Guidelines for Advertising and Marketing on the Internet – Marketing Degree Resources
Here are some legal guidelines for marketing and advertising on the Internet. This will help you understand some general rules and legalities about privacy and important acts when putting materials out on the web. Take a look at our other useful resources on marketing to help you learn more about the industry.
Websites and Internet connections are relatively new in the world of marketing and advertising compared to TV, print, telephone, and other advertising for brick-and-mortar or mailed products. There are many laws that protect consumers and regulated advertising and marketing plans in the older media, and those laws also apply to Internet-based advertising, marketing, and their sales. There are also some new laws and regulations to protect things like users’ online privacy and other Internet-specific situations. For a more thorough explanation see the Federal Trade Commission’s website.
General Rules and Laws
The Federal Trade Commission Act created the The Federal Trade Commission (FTC) and charged it with protecting consumers from unfair trade practices. These protections include the Clayton and Federal Trade Commission Acts, antitrust laws, and consumer-protection laws. Of the major protections the FTC looks for, the key element applicable to online advertising and marketing is deceptive practices. Commonly called false advertising, this protection is defined by two major elements: what it is like to cause and the amount of injury that will result. A charge of false advertising will likely apply if an ad or campaign is likely to deceive consumers and affect consumers’ decisions on buying a service or product. False advertising will also apply if the likely loss to the consumer is significant, avoidable, and not compensated by other advantages.
These regulations are why so much attention is paid to no-money-down offers or only-$20-a-month deals. If there are purchasing requirements or signing fees or necessary ad-ons that make the offer money-down or more than $20 a month, then the ads that drew customers to the offer or deal or purchase are fraudulent and illegal. There must be a way for the customer to get described goods or services for the stated rate. Any statements made must be verifiable and accurate. An Internet service provider cannot claim to provide unlimited data access and then limit the access in any way. Any claims not directly related to services or products must also be truthful. An ad cannot claim a product has a customer approval without the research. Nor can any claim be made that wasn’t actually discovered. If research found that fifty-percent of a carpet cleaner’s customers would recommend the cleaner to friends, an ad cannot claim eighty-percent (or ninety or even “most”) of their customers would recommend them. The FTC Act applies to all advertising and marketing medium. The Act was signed into law in 1914, well before the invention of the television, so it is not hard to see that it applied to the Internet and web ads and marketing the second they appeared.
Third parties are also potentially liable. A marketing or advertising company cannot make any claims the company could not make. Any party found to be lying or concealing information deliberately can be charged and fined by the FTC. If the company hiring the advertising company lied to the advertisers then they are most likely to be charged. If the advertising company made claims in ads they could not verify then they are most likely to be charged. There are, of course, responsibilities. A company that claims to not review ads before distribution, and would likely see unsubstantiated claims then, might be seen as suspicious and potentially culpable. Even catalog marketers, or website hosts might be charged as complicit in the fraudulent advertising. The FTC will consider the involvement between marketers and the hiring company, but the FTC will also reason what the marketing company should have known or should have asked about. Claims that a company makes about a product should be somehow supported. Any disclosures, qualifiers, exceptions must be visible, legible, and comprehensible to the average reader. If there are limitations to a claim, like the great rate is only for first-time buyers, then that needs to be visible and understood by the viewer. If a market audience is largely Spanish speaking but the qualifying terms are in English, this could be seen as fraudulent advertising.
Any demonstrations must be under expected use. Much like testing and research of a product or service must be accurate and realistic, demonstrations cannot use specially constructed situations to make a product look faster, more durable, or any advantage it would gain from being used other than how a buyer expects to use it. Headphones advertised as perfect for workouts might be considered fraudulent if the headphones do not resist damage from sweat. Advertising to children is a complex topic. Children are less able to analyze claims and promises next to a product. Children are easy to lie to, even if it is unintentional. See the Children’s Advertising Review Unit (CARU) of the Council of Better Business Bureaus for a detailed list of rules and guidelines on advertising to children.
For more general information on advertising online, see the FTC’s online guidelines for how to advertise online without fraudulent advertising. This includes necessary disclosures and rules for the Internet, and how other FTC regulations for print and other media apply to online advertising.
The reverse of the amazing ability of the Internet to distribute and provide information almost anywhere at astounding speeds is the ability to collect information about people by people who should not have the access. As early as 1998, the FTC performed a study on privacy of websites and the measures and warnings provided to online users. In 2000, the FTC performed a similar privacy study and found many websites were still not providing details of what information was collected (or that it was being collected at all), how it was used, or what means were being taken to protect it. Some of the new regulations include the Gramm-Leach-Bliley Act, which requires financial institutions to inform customers of how they share personal information and to protect personal data. The Children’s Online Privacy Protection Act details what information can be collected from children and frequently requires parental agreement to collect data. The Health Breach Notification Rule determines what happens if online health data is compromised, including telling everyone whose data had been exposed, telling the FTC, and in many cases telling the media.
