consumers. Specifically, it examines claims made by the advertiser and how those claims may be understood by a reasonable consumer.
A “material” claim is one important to a consumer’s decision to buy or use the product. Representations about a product’s performance, features, safety, price, or effectiveness are examples of material claims.
An express claim is literally made in the ad. E.g., “ABC Mouthwash prevents colds.”
An implied claim is one made indirectly or by inference. “ABC Mouthwash kills the germs that cause colds” contains an implied claim. While the ad doesn't literally say the product will prevent colds, it would be reasonable for a consumer to conclude from the statement that the product will prevent colds.
Under the law, advertisers must prove express and implied advertising claims; the FTC requires advertisers to have such proofs before an ad runs.
The FTC also looks at what the ad does not say—that is, whether failure to include information leaves consumers with a misimpression about the product.
Why Unsupportable Express Claims Are Dangerous
Making advertising claims that the company cannot back up can be very costly, and not just in terms of money; brand damage can also be extensive. For example, the online company Lumosity, which claimed that playing games could improve cognitive function, memory and even delay the mental declines of aging, was charged by the FTC with making claims of health benefits it could not back up with science.* The firm was fined $2 million, but faces a $50 million judgment. Worse, they are now prohibited from making the claims that are essentially the foundation of their entire business model.
What kind of evidence must a company have to support the claims in its ads?
Before a company runs an ad, it has to have a reasonable basis for product claims. “Reasonable basis” is defined as having objective evidence supporting the claim. The kind of evidence depends on the claim. At a minimum, an advertiser must have the level of evidence that it says it has. For example, the statement, “Two out of three doctors recommend ABC Pain Reliever,” must be supported by a reliable survey to that effect. If the ad isn’t specific, the FTC looks at several factors to determine the necessary level of proof, including what experts in the field think is needed to support the claim. In most cases, ads that make health or safety claims must be supported by “competent and reliable scientific evidence,” or tests, studies, or other scientific evidence that has been evaluated by people qualified to review it. In addition, any tests or studies must be conducted using methods that experts in the field accept as accurate; and companies should be careful about being seen as too cozy with the researchers conducting scientific studies.
No industry has found more ways to do an end run around false or deceptive claims than the homeopathic remedy segment of the vitamins industry. Homeopathic products (see Zicam, Airborne, and a host of so-called “immune boosters” as examples) are not categorized as drugs, so they are not regulated by the FDA. But they do have to do some fancy stepping around their claims to avoid drawing the attention of the FTC. Airborne was, in fact, sued by the FTC for falsely claiming it could ward off the harmful bacteria and germs that caused the common cold or flu. The firm they cited as having conducted a study providing evidence of the product’s effectiveness proved to not even be a clinical lab or research firm, and the study was sponsored by Airborne’s manufacturer. The company settled, paying $23.3 million, and had to cease making such claims. But drug stores still sell the product, and people still buy their (carefully rewritten) sales pitch. Caveat emptor.
Do your due diligence when working with clients who want to make specific, perhaps exaggerated claims for their products. Your agency does have exposure regarding clients’ false or misleading claims, and if you abet the client in promoting such claims, you risk financial damage as well as a tainted agency brand and reputation.
*Lumosity was also found to have failed to disclose that many customer testimonials had been paid for with substantial rewards, including lifetime subscriptions and iPads. But disclosure related to testimonials is another subject…
