Preventing Consumer Protection Litigation: Understanding and Avoiding Advertising Violations

October 16, 2020


In the modern marketplace, advertising is essential to the success of most businesses. From internet ads and T.V. commercials to billboards and commercial mailings, businesses and marketing agencies spend millions reaching consumers wherever they may physically or virtually be. Advertising isn’t arbitrary, and social psychologists continuously develop ways to identify, reach, and ultimately lure consumers. As such, both state and federal laws prevent businesses from engaging in certain false, misleading, and overall unfair advertising practices.
Many laws regulating deceptive advertising in Virginia and D.C. are not intuitive. Some of the laws that regulate marketing are the result of judicial decisions, while others only apply to certain professional services or products. Avoiding costly consumer protection litigation frequently requires consulting with business service attorneys who understand consumer protection laws in your jurisdiction. Before engaging in an advertising or marketing campaign, consider connecting with the experienced small business lawyers at McClanahan Powers, PLLC. Call us today at 703-520-1326 or contact our virtual office online to discuss protecting your company from consumer litigation.

Overview of False Advertising Laws & Regulations

The Federal Trade Commission (FTC) and its state counterparts regulate and enforce most consumer protection laws in the United States. The FTC Act contains truth-in-advertising statutes designed to prevent scams and fraud, penalize businesses that publish misleading advertisements, and ensure relevant claims have valid scientific support. The FTC pays special attention to health-related and financial management ads. If a product or service might seriously impact the consumer’s physical, mental, or financial health, businesses must generally follow advanced advertising protocols. These products/services commonly include:

  • alcohol
  • tobacco/cigarettes/legalized cannabis
  • over-the-counter drugs, vitamins, and dietary supplements
  • food and drinks
  • internet and computer services
  • smart technology and other high-tech products
  • legal services
  • wealth management, mortgage, and investment services/products
  • gambling and other adult-only industries

Many laws also limit where, when, and how businesses may advertise particular products and services. These regulations include prohibiting businesses from marketing certain products to children or requiring companies to include certain disclaims and public interest statements in advertising campaigns. If an ad materially misleads and injures reasonable consumers, it may violate federal law. Consider your target market carefully and structure ads appropriate for average consumers.

Importantly, even lawful advertisements may expose small businesses to civil liability depending on the language and promotional techniques used. The ad must contain truthful statements and necessary disclaimers. Forgetting to include the phrase while supplies last, for example, has resulted in unintentionally extended sales and business losses. Legal counsel might review your company’s website, commercials, and print ads to protect you from FTC/FDA legal violations and potential private liability. A single disclaimer could protect your small business from substantial consumer liability.

Avoiding Deceptive & Misleading Marketing Practices

Adhering to the following five rules of thumb may prevent businesses from unwittingly violating truth-in-advertising laws and exposing themselves to private consumer liability.

1. Assume Consumer Protection Laws Apply to All Mediums & Audiences – Businesses cannot generally avoid liability for manipulative ads by using certain mediums or marketing to a specific audience. Consumer protection laws apply to internet ads, billboards, periodicals, commercials, handouts, and even posters in your own store.
2. Know your Product/Service Category – Any product intended for human consumption or commonly used as such likely requires enhanced advertising precautions. Further, businesses may not imply they offer certain professional services such as financial, medical, or legal, without the proper state and federal certifications. The product/service offered generally controls the applicable regulations even if a different business industry market it.
3. Always Include Clear & Fair Disclaimers – Including tiny print disclaimers to the end of a short commercial does not generally mitigate liability for a manipulative T.V. ad. Businesses should not assume they’re protected from liability for otherwise underhanded ads simply because they incorporate some disclaimers. Instead, avoid making guarantees, include clear qualifying language in advertisements, and encourage consumers to call for additional details about a product or service requiring further explanation.
4. Market Products to an Appropriate Audience – Assume consumers do not know about your industry and will take the information provided at face value. The FTC often determines an advertisement’s appropriateness based on the target market. For example, children may not understand the inherent dangers associated with certain products requiring toy ads to contain additional disclaimers.
5. Consult with Legal Counsel & Focus Groups – Courts and the FTC often determine whether ads contain false or misleading information by asking reasonable consumers to interpret the advertisement. A legal professional might help businesses develop relevant focus groups and structure ads to ensure compliance with federal and state laws.

Nearly every product or service has nuances companies cannot address in short video ads. Lawyers can help small business owners develop reasonable and lawful marketing campaigns designed to attract consumers without violating truth-in-advertising laws or exposing companies to products, fraud, or contractual liability.

Consequences of Violating Consumer Protection Laws

Misleading advertisements may result in regulatory liability and private civil litigation. The FTC and FDA could trigger a federal investigation, and affected consumers may demand damages stemming from the misleading claims. Federal courts might impose fines up to $43,280 per violation and additional regulatory penalties may apply based on the product marketed. The court could also demand the company refund all aggrieved consumers and pay related expenses. In some cases, prospective clients might demand businesses honor the terms of an advertisement or offered service. This could include requiring companies to provide the seemingly promised product/service for the price advertised.

Call Us Today to Speak with an Experienced Lawyer

Even unwitting violations of federal or state truth-in-advertising laws could bankrupt small businesses in Virginia and D.C. Whether you received a warning letter from the FTC or wish to protect your business from civil liability, consider speaking with the experienced attorneys at McClanahan Powers, PLLC. Our dedicated team of false advertising and general business lawyers can challenge arbitrary regulatory decisions, defend against federal FTC litigation, and help you assert your commercial advertising rights. Connect with our Vienna or Pennsylvania Avenue office today by calling 703-520-1326 or reaching out online.