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Marketing is a foundational investment for any company’s go-to-market strategy in order to build awareness of their product or service, capture market share, and grow revenue. As in-house legal teams partner with marketing teams on campaign launches or partnerships, it’s important for counsel to understand and adhere to the maze of US advertising laws and regulations to prevent costly mistakes and reputation damage.
In the US, marketing compliance is governed by a combination of federal and state laws, regulations, and guidelines. One federal law to be aware of is the Federal Trade Commission (FTC) Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce” and broadly covers false advertising, misleading claims, and other deceptive practices.
The most basic and fundamental rule is that claims in advertisements must be (1) truthful, (2) cannot be deceptive or unfair, and (3) evidence-based. When evaluating marketing claims, in-house counsel should ask the following question: Would an average consumer be misled by what they are reading in the marketing copy to believe something other than what is factually true about the product or services? This is important in all types of media, whether traditional channels like television and magazines or new social media platforms. For example, promising that a certain outcome is guaranteed, is very likely misleading. If there are consumers or users of your product that do not achieve that outcome, then your advertisement would be factually incorrect.
Think through the details of the advertising copy carefully and add necessary caveats. For example, if your company is advertising a giveaway promotion, make sure that there’s a sufficient quantity of prizes so that the company doesn’t run out. If not, add additional caveats, such as “until supplies last” for limited stock promotions.
It’s a good idea to research false advertising claims that are filed against companies in your space to get familiar with the types of issues that commonly arise to help you with issue spotting. Leverage the FTC’s Cases and Proceedings search and press releases database and ask your outside counsel to keep you current on new cases. Many law firms and professional organizations offer advertising and marketing law newsletters to subscribe to, such as Frankfurt Kurnit’s Advertising Law Updates, Kelley Drye’s Ad Law Access, Venable’s All About Advertising Law, and the Global Advertising Lawyers Alliance blog.
Understanding your target audience is not just a marketing strategy but also a legal necessity. If your company is marketing to children under 13, the company must comply with the Children’s Online Privacy Protection Act (COPPA). If this is the case, you will need at a minimum to update your Privacy Policy so that it’s compliant and obtain consent from parents before collecting this information. The FTC offers a comprehensive FAQ and checklist for COPPA compliance.
The rise of social media platforms and digital-savvy audiences has made influencer marketing a key strategy for many brands to promote their products and services. However, partnering with influencers for endorsements and collaborations has its legal complexities.
First, if your business works with influencers or if you’re an influencer yourself, you must disclose material connections so that you aren’t unduly influencing your prospective buyers. The disclosure should be placed where it’s hard to miss and people will see and understand the disclosure, since knowing about the connection is important for anyone evaluating the endorsement.. Failure to disclose can result in substantial penalties. For example, the Securities and Exchange Commission settled with influencer Kim Kardashian for $1.26 million in penalties to settle a claim she had failed to disclose she was paid to promote EMAX tokens.
Second, endorsements have to be honest and not misleading. An endorsement must reflect the endorser's honest opinion and can’t be used to make a claim that the product’s marketer couldn’t legally make. The FTC has published Guides Concerning the Use of Endorsements and Testimonials in Advertising with advice on how to make sure testimonials are truthful and not misleading as well as extensive examples to reference.
Many consumers rely on online reviews to decide whether to purchase a product, so getting good reviews can drive substantial revenue. Some companies choose to abuse customer trust by writing or procuring fake reviews, or engaging in pay-to-play for reviews. When soliciting online reviews, it’s important for companies to maintain authenticity and transparency. This means only seeking reviews from customers who have actually used or experienced the product and services. If incentives are offered for reviews, it cannot be contingent on the review being positive. These incentives should also be disclosed in the review, as such incentives may influence the weight and credibility for those reading the review. Employees or friends and family may write reviews, but it’s important that those relationships are disclosed.
Due to their sensitive nature, certain industries come with an added layer of legal scrutiny. For example, the financial services industry has stringent regulations to prevent fraud and ensure consumer trust. Health-related industries must adhere to strict standards to ensure public safety. Being in a regulated sector means adhering not only to standard advertising laws but also to industry-specific regulations and security requirements.
For example, the Truth in Lending Act (Regulation Z) governs the provision of consumer credit and requires lenders to provide consumers with clear, accurate, and timely information about the terms and costs of credit. In 2018, the FTC alleged that SoFi, a fintech company specializing in online student loan refinancing, had misrepresented in television, print, and internet ads the amount of money student loan borrowers could save by refinancing with them. When making these savings claims, the FTC alleged that the average savings highlighted in its ads inflated the actual average savings by excluding large categories of consumers. When SoFi did disclose these exclusions, the disclosures were often buried in fine print, which was misleading. SoFi settled with the FTC without admitting wrongdoing but agreed to stop making false claims about potential savings.
Contests and sweepstakes can effectively create buzz and engagement around a company’s brand, products, or services. No single federal law governs these types of promotions in their entirety — rather, it’s a mix of federal and state consumer fraud and consumer protection laws that may apply. Because this can be complex, it’s important to research thoroughly and consult with outside counsel. Some key considerations for contests and sweepstakes include
First, it’s essential to understand the difference between a contest and a sweepstakes. A contest typically requires participants to perform a task or demonstrate a skill to win, and winners are chosen based on merit. A sweepstakes, on the other hand, awards prizes based on chance, and winners are typically chosen at random. Lotteries, which involve paying for a chance to win, are generally illegal unless run by the state.
In many jurisdictions, one of the most fundamental principles of sweepstakes law is the “no purchase necessary” rule, which means that entrants cannot be required to make a purchase or pay an entry fee to participate in or win a sweepstakes. If a purchase is involved, an alternative method of entry must be provided to ensure that participants have an equal opportunity to win, regardless of whether or not they make a purchase.
Companies should have an official set of rules for the promotion, and such rules, terms, and conditions of the promotion should be clearly and conspicuously disclosed to participants. This should include details such as eligibility criteria, entry methods, prize descriptions, the selection process, and any other relevant information. Failure to provide comprehensive disclosures can lead to accusations of deceptive advertising practices.
Collecting personal information from entrants, such as names, addresses, and email addresses, can raise privacy concerns, so it’s crucial to ensure that the company’s data collection and usage practices comply with relevant privacy laws and regulations. The promotion’s rules should disclose how personal data will be used and stored, and participants should provide explicit consent for such use.
Many companies utilize social media platforms to host or promote their contests and sweepstakes. In-house counsel should be aware that social media platforms such as Meta and X (formerly Twitter) have their own sets of guidelines and policies regarding promotions on their platform. Reviewing and adhering to these guidelines is essential to avoid having the promotion removed or risking your company’s removal from the platform.
If the contest or sweepstakes is open to participants outside the company’s home country, in-house counsel should be aware of the laws and regulations in each jurisdiction. Different countries have varying rules about what constitutes legal contests and sweepstakes and what disclosures must be made, and some countries might require government approval or bonding before a sweepstakes can be conducted.
In-house legal teams serve as the essential bridge between creative marketing ideas and legal boundaries to safeguard the company's reputation and prevent expensive oversights. Staying informed of the latest regulations and news, proactively partnering closely with marketing teams, and consulting with experts and outside counsel, will empower in-house counsel to effectively guide and support company marketing initiatives.
The information provided in this blog post and in this website does not, and is not intended to constitute legal advice and is for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites and such links are only for the convenience of the reader, user or browser; Streamline AI does not recommend or endorse the contents of the third-party sites.
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