United States: The Pursuit Of Truth In Advertising: Regulatory

Last Updated: November 29 2018
Article by Ronald R. Urbach

As mentioned in my previous blog post, I gave a presentation at the 40th Annual Association of National Advertisers/Brand Activation Association Marketing Law Conference titled "The Pursuit of 'Truth' in Advertising." It explored how consumers view the truth in this era of fake news and alternative facts, and how this changing understanding of the truth has affected the advertising ecosystem and the practice of advertising law. Today, I will share the second installment in my series of highlights from my presentation.

There is one bedrock principle that has always defined advertising regulation: advertising and marketing must be truthful, non-misleading and non-deceptive. That's the common thread tying together all consumer protection principles. But today, it's much more complicated.

When the meaning of truth changes each day, what does it mean for advertising regulation and for marketers navigating the regulatory maze? In the world of advertising law, is truth still truth? The answer is a resounding "yes!"

Here are some things to consider

Although the current administration has focused on deregulation, the FTC, an independent agency, has not lost sight of its consumer-protection mission. The new commissioners – though steeped in antitrust law – understand the Commission's role. The new head of the Bureau of Consumer Protection has warned the industry that the FTC is on the prowl and will take action. And when it does, watch out! The days of consent orders without significant and substantial financial consequences are gone.

The FTC is continuing to focus on protection of vulnerable groups like seniors. In May, the agency announced a settlement relating to a sound amplification device called the MSA-thirty-X. One of the challenged claims was "independently tested" to help consumers "hear up to 30 times better." Another claim was users could hear better when watching TV, in restaurants or movie theatres. The FTC said the claims were bogus and the marketers did not have support to prove these claims. The result: a $47 million judgment serving as a prime example that FTC cases lead to big money.

The FTC also recently and publicly re-affirmed its support for the self-regulatory process of the ASRC and NAD, which continues to focus on quintessential advertising law issues involving claims and substantiation. Of note, the NAD has recently revised its procedures, allowing advertisers to re-open cases upon new substantiation.

State and local regulators are also stepping up their enforcement efforts, particularly in the realm of automatic renewals, trial offers and refunds/guarantees. This can happen even after an investigation by the FTC.

Adore Me, a subscription-based lingerie startup, agreed to pay $1.4 million in restitution to its customers following an FTC action. Shortly after, the New York AG entered into a separate settlement, imposing $300,000 in penalties and mandatory refunds to consumers because the company failed to adequately disclose recurring monthly charges to its members. Consumers also were not able to cancel their monthly subscriptions.

In addition, local regulators are challenging advertising and marketing practices. Last month, the owner of online dating sites JDate and Christian Mingle settled a consumer protection action brought by several California counties alleging that negative option subscriptions had been renewed without expressed informed consent and consumers had been denied refunds. The settlement? $500,000 in penalties and nearly $1 million in restitution to consumers.

Regulators aren't the only ones paying attention to advertising. Let's not forget about consumer class actions – a constant threat, particularly in the food industry.

Many products labeled as "preservative free" are facing consumer class actions. Why? Because they contain substances like citric acid that can be used to add flavoring, but also have qualities that act like a preservative.

In addition, we're seeing no slowdown in claims based on California's Proposition 65, which requires disclosures for any product containing known carcinogens. It's not just food companies that need to take note – but any industry like clothing, airlines, furniture and even construction materials.

The Way I See It

You may be thinking – I'm a legitimate and responsible marketer, so what does this mean to me?

The legal principles underlying these cases undoubtedly apply to you. Even though you may view your products and services as responsible and legitimate, they may not be perceived as such by the FTC, state and local regulators.

And, even for businesses that are on the up and up, good-faith marketing practices can still draw the ire of competitors and the class action bar.

So look at the cases, learn the law, and apply the principles they demonstrate.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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