From the October 1998 issue of Startups

We've all seen ads that seem too good to be true, promoting products with descriptions like "the device that kills bugs every time." Fill in the coupon, send in your check and you'll receive two blocks of wood with the following instructions: "Place bug between blocks and press firmly." No wonder advertising was once described by Stephen Butler Leacock as "the science of arresting the human intelligence long enough to get money from it."

As a consumer, false or deceptive advertising can annoy, infuriate, victimize and, in tragic cases, even ruin your life. As an advertiser standing accused of wrongdoing, you may have to answer not only to those consumers, but to your competitors and to government authorities, such as the Federal Trade Commission (FTC) or state attorneys general. If you're found guilty, you may be ordered to repay consumers, pull the ads in question, run a corrective campaign and, in some cases, pay exorbitant damages to your competitors. You could even be subject to criminal penalties.


Marc Diener is an attorney and author of Deal Power: 6 Foolproof Steps to Making Deals of Any Size (Owl Books/Henry Holt). This article contains general information only. If you are concerned about how these issues might affect you, seek independent counsel.

Check Webster's

Legally, the definition of advertising is imprecise and broader than you may expect. It certainly includes much of the "commercial speech" on television, in print, on billboards and on the Internet. But marketing materials, a press release or even a business proposal with limited distribution may also be considered advertising, and are therefore subject to the same restrictions as more standard advertising. Cyberspace presents other gray areas. For example, can what is said in a chat room be considered advertising? In cases where you have any doubt, caution is advised.

Prove It

"It's a fundamental tenet that an advertiser be able to substantiate all claims, expressed or implied," says John Feldman, an attorney who specializes in advertising, promotion and intellectual property law at Arent, Fox, Kintner, Plotkin & Kahn in Washington, DC. Feldman points out this tenet doesn't apply to so-called "puffery"--claims that no reasonable consumer would rely on or that are incapable of substantiation, for example, saying something is the prettiest or the ultimate. But you had better have a reasonable basis for making any kind of objective product claim. If challenged by authorities, what you've done or failed to do to "substantiate" that reasonable basis before the fact will be the issue.

Generally, what is reasonable will depend on many factors: the product, what is being claimed, the benefits of a true claim and the consequences of a false one, what it would cost to substantiate the claim, what experts would consider proper substantiation, and whether some governmental authority has rules or requirements on that point. The FTC and state authorities consider the last two factors most important, and from this, we can take a cue.

As you might imagine, being familiar with the public record of a product is critical. Is it regulated by any government agency? Is there a trade organization which promulgates certain standards? Have similar claims for similar products been challenged? Has the National Advertising Division of the Council of Better Business Bureaus issued any rulings?

When it comes to making a claim, you had also better keep the entire picture in mind--all the evidence, both for and against. You can't ignore the studies that contradict what you plan to claim and rely solely on the ones that support you, nor can you make claims simply because there is some promising research. In this regard, you must make it your business to become extremely well-informed about the claims you want to make.

In many cases, you'll have to have your product evaluated scientifically. For example, if you claim that your exercise equipment tones, strengthens and burns calories, you'll need solid, controlled clinical studies conducted by experts qualified in physiology, biomechanics and kinesiology to substantiate those claims. NordicTrack learned this the hard way when the FTC found it had relied on flawed studies to make weight loss claims about its product. If you're selling a diet product, your claims should be based on a representative sample of everyone who has used it. Similarly, the claim of Dave Del Dotto's Cash Flow System that "you can earn thousands of dollars a month" by using it was successfully challenged by the FTC as being atypical of most of the people using the system.

Watch Out!

All the above guidelines are also applicable to implied or even unintended claims. And here is a pitfall that awaits every advertiser: "Government authorities will consider whether the reasonable consumer would take away a false impression [after seeing or hearing your ad]," warns Feldman. "For example, if you were to claim that something about your product is unique and specially designed to perform a certain task, a consumer might be misled into thinking your product is the only one on the market that can perform that task." Perhaps these are subtle distinctions, but they can expose the unwary advertiser to an awful lot of grief.

Be warned, too, that disclosures are no panacea. A disclosure or disclaimer will not immunize an otherwise deceptive ad from attack. The FTC will look at the ad as a whole. In particular, a phrase such as "results may vary" is deceptive in its own right. While it implies that not everyone will achieve the desired results, it does not dissuade consumers from believing that the results portrayed in the ad are the norm. In these cases, the small print cannot taketh away what the big print has already giveth. As before, what the reasonable consumer would infer from the ad will be key.

One tried-and-true way to bolster the credibility of any ad is to use testimonials from experts, celebrities and real people. Testimonials alone, however, can't substantiate an advertising claim. Moreover, an advertiser can't use statements made by an endorser that the advertiser wouldn't make directly.

If you use the testimony of experts, the endorsement should be based on their use of the product or their actual expertise. If you use real-life consumers, their experience should be typical of what others could expect. Don't use actors to play consumers unless you disclose that fact. Also, never use any person's name or likeness without their permission, unless, of course, you like entering the courtroom as the underdog. Any compensation to or financial ties with any endorser must also be disclosed. For more information, check out the FTC's "Guides Concerning the Use of Endorsements and Testimonials in Advertising" (Volume 16 of the Code of Federal Regulations, Part 255).

Advertising can be exciting, creative and enormously effective when it comes to promoting your product or service. But the next time you undertake it, whether you're designing a simple ad or an entire campaign, remember these words from David Ogilvy's well-known book, Confessions of an Advertising Man: "If you tell lies about a product, you will be found out--either by the government, which will prosecute you, or by the consumer, who will punish you by not buying your product a second time."