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General Outline of Advertising Law Advertising relies on a business being able to protect its product's identification -- its brand name or trademark. The law offers such protection: in the United States, mainly through the Lanham Act, 15 USC §1051 (also known as The Trademark Act of 1946). The law places limits on how a business promotes its product and name through traditional common law restrictions, through state laws and regulations and through federal law and regulations. Federal law, the most important source of advertising restrictions, is found in the Federal Trade Commission (FTC) Act, 15 U.S.C. § 45. The FTC has power to issue regulations governing advertising and interpreting federal law. As well, State Attorneys General often enforce state-law based advertising restrictions. A business has remedies for unfair competition; unfair competition may include false advertising, trade libel, and trademark infringement. Business will also need to know when a media outlet can reject advertisements and when a media outlet is liable for damage caused by an advertisement. The ability of states and the FTC to restrict advertisements is itself limited by the First Amendment to the U.S. Constitution, which provides for the right to free speech. (Many U.S. Supreme Court address what limits the First Amendment places on restrictions on advertisements.) Many questions and practical considerations arise when a business transmits information, engages in advertising, or is affected by a competitor's advertisements. For example, a media outlet may be an internet web page allowing members of the public to post comments about publicly traded companies. If some of those posts are false but nevertheless cause the stock price of a publicly-traded company to drop, when can the internet provider be held liable to the publicly-traded company? What if the posts are not clearly false? What if the internet outlet allows posts to be made anonymously? Practical considerations must be kept in mind at every step of the way: certainly the company may have a good case against the individual doing the posting, but what value is that case if the individual has little or no assets to pay for the damages? In such a case, the business may be forced to make out a case against the internet web page provider itself. A company advertising needs also to know that under Section 5 of the FTC Act, the FTC has power to prohibit "unfair methods of competition." FTC pronouncements establish three ways an advertisement may be unfair. First, an advertisement may be deceptive. Deception includes material omissions, express misrepresentations, implied misrepresentations. Second, an advertisement may be unfair. Unfairness centers around causing injury that is reasonably avoidable. Third, an advertiser must be able to substantiate specific claims, i.e., documentation of tests performed before issuing the advertisement. Those potentially liable include not only the manufacturer or service provider, but also the advertising agency, the distributor of the advertisement, anyone who helped in its preparation, a website provider, catalog marketers. Such facilitators of an advertisement are normally only liable when they knew or should have known of the unfairness of the advertisement. Specific guidance governs many specific types of advertising including:
The FTC web site contains much information: http://www.ftc.gov. Of particular
help is a document entitled "Frequently Asked Advertising Questions:
A Guide for Small Business" found at http://www.ftc.gov/bcp/conline/pubs/buspubs/ad-faqs.htm. .
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Law Office of Michael Trevelline |
