In brief: prohibited and controlled advertising in USA

Prohibited and controlled advertising

What products and services may not be advertised?

Illegal products and services may not be advertised. There are additional restrictions or disclosure requirements for advertising certain legal products. For example, alcohol advertising cannot be targeted to anyone under 21 (the legal drinking age in the United States) and tobacco products cannot be advertised on television and many social media platforms. Many other restrictions on tobacco ads also apply. Broadcasters, publishers and media platforms have their own advertising policies and standards that identify specific products and services that may not be advertised.

Are certain advertising methods prohibited?

Deceptive advertising is prohibited. In its Advertising FAQ’s: A Guide for Small Business the Federal Trade Commission (FTC) has stated ‘it would be deceptive for marketers to embed ads with subliminal messages that could affect consumer behavior. However, most consumer behavior experts have concluded that such methods aren’t effective’. Although subliminal advertising is considered ineffective, it would be prohibited as deceptive.

Unsolicited commercial electronic messages (including SMS) are prohibited under the Telephone Consumer Protection Act (TCPA). Further, the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM Act) imposes certain restrictions on unsolicited email messages.

The TCPA requires express written consent that the consumer opts in to the SMS marketing campaign. The TCPA requires a business to provide certain information to the consumer in the text:

• a description of the campaign;
• the approximate number of messages the consumer will receive (eg, once per day or twice a month);
• instructions on how to opt out from the campaign;
• instructions on how to get help information; and
• where to find the full terms and conditions of the business’s privacy policy.

The CAN-SPAM Act regulates all commercial emails, defined as ‘any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service’, and includes email that promotes content on commercial websites. It restricts businesses from using false information to open multiple email accounts, transmitting unsolicited commercial emails through open relays, falsifying header information, using deceptive subject lines and harvesting email addresses. Additionally, a business must provide the following information in the commercial email:

• accurate header information and subject lines;
• notice of the right to opt out;
• a functional opt-out procedure;
• the business’s physical address;
• notice that the message is an advertisement; and
• warning labels for sexually explicit content.

Opt-out requests made by consumers must be honoured.

What are the rules for advertising as regards minors and their protection?

The FTC works with consumer advocates, academics and the industry to create effective self-regulatory initiatives regarding advertising to minors, although those guidelines are not binding as law. In particular, the Children’s Advertising Review Unit of BBB National Programs established voluntary guidelines for advertising to children. The guidelines suggest that advertisers not exploit children’s credulity nor advertise inappropriate products or content. Advertisers should consider any lesson affecting health or wellbeing that is being conveyed in the advertising, and should not ‘undermine the parent-child relationship’ and ‘should encourage responsible use of the product with a view toward the healthy development of the child’. The advertising should not portray or encourage negative social stereotyping, prejudice or discrimination. Hosts of children’s programmes may not advertise products, and additional disclosures may be required for advertising directed at minors. Adult product advertising should not be directed at minors.

The Children’s Online Privacy Protection Act (COPPA) is enforced by the FTC and regulates the collection of personal information from children under 13. COPPA requires businesses to include certain information in their privacy policies and to obtain parental consent before collecting information from children online. In December 2023, the FTC proposed changes to COPPA that would place new restrictions and limits on businesses' use and disclosure of children's data.

Are there special rules for advertising credit or financial products?

In addition to general compliance requirements, such as section 5(a) of the FTC Act, which prohibits unfair or deceptive acts or practices (UDAP), and a tapestry of state laws, credit and financial product advertisements are subject to a number of specific federal regulations.  

One example, and perhaps the most well known, is 12 CFR 1026 – Truth in Lending (Regulation Z). Regulation Z requires that both open- and closed-end credit products must make advertised terms actually available (see 12 CFR paragraph 1026.16(a) and all required disclosures must be clear and conspicuous 12 CFR paragraph 1026.24(a). In other words, if an advertisement mentions specific credit terms, the creditor must provide those terms to applicants. The clear and conspicuous standard does not require a specific format, but it does require the disclosures to be in a 'reasonably understandable form' so as not to make it difficult for consumers to understand the credit terms (see Comment for 1026.17 General Disclosure Requirements). Regulation Z also imposes a variety of advertising requirements that are specific to open-end credit products or closed-end credit products. Some of these requirements are listed in 12 CFR 1026. The National Credit Union Administration provides a Truth in Lending Act Checklist that can serve as a helpful guide.

The Truth in Savings Advertising Rules (Regulation DD), at its simplest, prohibits advertisements from being inaccurate, misleading or misrepresenting an institution’s deposit contract. Regulation DD includes one trigger term: the statement of a rate of return. That is, if a rate of return is stated, it must be the 'annual percentage yield' for the advertised accounts. Regulation DD also includes special rules for broadcast or electronic media, outdoor media or telephone response machines.

