Truth in Advertising: A Simple Guide to Stay Compliant with FTC Marketing Rules

What is the FTC?

First, let’s address the role of the FTC. The Federal Trade Commission (FTC) is a U.S. government agency responsible for protecting consumers and promoting competition. One of its primary roles is to ensure that businesses engage in fair and truthful marketing practices. The FTC enforces laws that prohibit deceptive or unfair advertising and requires companies to substantiate their claims with evidence. It also oversees privacy issues, fraud prevention, and anti-competitive business practices. Through these efforts, the FTC helps protect consumers from false or misleading information, especially in marketing and advertising.

What is “Truth in Advertising”?

If you’re a small business owner, online entrepreneur, coach, or consultant, marketing is a key part of your success. But did you know that the Federal Trade Commission (FTC) has strict rules when it comes to advertising? The FTC’s Truth in Advertising laws are designed to ensure that businesses provide clear, honest, and non-misleading information in their advertising. Whether you’re launching an email campaign, running ads, or promoting your services online, it’s essential to follow these rules to avoid penalties.

In this post, we’ll break down what you need to know and provide actionable steps to keep your marketing legal and effective.

What is “Truth in Advertising”?

At its core, the FTC’s Truth in Advertising rules require that:

1. All claims must be truthful and not misleading.
2. You must have evidence to back up your claims.
3. Any disclaimers must be clear and conspicuous.

These principles apply to all types of marketing—whether you’re writing a blog, posting on social media, sending emails, or creating sales pages.

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Key Marketing Pitfalls to Avoid

1. Deceptive Claims
   Misleading or false statements are a major red flag for the FTC. This includes exaggerated benefits, unrealistic promises, or not telling the whole story. Action Tip: Be honest about what your product or service can deliver. Avoid making claims like “earn $10,000 in your first month!” unless you can substantiate it with real data.
2. Not Backing Up Your Claims
   It’s not enough to say your product is “the best” or that it “guarantees results.” The FTC requires that you provide competent and reliable evidence to support your statements, especially if they involve health, income, or safety. Action Tip: If you say your product or service helps people lose weight, build a case study or gather data to support this claim. Keep this documentation ready in case it’s ever requested.
3. Inadequate Disclosures
   If your marketing involves affiliate links, sponsored content, or testimonials, the FTC requires clear disclosures. Not clearly informing your audience that you’re earning money from these recommendations is a violation of the rules. Action Tip: Use simple, clear language when disclosing partnerships or compensation. For example, “I may earn a commission if you purchase through my link” should be easy to find in your content.
4. Using Endorsements Incorrectly
   Testimonials and endorsements must represent genuine customer experiences. The FTC frowns upon using fake reviews or selective positive feedback to create a misleading impression. Action Tip: If you’re sharing a customer testimonial, ensure that it’s a fair reflection of the average experience. Avoid cherry-picking only the most positive feedback unless you state that results may vary.

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Actionable Steps for FTC-Compliant Marketing

1. Be Transparent
   Always be upfront about what your product or service does. Over-promising sets unrealistic expectations and leads to complaints and possible legal trouble.
2. Disclose Affiliations Clearly
   If you’re being paid to promote something, say so. Use clear, concise language that’s hard to miss—this is especially important in social media posts.
3. Provide Evidence
   If you make claims (e.g., “My course helped 500 people start their business!”), make sure you have the documentation to back it up. Keep case studies, testimonials, and data readily available.
4. Use Caution with Testimonials
   Testimonials should reflect real customer experiences. Don’t manipulate or exaggerate them for marketing purposes. If results aren’t typical, be transparent about that.
5. Include Clear Disclaimers
   Don’t hide disclaimers in small print or link them somewhere obscure. The FTC requires them to be clear and conspicuous, meaning your audience can’t miss them.

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If you Want to Learn More, Here are the Key Legal Regulations Behind FTC Truth in Advertising Rules:

1. FTC Act, Section 5: Prohibition Against Deceptive or Unfair Practices
   • What it Covers: This section of the FTC Act is the foundation of the truth-in-advertising rules. It prohibits any deceptive acts or practices in commerce, including false or misleading advertisements.
   • Reference: 15 U.S.C. § 45
   • Link to FTC Guide: FTC’s Deception Policy Statement
   • Explanation: Businesses must ensure their marketing claims are truthful, not misleading, and based on reliable evidence.
2. FTC’s Endorsement Guides: Use of Endorsements and Testimonials in Advertising
   • What it Covers: These guidelines clarify how businesses should disclose material connections (e.g., payments or gifts) between the business and endorsers (including influencers, affiliates, etc.).
   • Reference: 16 CFR Part 255
   • Link to FTC Guide: FTC Endorsement Guides
   • Explanation: If you use endorsements or testimonials, they must reflect the honest opinions and experiences of actual customers. Disclosures about relationships between the advertiser and endorser must be clear and conspicuous.
3. FTC’s Advertising Substantiation Doctrine
   • What it Covers: This doctrine requires businesses to have a reasonable basis for any objective claims made in their advertising, such as health benefits, performance, or cost savings.
   • Reference: 15 U.S.C. § 45 (FTC Act)
   • Link to FTC Guide: FTC’s Advertising FAQ for Small Businesses
   • Explanation: If you make claims like “Lose 10 pounds in one week!” or “Double your income in 30 days!”, you must have competent and reliable evidence to back up those claims.
4. FTC’s “Clear and Conspicuous” Disclosure Standard
   • What it Covers: The FTC requires that any disclosures needed to prevent deception be “clear and conspicuous.” This standard is crucial when making disclaimers about the limits of your product or service, affiliate relationships, or sponsored content.
   • Reference: 16 CFR § 255.5 (part of Endorsement Guides)
   • Link to FTC Guide: FTC’s Dot Com Disclosures
   • Explanation: Disclosures must be placed where consumers can easily see or hear them. They can’t be buried in the fine print or hidden behind multiple clicks on a website.
5. CAN-SPAM Act: Email Marketing Regulations
   • What it Covers: While the CAN-SPAM Act primarily focuses on email marketing, it is important for online entrepreneurs engaged in email marketing to know the rules. It requires truthful subject lines, clear identification as an ad, and easy opt-out methods.
   • Reference: 15 U.S.C. § 7701
   • Link to FTC Guide: CAN-SPAM Act: A Compliance Guide for Business
   • Explanation: If you use email for marketing, you must follow rules that include not misleading recipients and offering a clear way to opt out of future emails.

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And for You Super Overachievers, Additional Resources & Information to Check out:

FTC’s Advertising and Marketing Basics

FTC’s Small Business Guide 

More on Testimonials: 

Testimonials and endorsements must reflect the typical experiences of consumers, unless the ad clearly and conspicuously states otherwise. A statement that not all consumers will get the same results is not enough to qualify a claim. Testimonials and endorsements can’t be used to make a claim that the advertiser itself cannot substantiate.

Connections between an endorser and the company that are unclear or unexpected to a customer also must be disclosed, whether they have to do with a financial arrangement for a favorable endorsement, a position with the company, or stock ownership. Expert endorsements must be based on appropriate tests or evaluations performed by people that have mastered the subject matter.See FTC Guides Concerning Use of Endorsements and Testimonials in Advertising.

Guarantees: 

If your ad uses phrases like “satisfaction guaranteed” or “money-back guarantee,” you must be willing to give full refunds for any reason. You also must tell the consumer the terms of the offer. See Guides for the Advertising of Warranties and Guarantees, A Businessperson’s Guide to Federal Warranty Law, and Consumer Product Warranties.

NonCompliance: What Happens if You Don’t Comply?

The FTC periodically joins with other law enforcement agencies to monitor the Internet for potentially false or deceptive online advertising claims.

If your advertisements don’t comply with the law, you could face enforcement actions or civil lawsuits. For advertisers under the FTC’s jurisdiction, that could mean:

• orders to cease and desist, with fines up to $51,744 per violation should they occur.
• injunctions by federal district courts. Violations of some Commission rules also could result in civil penalties of up to $40,654 per violation. Violations of court orders could result in civil or criminal contempt proceedings.
• in some instances, refunds to consumers for actual damages in civil lawsuits.

FTC’s Notices of Penalty Offenses.

Detailed Illustration of What Not To Do:

See also this sample FTC Press Release regarding action taken against Anik Singhal & Lurn and the FTC Lurn Case Summary, as well as this FTC Blog Post which outlines a very clear and detailed example of WHAT NOT TO DO, in a recent example that garnered a lot of attention. (And please beware that Anik Singhal has launched a new business capitalizing on this situation). I recommend being very wary of any business with this track record. Please do not follow in their footsteps (or the footsteps of anyone who engages in unethical advertising and sales practices).

DISCLAIMER: THE INFORMATION PROVIDED IN THIS POST MAY CONTAIN LEGAL INFORMATION, BUT DOES NOT CONSTITUTE LEGAL ADVICE. NO RELATIONSHIP, INCLUDING ATTORNEY-CLIENT RELATIONSHIP, HAS BEEN FORMED AS A RESULT OF THIS POST. YOU ARE ADVISED TO SEEK THE ADVICE OF AN ATTORNEY LICENSED IN YOUR STATE IF YOU HAVE ANY QUESTIONS.

© 2024 Heather Pearce Campbell, The Legal Website Warrior®