Advertisers must have evidence to back up their claims;
Advertisements cannot be unfair.
Additional laws apply to ads for specialized products like
consumer leases, credit, 900 telephone numbers, and products
sold through mail order or telephone sales. And all states
have consumer protection laws that govern ads running in that
What makes an advertisement deceptive? According to the FTC's Deception
Policy Statement, an ad is deceptive if it contains a
statement -- or omits information -- that:
is likely to mislead consumers acting reasonably under
the circumstances; and
is "material" -- that is, important to a consumer's
decision to buy or use the product.
it causes or is likely to cause substantial consumer injury;
which a consumer could not reasonably avoid;
and it is not outweighed by the benefit to consumers.
How does the FTC determine if an ad is deceptive?
A typical inquiry follows these steps:
The FTC looks at the ad from the point of view of the
"reasonable consumer" -- the typical person looking
at the ad. Rather than focusing on certain words, the FTC
looks at the ad in context -- words, phrases, and pictures
-- to determine what it conveys to consumers.
The FTC looks at both "express" and "implied"
claims. An express claim is literally made in the
ad. For example, "ABC Mouthwash prevents colds"
is an express claim that the product will prevent
colds. An implied claim is one made indirectly
or by inference. "ABC Mouthwash kills the germs that
cause colds" contains an implied claim that
the product will prevent colds. Although the ad doesn't
literally say that the product prevents colds, it would
be reasonable for a consumer to conclude from the statement
"kills the germs that cause colds" that the product
will prevent colds. Under the law, advertisers must have
proof to back up express and implied claims that
consumers would take from an ad.
The FTC looks at what the ad does not say --
that is, if the failure to include information
leaves consumers with a misimpression about the product.
For example, if a company advertised a collection of books,
it would be deceptive if the ad did not disclose that what
consumers actually would receive were abridged versions
of those books.
The FTC looks at whether the claim would be "material"
-- that is, important to a consumer's decision to buy or
use the product. Examples of material claims are representations
about a product's performance, features, safety, price,
The FTC looks at whether the advertiser has sufficient
evidence to support the claims in the ad. The law requires
that advertisers have proof before the ad runs.
What kind of evidence must a company have to support the
claims in its ads? Before a company runs an ad, it has to have a "reasonable
basis" for the claims. A "reasonable basis"
means objective evidence that supports the claim. The kind
of evidence depends on the claim. At a minimum, an advertiser
must have the level of evidence that it says that
it has. For example, the statement "Two out of three
doctors recommend ABC Pain Reliever" must be supported
by a reliable survey to that effect. If the ad isn't specific,
the FTC looks at several factors to determine what level of
proof is necessary, including what experts in the field think
is needed to support the claim. In most cases, ads that make
health or safety claims must be supported by "competent
and reliable scientific evidence" -- tests,
studies, or other scientific evidence that has been evaluated
by people qualified to review it. In addition, any tests or
studies must be conducted using methods that experts in the
field accept as accurate.
Are letters from satisfied customers sufficient to substantiate
No. Statements from satisfied customers usually are not sufficient
to support a health or safety claim or any other claim that
requires objective evaluation.
My company offers a money-back guarantee. Very few people
have ever asked for their money back. Must we still have proof
to support our advertising claims?
Yes. Offering a money-back guarantee is not a substitute
for substantiation. Advertisers still must have proof to support
What kind of advertising claims does the FTC focus on?
The FTC pays closest attention to:
ads that make claims about health or safety, such as:
"ABC Sunscreen will reduce the risk of skin cancer."
"ABC Water Filters remove harmful chemicals from
"ABC Chainsaw's safety latch reduces the risk of
ads that make claims that consumers would have trouble
evaluating for themselves, such as:
"ABC Refrigerators will reduce your energy costs
"ABC Gasoline decreases engine wear."
"ABC Hairspray is safe for the ozone layer."
Ads that make subjective claims or claims that consumers
can judge for themselves (for example, "ABC Cola tastes
great") receive less attention from the FTC.
How does the FTC decide what cases to bring?
The FTC weighs several factors, including:
FTC jurisdiction. Although the FTC has jurisdiction
over ads for most products and services, Congress has given
other government agencies the authority to investigate advertising
by airlines, banks, insurance companies, telephone and cable
companies, and companies that sell securities and commodities.
The geographic scope of the advertising campaign.
The FTC concentrates on national advertising and refers
local matters to state, county or city agencies.
The extent to which an ad represents a pattern of deception,
rather than an individual dispute between a consumer and
a business or a dispute between two competitors. State
or local consumer protection agencies or private groups
such as the Better Business
Bureau (BBB) often are in a better position to resolve
disputes involving local businesses or local advertising.
To get the address and phone number of your state attorney
general's office, your local consumer agency, or the nearest
BBB, check your telephone directory or the Consumer's
The amount of injury -- to consumers' health, safety,
or wallets -- that could result if consumers rely on
the deceptive claim. The FTC concentrates on cases that
could affect consumers' health or safety (for example, deceptive
health claims for foods or over-the-counter drugs) or cases
that result in widespread economic injury.
What penalties can be imposed against a company that runs
a false or deceptive ad?
