False advertising occurs when an ad crosses the line and makes claims that mislead consumers. There are three main types of false advertising. In general terms they are:
- Disparaging a competitor’s product through claims that prove to be false.
- Using unsupported/false research to assert claims.
- Failing to disclose material information that the consumer should know. This is defined by the FTC as an omission, practice, or representation that “is likely to affect the consumer’s conduct or decision with regard to a product or service.”
Who Reports False Advertising?
Generally, consumers and competitors are the ones that report claims of false advertising to the FTC. The FTC can decide to take action either informally or through formal means. Formal methods include:
- Civil lawsuits
- Injunctions to stop an ad from running during an investigation
- Cease and desist orders
- Requiring corrective ads
- Pretty hefty fines
Examples of False Advertising
Astroturfing is an example of false advertisement that has been making the news recently. The New York Attorney General’s Office recently conducted an investigation that resulted in more 15 businesses being fined for using SEO firms to post false reviews on sites such as Yelp. Not only is this false advertising but reviewers were also being compensated for their fake reviews, a practice which is in direct violation of FTC rules.
You may be wondering why this is so bad. What’s the big deal with a few fake reviews, right? Well, arguably just a few fraudulent reviews can hurt competitors. Here’s how this would work: let’s say that you’re visiting a new city and looking for a place to eat. After checking restaurant reviews on Google for those located nearest you, which are you most likely to choose- the place with 3 stars and average (honest) reviews or the place with 4 stars and rave reviews? Let’s be honest, the prospect of food poisoning is never a great one, especially not when you’re far away from home. Thus, the local competitor with a less than stellar online rating loses out on potential business.
Another example involves the search engine Bing. The validity of Bing’s cutesy “Bing it On,” challenge has been called into question by many, including Yale professor Ian Ayers. Professor Ayers duplicated the study conducted in the “Bing it On” challenge and found that Google’s results actually outrank Bing’s, with similar conclusions being reached by others taking the challenge themselves.
Avoid This in Your Marketing
There are a few rules of thumb to follow when it comes to avoiding having claims of false advertisement being brought against you. This list isn’t all-inclusive, but it does cover some general points.
- Remember that state laws are just as important as federal laws. Although the FTC is usually the first entity that comes to mind for regulatory issues in advertising, states also have a say. For example, in Washington State the font in an advertising disclosure must be 10pt or larger. So put that magnifying glass away.
- Always check your facts. Then check them again. This is to ensure that your advertisement is not misleading, such as making false claims about the effectiveness of a product or making unfounded disparaging remarks about a competitor’s product.
For me, honesty is the best policy in order to avoid the possible ramifications for false advertisement. If you’re having second thoughts about whether or not you’ve crossed into the territory of false advertising with your ad you may want to step back and ask yourself – should I be that close to the line to begin with?