Preparing for the Advertising Police
Do you use “mouse type” in your ads? Are the disclosures in your TV ads tiny, scrolling lines no one can read? Does the announcer in your radio ads spout key information at a pace that sounds like he’s been sucking helium? If so, you need to read this.
Over the past few months, the Federal Trade Commission (FTC) has reviewed more than 1,000 magazine and television ads disseminated by companies in a wide variety of industries. It then issued warning letters to numerous companies about how they made “qualifying disclosures” — statements that explain offer conditions or limitations — in their ads. The message was clear: “Clear and conspicuous” disclosures really need to be clear and conspicuous.
The FTC has broad authority to bring enforcement actions against businesses that engage in “unfair or deceptive acts or practices.” Under the law, an ad may be deceptive because it makes claims that are false or misleading, or because it either omits entirely or doesn’t adequately disclose information necessary to prevent the ad from creating a false impression.
In its warning letters, the FTC noted it has provided guidance on what constitutes a “clear and conspicuous” disclosure. It also explained why the disclosures in the ads were not sufficiently clear and conspicuous for consumers to notice and understand. Companies were then asked to report back to the FTC on what steps they were taking to correct the problem. Companies that failed to make adequate corrections, the agency warned, could become the targets of FTC investigations and lawsuits.
The letters did offer guidance on how to make disclosures clearly and conspicuously, stating that disclosures should be presented close to the claims they relate to and not buried in footnotes or blocks of text people are not likely to read. The letters also advised that disclosures should be made in a font that is easy to read and at least as large as other fonts the advertiser uses to convey the claim. Disclosures should also be in a shade that stands out against the background.
For video, disclosures need to be on the screen long enough to be read and understood. As for oral disclosures, they must be read at a cadence that is easy for consumers to follow and with words they will understand.
Most of these common-sense principles are flexible enough to allow advertisers to tailor their disclosures to the specific circumstances. However, the FTC generally has not required disclosures to be as large as the claim, which may be impractical or impossible for marketers to comply with. Whether that requirement will be applied strictly remains to be seen, but the FTC is sending a message to advertisers that the sorts of disclosures we often see buried in the fine print are not sufficient. And it is likely other regulators will take the same position.
Of course, before you figure out how to meet these standards, you need to decide whether a disclosure is necessary in the first place, and, if so, whether it needs to be in the ad or can be made later in the transaction. There is potentially an unlimited amount of information that at least some consumers would like to know about, but overwhelming them with too much information in an ad is in no one’s interest. In fact, cluttering up your ad with a lot of extraneous information may conceal the information you do need to disclose.
The general rule when it comes to disclosures is that only information necessary to dispel a misleading impression the ad would otherwise create must be disclosed. But where do you draw the line? Suppose you offer vehicle financing with a “teaser” rate, which starts at 2% but increases after 60 days to 5%. The FTC would tell you that, in the absence of a clear and conspicuous disclosure about the rate increase, promoting only the initial rate would be deceptive because consumers would assume the 2% rate was permanent.
Although the letters were only delivered to companies that ran print or television ads, the FTC will undoubtedly apply the same disclosure principles to other forms of marketing, including online advertising.
Ultimately, it is the advertiser’s responsibility to make the necessary disclosures in a clear and conspicuous way. Unless you have already cleaned up your advertising practices in a way that addresses these concerns, it might be time for a thorough legal review.
Joel Winston is a former FTC official who now serves as a partner in the Washington, D.C., office of Hudson Cook LLP Email him at firstname.lastname@example.org. Copyright CounselorLibrary.com 2014, all rights reserved. Based on an article from Spot Delivery. Single print publication rights only, to F&I and Showroom. HC# 4834-6910-5182 (9/14)
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