Any advertising which is misleading in any material respect is considered false advertising. An advertisement is considered misleading if it fails to disclose facts that are important in light of what is stated in the advertisement or facts that are relevant in the light of the customary use of the product. The Federal Trade Commission (FTC) has the statutory power to cancel trademarks it finds constitute false advertising.
Deceptive in Nature
Advertisements that contain representations that are false, misleading, or deceptive are illegal under state and federal laws. To be found liable for false advertising, it must be shown that the advertisement was deceptive in nature. Proof that the ad actually harmed anyone is not important. Moreover, the intentions of the advertiser are irrelevant, including if the false or deceptive advertisement was a mistake.
Federal Law Protections Against False Advertising
The FTC is the main federal agency that monitors false advertising practices. The FTC relies on consumers and competitors to report unlawful advertising. If FTC investigators find that an ad violates the law, there are several ways in which the agency can act:
The FTC may try to bring the violator into voluntary compliance through informal means
The FTC can issue a cease-and-desist order and bring a civil lawsuit on behalf of people who have been harmed.
The FTC may seek a court injunction to stop a false ad.
The FTC may require an advertiser to run corrective ads that state the correct facts and admit that an earlier ad was deceptive.
State Law Protections Against False Advertising
The majority of states have consumer fraud or deceptive practices statutes that regulate advertising. Under these laws, state or local officials can seek injunctions against unlawful advertisers to stop the ads and collect damages for injured consumers or businesses. Additionally, state consumer protection laws usually allow consumers or businesses to directly sue advertisers for any monetary damages stemming from the false advertisements. Some laws even provide for criminal penalties if fraud is involved.
Federal Unfair Competition Laws
Under federal law, a business practice is unfair “when it offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” The Lanham Act gives parties a private remedy for false advertising claims. To prevail on a false advertising claim under the Lanham Act, the injured party must prove that the advertisement is literally false or is likely to mislead and confuse customers. Evidence of consumer confusion in the marketplace is a prerequisite for recovery under the Act. Parties with successful Lanham Act claims are usually awarded monetary damages and an injunction to stop the advertiser.
Keeping Advertisements Lawful
The following are some of the generally accepted rules for legal advertising:
Keep representations accurate.
Obtain permission from outside sources used in advertisements.
Treat competitors fairly.
Keep sufficient quantities of advertised products on hand.
Be careful when using the word “free.”
Be truthful in all claims about pricing.
Do not overextend offers of credit.