The penalties depend on the nature of the violation. Among
the remedies that the FTC or the courts have imposed include:
Cease and desist orders. These legally-binding
orders require companies to stop running the deceptive ad
or engaging in the deceptive practice, to have substantiation
for claims in future ads, to report periodically to FTC
staff about the substantiation they have for claims in new
ads, and to pay a fine of $11,000 per day per ad if the
company violates the law in the future.
Civil penalties, consumer redress, and other monetary
remedies. Violation of certain statutes can result in
civil penalties ranging from thousands of dollars to millions
of dollars, depending on the nature of the violation. In
other cases, advertisers have had to give full or partial
refunds to all consumers who bought the product.
Corrective advertising, disclosures, and other informational
remedies. Advertisers have been required to take out
new ads to correct the misinformation conveyed in the original
ad. Advertisers also have had to notify purchasers about
deceptive claims in ads, include specific disclosures in
future ads, or provide other information to consumer
Bans and bonds: In some cases, individuals have
been banned from an industry or have been required to post
a bond before continuing business.
Will the FTC review my company's ads before they run to
make sure that we've complied with the law?
FTC staff cannot clear your ads in advance. However, there
is guidance to help you comply with the law. See Business
Guidance for our library of materials for advertisers.
For more general information on advertising policies, call
the FTC's Division of Advertising Practices at (202) 326-3090.
How can I keep up-to-date on what's going on at the FTC?
The Federal Trade Commission
Homepage is updated almost every day, so bookmark it for instant
access to FTC news and views, including recent enforcement
actions, speeches, public hearings, and other business information.
Before running an ad, check out what the FTC has had to say
about products or advertising claims similar to yours. From
the homepage, you can search the entire FTC web site using
key words or phrases. For example, a search using the word
"diet" will yield cases, reports, news releases,
and other materials related to FTC policies about the advertising
of diet products and services. In addition, see www.consumer.gov
for consumer and business information from the FTC, FDA, SEC,
and other federal agencies. You may also want to check the
Better Business Bureau for
tips on truthful advertising, the BBB's voluntary Code of
Advertising, and information about scams targeting small businesses.
How does the FTC address the needs of small businesses?
In its continuing commitment to regulatory reform, the FTC
has repealed almost 50% of its trade regulation rules and
has streamlined and simplified remaining rules. The FTC's
Small Business Compliance Assistance Policy Statement
describes other forms of assistance available to small businesses
to help them comply with truth-in-advertising laws. For example,
Guidance section of the FTC homepage includes an expanding
library of materials written especially for small businesses.
Small businesses also may contact the FTC headquarters or
one of the FTC's ten regional
offices with specific inquiries about how to comply with
the law. In addition, one of the FTC's top law enforcement
priorities is fighting fraudulent and deceptive practices
aimed at small businesses. The agency has taken lead in challenging
deceptive invention promotion services, questionable franchise
opportunities, bogus office supply scams, and other practices
that prey on aspiring entrepreneurs.
What can my company do if a competitor is running an ad
that I think is deceptive?
Explore your legal options under federal and state statutes
that protect businesses from unfair competition. For example,
the Lanham Act gives companies the right to sue their competitors
for making deceptive claims in ads.
File a complaint with the National
Advertising Division (NAD) of the Council of Better
Business Bureaus, if your competitor's ad is running nationally
or regionally. The NAD is a private, self-regulatory group
affiliated with the BBB. It investigates allegations of
deceptive advertising and gives advertisers a mechanism
for resolving disputes voluntarily
Call your local BBB or file an on-line complaint with
the Better Business Bureau
if the ad is local. Many BBBs have procedures for resolving
disputes between businesses.
Contact the radio station, television station, or publication
where you saw the ad. Let them know that they're running
an ad you think may be deceptive.
Contact your state Attorney General's Office or your city,
county, or state Office of Consumer Affairs. To get their
phone numbers, check your telephone directory or the Consumer's
Contact the Federal Trade Commission.
Federal Trade Commission
Consumer Response Center
Washington, DC 20580
Federal Trade Commission
Consumer Response Center
(202) FTC-HELP (382-4357)
If my company files a complaint about a competitor with
the FTC, will the FTC resolve the dispute?
The FTC is authorized to act when it appears that a company's
advertising is deceptive and when FTC action is in
the public interest. Although the FTC cannot intervene in
an individual dispute between two companies, the agency relies
on many sources -- including complaints from consumers and
competitors -- to find out about ads that may be deceptive.
To file a complaint, call the FTC's Division of Advertising
Practices at (202) 326-3090, or write to:
Federal Trade Commission
Division of Advertising Practices
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
If my company files a complaint against a competitor with
the FTC, will we be kept informed about the status of any
No. The FTC keeps investigations confidential. Matters become
public only after the FTC reaches a settlement with a company
or files a lawsuit. However, you can be assured that complaints
received from companies alleging that competitors are advertising
deceptively are reviewed carefully.
Can I find out if the FTC already has an investigation
against a company?
The FTC can tell you if it has already taken formal action
(e.g., filed or settled a lawsuit) against a particular
company or against similar kinds of advertisements or products.
But the FTC cannot disclose whether an investigation is going
on. To find out if a company or product has been the subject
of a recent FTC action, search the Federal
Trade Commission homepage.