SmallBizResource Blog -- Business Know-How

6 Advertising Laws You Need To Know

Posted by Janet Attard, Courtesy of Business Know-How Thursday, May 7, 2009, 11:06 AM ET

Whether you've just started a small, home-based business or have millions in sales, you must be aware of and comply with advertising laws.

Failure to do so could cost you, your business, and possibly everything else you own. Although a wide range of advertising laws may apply to your business, the following are some that most frequently trip up small and big businesses alike:

1. Misrepresentation of the product: All descriptive text and photos must give consumers an accurate representation of what they will get. If you are selling frozen ice cream bars, for instance, you can't show a picture of five bars on the box if the box only contains four. You also cannot touch up photos to make a product look better or bigger than it is.

Facts about the product cannot be misrepresented either. Two business owners learned that the hard way when they were fined $20,000 each for claiming Native American style artwork they sold was made by Native Americans when, in fact, it wasn't.

2. Unsubstantiated claims: You must be able to substantiate factual claims with proof there is a reasonable basis for each one. A New Jersey talent agency, for instance, was fined more than $175,000 for misrepresenting its ability to place children in high-paying modeling and acting jobs. The substantiation must exist before you make the claims.

The fact that someone might be able to realize the benefits you state in your ads, or that one or two individuals have achieved the results, won't suffice when claims lead people to believe that the average purchaser could achieve the touted benefits.

If you make such claims as "recommended by doctors," "tests prove," or "leading experts say," then you must have proof that will stand up to scrutiny by experts. In the case of making health, nutrition, or safety claims, you need reliable scientific evidence. To provide that, you should have at least one independent double-blind study to support your claim. The study group also should be of sufficient size to provide reliable data.

3. Fake testimonials: If you use testimonials in your advertising, then the people making them must actually use your product or service. If you pay them for their testimonials, then that fact has to be disclosed unless the person giving the endorsement is a well-known person or expert.

4. Simulations of real situations:
If you retouch before-and-after photos, such as showing someone cleaning a floor with one swipe of a mop when it really would have taken five, or use something other than what is stated to demonstrate your product, then those facts must be disclosed.

5. Price and merchandise comparisons:
If you use words like "sale," "reduced," or "$150 value," then you must have actually offered the product at that price for a reasonable period of time.

Similarly, if you say a product you are selling is "Sold elsewhere for $30 more," then you must be able to prove the item actually has been sold at that price. Terms like "special purchase" or "inventory clearance" should be reserved for times when you actually have bought merchandise at a special purchase price or are clearing out your inventory.

6. Warranties and guarantees:
You don't have to advertise a warranty or guarantee, but if you do, then you must state the terms and any limitations that apply. If you sell by mail and will refund the purchase price if a customer is unsatisfied, but not the shipping and handling costs, then your guarantee must make that clear, too.

Business Know-How