Advertising and Promotions Law Essentials for Small-Business Owners

rsz_computerwithphone by Tim Parker on June 6, 2013
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You know that lying about your products and services can land you in hot water, but there’s a lot more to “truth in advertising” than just being honest.

What are the rules around how you can advertise and promote your products and services? The Intuit Small Business Blog recently reached out to a few marketing experts and attorneys for key advice related to advertising and promotions law.

Understand What “Truth” Means

Marketing and intellectual property law attorney Sharon Toerek explains that the claims you make about your product must not only be true, but also verifiable.

“The advertiser must retain documentation of any substantiation (such as research, product testing, etc.) that supports its claims,” Toerek says. “Additionally, if a marketer intends to use competitive claims in its advertising, the claims about the competing products must also be truthful, verifiable, and substantiated.”

Don’t Say “Free” If Something Isn’t

Randall Hull, chief creative officer at The Brand Ranch, says that one of the most misused words in advertising is “free.”

Companies need to be very careful about using the word “free” because saying something is “free” when it is included in the overall price or conditioned by purchase, does not meet the [FTC] standard of free.” There cannot be any unstated terms or hidden fees and surcharges that qualify the offer — you must state them clearly and conspicuously.

Hull says, “Check with the Attorney General’s office in the state where the business plans to advertise to fully understand how that state defines the parameters of these types of promotions.”

Make Sure Your Promotion Isn’t a Lottery

“Often, small businesses will unknowingly put together and execute an illegal lottery, instead of a legal sweepstakes or contest,” warns Scott Hamula, an associate professor and chair of strategic communication at Ithaca College. “In most states, lotteries are illegal, unless you are the state.”

Hamula says that if a promotion fails any one of these three lottery criteria, it’s probably legal. If all three are true, you’re in trouble:

  • Participation requires consideration (such as an entry fee);
  • Winning is determined by chance; and
  • A prize goes to the winner.

“Most businesses fail the first criteria by including ‘no purchase is necessary’ as a disclaimer. However, some businesses may try to require that you ‘must be present to win.’ This is problematic in some states that categorize, ‘your presence’ as a form of consideration,” Hamula says.

“If a business wants to create a pay-to-play promotion, it could do so legally by failing the second criterion by creating a contest, not a sweepstakes. Contests require skill to win, hence removing the ‘chance’ element from the equation.”

Don’t Use Misleading Images

“Avoid misleading photographs or illustrations that exaggerate the attributes of your product or service,” Hull says.

“For example, showing elements of your product larger than they are, only showing a product assembled when it is sold unassembled, and not providing a clear statement that it is sold unassembled may result in a false advertising claim.”

Educate Yourself

Advertising law isn’t easy to comprehend, but the Better Business Bureau can help. It publishes a Code of Advertising and maintains a resource library of FTC advertising rules.

The Small Business Administration also has helpful resources including guidelines for product labeling, telemarketing, and industry-specific advice.

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