There are workshops, documents, and details and news reports of cases filed by the FTC. The new subjects of security and privacy include companies tracking individual consumers, companies keeping files on employees, use of credit reports. You can find more details, information, studies, and regulations on the FTC’s website.
Federal Trade Commission Laws
In addition to online concerns, the FTC has almost a hundred years of consumer protections to enforce. As these are trade laws and regulations, it is likely these can affect or be affected by online advertising and marketing because these actions lead to sales and trade, so it pays to understand even broad outlines of what the FTC will enforce and why.
Truth in Lending Act
The Truth in Lending Act requires anyone providing credit to display details of charges, fees, and interest related to credit payments. This act provides for the annual percent rate used in many credit card advertisements. It stipulates other requirements for advertising credit. See websites like GPO for details on this act.
Fair Credit Billing Act
The Fair Credit Billing Act provides protections for buyers who use credit to purchase goods or services. Sellers who receive payment through credit must respond to billing concerns in writing, investigate billing errors, and they cannot take adverse action against a buyer’s credit rating before the result of an investigation. There are also buyer protections during disputes and a requirement to apply payments to a buyers account quickly. See websites like CreditorWeb for details on this act.
Fair Credit Reporting Act
The Fair Credit Reporting Act requires protections for users of credit from the companies that derive the worth of the user’s credit. Companies who provide credit must protect the confidentiality of the information, the accuracy, and only provide the data for legitimate uses. Credit companies must allow users to see information on their credit for verification or disputes. See websites like Epic for more details on this act.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act requires credit to be provided based solely on a credit user’s ability to fulfill the credit requirements. Credit may not be provided or restricted based on race, gender, religious affiliation, national origin, marital status, age, or use of public assistance. Credit providers must give a reason for any denial of credit. For more information as a user of credit, provider, or insurer, and to find out why all these groups use credit scores, see these articles or other websites like the FTC, Better Business Bureau, Consumer Reports, Small Business Association, or Money Central.
- Performing Pre-Employment Background Checks
- Using Consumer Reports: What Employers Need to Know
- Why Do Insurers Need to Know Your Credit Score?
- Consumer Reports: What Insurers Need to Know.
Electronic Fund Transfer Act
The Electronic Fund Transfer Act provides protections for users of electronic systems (online or phone) to move money. The act determines methods for error prevention and recovery. It describes limits for losses in case of unauthorized transfers.
Consumer Leasing Act
The Consumer Leasing Act protects consumers when property is leased for personal or family uses for more than four months. These protections include describing costs and terms before signing and limits how much can be charged in breaking a lease agreement.
Advertising and Marketing Issues
There are many parts of advertising and marketing that fall under the FTC’s jurisdiction. Most of these relate to the kinds of things sold and how. This is a list of common marketing strategies and some of the problems that can occur.
Sometimes called network or matrix marketing, this form of sales is where the pyramid scheme concept comes from. The illegal form of multi-level marketing is when a seller receives income only for recruiting other people to be sellers who are supposed to recruit other sellers. At some point, usually before anyone but the beginner of the scheme makes any significant money, the market becomes saturated with sellers who can no longer sell a product because there are so many sellers.
This is different from a more accepted multi-level system where a seller makes income from what he or she sells in addition to a smaller percentage of what his or her recruits sell. For more information on multi-level marketing see the MLM Watch website.
Any business association or franchise sale must be preceded by documentation presented to the buyer ten days before the sale. This disclosure of the business the buyer is purchasing or buying into must have:
- Contact information of other buyers
- Audited financial statement of the seller
- Experience and other background of all of the business’s executives
- List of responsibilities of both the seller and the buy for after the sale is made
- Any sales or income claims the seller makes must be documented, such as data on other buyers who have performed up to the seller’s claims.
Any sales of franchise rights or other business association agreements must comply with FTC regulations on the sales of these ventures. See the title 16 of the commercial practices rules at the FTC website for more details.
A green product is a recent development in advertising. With this awareness in consumers came a value to producers and providers to make their products and services more environmentally friendly. But much like not being able to claim a paper shredder can tear 50 sheets of paper when it cannot tear more than 25, advertising cannot claim a product was made or a service is done in some way that is untrue.
The word free is used in many ways for selling. Free services with purchase, free item with purchase of another (buy-one-get-one) or buying something comes with something else, free. Anything free must not create a cost increase in the accompanying purchase. Consult this article from Alllaw.com for more explanation on the use of free in advertising.
There are a number of considerations when selling jewelry. Because of the variations on how precious metals like gold, silver, and platinum can be graded for their purity and precious stones like diamonds, pearls, emeralds are graded for flaws with little ability to see it in the final product, there are specific words and phrases that can and cannot be used in advertising. Flawless is a word that can be used to describe a design of a car or a bridge, but flawless in describing a diamond has a specific meaning. Know what phrases like gold-plated, 24 karat, cultured (pearls) mean before you use them and prevent misleading customers and risking FTC involv.ment. See this guide from Justia.com or something similar for more details on words with specific meanings in the jewelry industry.
