In this blog we often discuss products being subjected to a lawsuit based on allegations that a label is false or misleading under California’s consumer protection laws. The Federal Trade Commission is similarly concerned with the prevention of false and misleading claims, but its focus is also on the product’s advertising, not just its labeling.
Recently, FTC sent warning letters to more than 60 companies – including 20 of the 100 largest advertisers in the country – saying that the companies failed to make adequate disclosures. The initiative, called Operation Full Disclosure, was brought after the agency reviewed national television and print advertisements.
The inadequate disclosures fell into different categories – from not adequately disclosing the conditions for obtaining a stated price (such as an automatic billing feature or the need to buy an additional product or service), to claiming that a product was unique or superior but not disclosing the narrow definition applied or the basis of the comparison. Other ads made absolute statements but did not adequately disclose exceptions or limitations, did not adequately disclose issues related to the safety or legality of a product or service, or did not disclose material alterations to a product demonstration.
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If you received such a letter, or if you want to review your advertising to make sure it is in compliance with FTC’s standards, you can follow its performance standard of “Clear and Conspicuous” disclosures. That is, a disclosure is clear and conspicuous if consumers notice it, read it, and understand it. Instead of dictating the specifics of font size, etc., FTC advises companies to focus on “The 4 Ps”:
- Prominence. Is the disclosure big enough/present long enough for consumers to read easily?
- Presentation. Is the disclosure worded in a way that consumers can easily understand?
- Placement. Is the disclosure where consumers are likely to look?
- Proximity. Is the disclosure close to the claim it modifies?
FTC’s parting wisdom: when in doubt, rethink your ad campaign.