In addition to the federal regulations listed above, credit and financial products can also be subject to advertising guidance from not-for-profit groups such as FINRA and independent agencies like the FDIC. FINRA (the Financial Industry Regulatory Authority) is a government-authorised not-for-profit organisation that oversees US broker-dealers. FINRA’s Advertising Regulation Department protects investors by ensuring that broker-dealers’ communications are fair, balanced and not misleading and comply with the advertising rules of FINRA, the Securities and Exchange Commission, the Municipal Securities Rulemaking Board and Securities Investor Protection Corporation. Independent agencies require that some credit and financial product advertisements include certain logos or statements.

The Federal Deposit Insurance Corporation (the FDIC) requires an official advertising statement (12 CFR paragraph 328.3), such as 'Member of the Federal Deposit Insurance Corporation' and/or the FDIC logo be used on commercial messages. Banks advertising loans for homes through written and visual advertisements must include 'equal housing lender logotype' and/or explain that the bank provides the loans without regard to race, colour, religion, national origin, sex, handicap or familial status. 12 CFR paragraph 338.3. The National Credit Union Administration requires its member credit unions to provide an official statement on their website and in advertising. 12 CFR paragraph 740.5. 

Lastly, the FTC, the executive agency responsible for enforcing the federal UDAP statute, provides business guidance to companies in the following industries: credit and loans, debt, debt collection, fintech and mortgages. 

Are there special rules for claims made about therapeutic goods and services?

The Food and Drug Administration (FDA) regulates advertising for food, drugs and devices. Only FDA-approved drugs may be advertised; off-label use (use of drugs other than as approved by the FDA) may not be advertised. Any advertisement must be fair and balanced, including a description of any risks or side-effects associated with the drug. Advertisements must include certain material facts and must be submitted to the FDA. Two well-controlled clinical studies are required to substantiate comparative claims. Advertisements for drugs and certain classes of devices must be pre-cleared by the FDA.

Print advertising is required to include a ‘brief summary’ relating to side-effects, contraindications and effectiveness similar to the FDA-approved label. Broadcast advertisements are required to include a ‘major statement’ that discloses the product's major risks in either the audio or audio and visual parts of the presentation. The broadcast advertisement must also include the ‘brief summary’ or ‘adequate provision’ of the approved or permitted package labelling. The FDA outlines ways to make an ‘adequate provision’ of the labelling information in its Consumer-Directed Broadcast Advertisements Guidance for Industry.

Are there special rules for claims about foodstuffs regarding health and nutrition, and weight control?

The FDA regulates food and beverage labelling (and advertisements that comprise ‘labelling’), and the FTC regulates food and beverage advertising. The FTC gives deference to the FDA’s definitions and regulations regarding health claims. Both the FDA and FTC can and will send warning letters relating to statements in advertising about health or weight control if they believe the statements violate the applicable regulations, are misleading or are unsubstantiated.

The FDA definition of a health claim includes an express or implied statement that characterise the relationship of any substance to a disease or health-related condition (21 CFR 101.14(a)(1)). Certain products are prohibited from making health claims (21 CFR 101.14(a)(4)). The FDA also regulates when nutrient content claims can be made, and under what circumstances. A nutrient content claim is an express or implied statement that characterises the level of a nutrient in the product (21 CFR 101.13(b)).

The FTC requires scientific studies to substantiate advertising claims related to health-related claims.

What are the rules for advertising alcoholic beverages?

In March 2014, the FTC issued its report regarding Self-Regulation in the Alcohol Industry, which recommended the continued use of voluntary industry guidelines to reduce alcoholic beverage advertising and marketing to an underage audience. The guidelines are published by the Distilled Spirits Council of the United States, the Beer Institute and the Wine Institute. Under the voluntary self-regulatory codes, 71.6 per cent of the audience for each advertisement should consist of people 21 or older. Websites and social media that advertise alcohol are encouraged to be ‘age gated’ so that a consumer must enter a date of birth to show legal age. Models and actors in alcohol advertising should be at least 25 years old, substantiated by proper identification, and should appear to be over 21. State and local laws impose licensing requirements for producers, distributors and retailers of alcohol and additional restrictions on the advertising of alcohol including certain promotions and outdoor advertising.

What are the rules for advertising tobacco products?

Answer in progress.

Are there special rules for advertising gambling?

The Communications Act of 1934 (18 USC section 1304) prohibited gambling advertising over broadcast media until the Supreme Court ruled it was unconstitutional under the First Amendment in 1999 (Greater New Orleans Broadcasting Assn v US, 527 US 173 (1999)). The Department of Justice noted in 2011 that advertising for illegal or online offshore gambling could be aiding and abetting prohibited gambling under the Wire Act (31 USC sections 5361–5367). The Federal Communications Commission permits in-state and out-of-state broadcast advertisements for lawful casino gambling. States have individual gambling advertising restrictions, and base their advertising regulations on what is legal within the state; for example, New York State allows broadcast advertising for physical casinos legal in the state, but not for online sports wagering when illegal. Many states also prohibit depicting those under 21 gambling, and require listing limiting factors and a gambling help hotline number (eg, Tennessee Sports Gaming Act HB00001 (2019)). The American Gaming Association, representing casinos in 44 states, assists members with compliance in the advertising of sports wagering in print and broadcast media. As of February 2024, 28 states have legal online mobile betting for sports, which has seen a significant boom in the United States over recent years, which entails additional requirements from each state on how online app-based gambling can be advertised.