Mail and Telephone Orders
Mail-in orders have been around a long time and it is not a long leap to phoning an order in, and then to ordering something through e-mail or a website. For being around a long time, there are a number of rules and regulations to define how to do it. Like how long it will take to deliver a product. There must be a reason, rather than wishful thinking or a wild guess, as to how long shipping will take. Like any other thing declared in an advertisement, a claim has to be based on something. And if a product cannot be shipped in time there must be allowance for the customer to cancel. Shipping updates can be done by phone or e-mail if there is a reasonable idea the customer is getting any messages. For long delays (more than a month) or second delays, customer consent is needed otherwise the cash or credit must be refunded immediately. Check the FTC’s website for details mailing products and order requirements.
Negative Option Rule
The sales method for a book-of-the-month club or free-trial offer is regulated by the Negative Option Rule. These kinds of sales must be detailed before any agreement or payment is made. There is also a requirement to tell the buyer before shipping any products so the buyer can decline the product. For more information on the Negative Option Rule and subscription selling see this article from Creditcards.com or the FTC website.
Originally pay-per-call phone numbers were limited to the 900 prefix, but with use and income and interest numbers like 976 are used as well. And all these numbers have restrictions in ads: the cost of the call must be clearly disclosed. Any number that is connected to betting, focuses on people under 18, or is a non-federal organization providing information on federal programs must have even more detailed disclosures. For more information see the Telephone Disclosure and Dispute Resolution from the Cornell law website, this website from the FTC, or other similar information sources.
The rules on telemarketing sales are very specific. Most order-by-phone solicitations will not be affected by the telemarketing rules. Advertisements for credit repair, loans for up-front fees, or investment opportunities have other regulations and required disclosures. General phone solicitations, including non-profit calls made by for-profit companies, must follow the telesales rules like not calling anyone on the national Do Not Call list, notification of certain information, and callers not misrepresenting themselves or the organization or what it does. For more details and help in complying with the Telemarketing Sales Rule see this webpage from the Direct Marketing Association.
Tools within Advertisements
Several tools are common in advertisements: testimonials, endorsements, warranties, and guarantees. These methods of selling have certain potential for fraud, which the FTC focuses on.
A testimonial must be from an average user of a product or service. Stating that the results might vary or not all users will get the same results is not sufficient. A weight-loss program depicting testimonials of people who lost 20, 30, or 50 pounds is likely to require statements like, results not typical, to explain what an average user is more likely to experience. For more information and help with testimonials, see this article or the FTC website.
Endorsements using famous people, characters, or voices to sell a product must explain the relationship between the person and the product or company, whether he or she or they are paid, have positions with the company, use the product for free. For more information and help with endorsements, see this article or the FTC website.
Any mention of a warranty in an advertisement must have a description of how to get the refund. For detailed information on using warranties, see the GPO website.
Guarantee has a specific meaning in advertisements that is sometimes forgotten in everyday speech. Phrases like “satisfaction or your money back, guaranteed,” means a refund must be provided for any reason. Any terms of the guarantee, whether to get the guarantee or limits of the guarantee, must be explained in the advertisement. For more detail on how to handle guaranties in advertising see this website from Justia.com, Vlex, or Small Business Notes.
Textile and Wool Acts
The Textile and Wool Acts are regulations but they have a specific requirement for advertisements. All advertisements, print or online, that sell textiles or wool must provide a country of origin for the material. Descriptions of types of fibers must also use the generic names in percentage of a fiber used. For details in writing advertisements for wool or textiles see the Missouribusiness.net website, the Openregs.com website, or a similar source.
Made in the U.S.A. Label
According to the Enforcement Policy Statement on U.S. Origin Claims to get a label of “Made in the U.S.A.” a product must be entirely or almost entirely made and manufactured in the United States. This includes advertising for products made, or not, in the United States.
The FTC does routine checks for online fraudulent advertising, much like print, TV, and other media. Advertising companies, website hosts, or production or service companies can be fined up to $16,000 per occurrence. Federal court injunctions can force $16,000 in penalties per occurrence with civil or criminal contempt charges and jail for failure to pay. Finally, refunds for damages through civil lawsuits are possible. For more details on penalties of non-compliance see this website by Crest Capital.
- Call toll-free: 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261
- For free information on consumer advertising concerns from the FTC see their website.
- To file a compliant with the FTC or to sign up with the national Do Not Call list, go to their website.
- For help with your small business’s advertising and staying compliant with FTC regulations see their website.
- To file your complaint in the FTC’s Consumer Sentinel Network, go to their website.