What are the rules for advertising lotteries?

Broadcast media advertising for lotteries must conform to the Federal Communications Commission’s regulations. Federal law generally prohibits broadcast media advertising for or about lotteries unless the advertiser fully and accurately discloses rules and terms of the lottery; the lottery is conducted substantially as advertised; and falls under one of the following categories of exceptions:

• the advertisement is broadcasted for a station licensed in a state for that state’s lottery;
• the advertisement is for legal Native American tribe gaming;
• the advertisement is for lawful casino gambling in any state;
• the advertisement is for not-for-profit fishing contests; or
• the advertisement is for a lottery authorised or not otherwise prohibited by the state the ad is broadcasting in, if the lottery is conducted by a not-for-profit governmental organisation or is a promotional activity by a commercial organisation whose primary business is not lotteries.

Print advertisements of lotteries are permitted for legal gambling within the state, including mailed advertisements (8 USC section 1302; 3001; 3005).

What are the requirements for advertising and offering promotional contests?

Generally, ‘promotional contests’ are defined as an event where a participant can win a prize based on skill, differentiating them from lotteries, gambling or sweepstakes where chance determines prize award. The contest must be based on skill and not chance. Examples of contests include a half-court basketball shot, a crossword puzzle tournament or a magazine photography competition. The skill challenged must be a legitimate objective skill. Consideration can be required from an entrant for a contest and solicited through an advertisement, though states may restrict the amount or kind of consideration. The FTC and states generally require a clear and conspicuous disclosure in advertisements on terms, rules, prizes, length, sponsors and location of a contest (15 USC sections 41–58).

Sweepstakes are promotions in which participants have the chance to win a prize based on chance, including by random drawing. Purchase requirements or other forms of consideration are prohibited under state lottery and gambling laws. Sweepstakes involving prize values of more than US$5,000 must be registered in New York and Florida.

Are there any restrictions on indirect marketing, such as commercial sponsorship of programmes and product placement?

The FTC and the US Postal Service have authority to restrict and prosecute indirect marketing, promotions and advertising (15 USC section 41; 39 USC sections 3001). All individual states also have similar laws restricting deceptive advertising. A civil action can also be brought under the Lanham Act if a deceptive, indirect sponsorship harms a brand by causing confusion about the origin, sponsorship or association of a brand in an advertisement (15 USC section 1125).

Product placements are regulated on broadcast media by the Federal Communications Commission under Section 317 of the Communications Act of 1934. The Act allows ‘embedded advertising’, or production sponsorship, provided the paid sponsorship and sponsor are clearly disclosed to the audience of the broadcast at the time of the broadcast. The Federal Communications Commission requires broadcast television to include disclosures of product placements in television shows. The FTC does not require disclosure of whether a product or brand appearing in the broadcast is sponsored unless there is an endorsement by a show host that is not ‘obviously an advertisement’. The increased prevalence of social media influencers obtaining sponsorships and free products from brands has led the FTC to also clarify that clear disclosures outlining the influencers relationship to the brand on posts is required. As of 1 January 2024, small businesses that have 20 or fewer employees, or have US$5 million or less in gross sales, must identify those who indirectly own or control the company in financial-centred pitches and advertisements according to the Financial Crimes Enforcement Network of the United States. 

Briefly give details of any other notable special advertising regimes.

The Federal Election Commission requires any public communication by a political committee or candidate on broadcast or print media to display a disclaimer – including an audible disclaimer by a candidate for broadcast advertisements authorised by the campaign.

Though First Amendment free speech considerations underly all advertising forms in the United States as commercial speech (Central Hudson Gas & Electric Co v Public Service Commission, 447 US 557 (1980)), some jurisdictions have successfully enacted legislation that bars political, religious or advocacy advertisements on public property. The United States allows promotion and advertising of new financial formats, such as non-fungible tokens (NFTs) and cryptocurrency, though many online platforms have private restrictions. It is predicted in some quarters that the Securities and Exchange Commission or another Executive Agency will issue more stringent guidelines regarding cryptocurrency and NFTs.

The boom of artificial intelligence (AI) and other generative technology are leading states to enact rules dictating the use of AI in advertisements, especially in political advertising. As an example, Michigan passed a law at the end of 2023 banning the use of 'deepfakes' in political advertising, and other use of AI in advertising require a disclaimer in the same font size as the majority of the text in the print or visual media. (Michigan HB 5141 (2023)). Other states that currently have similar laws include Texas, California, Washington and Minnesota.