Advertising Law

The Basics

• The Federal Trade Commission (FTC) has principal federal authority over cosmetic and OTC drug advertising. The FDA, on the other hand, has principal authority over their labeling.

• The FTC investigates ads that it has reason to believe are deceptive or misleading.

• For the FTC to take action against a deceptive ad, three elements must be present:

  1. The ad must contain a claim, practice or omission likely to mislead consumers;
  2. Consumers must be interpreting the ad’s message reasonably under the circumstances; and
  3. The representation must be material— that is, it must be likely to affect a consumer’s conduct or decision with respect to the product, particularly his or her decision as to whether or not to purchase it.

• According to the FTC, an ad is deceptive unless an advertiser has a reasonable basis for every objective product claim before the ad is run.

• The FTC Environmental Marketing Guidelines cover “green” advertising claims.

• The FTC evaluates comparative advertising in the same manner as it evaluates all other ad claims. Thus, comparative ads are not held to a “higher” substantiation standard than ads containing noncomparative claims.

• The National Advertising Division (NAD) of the Council of Better Business Bureaus (BBB) monitors the truth and accuracy of national advertising, but is not a government entity.

• Children’s Advertising Review Unit (CARU), another BBB self-regulatory body, oversees advertising aimed at children under 12.

• The NAD uses its own monitoring program to generate investigations, and also gets complaints about ads from consumers, competitors, and consumer groups. Its investigations are kept confidential until they are complete.

• The major television networks also require advertisers to substantiate claims before ads are aired. • Section 43(a) of the Lanham Act, enacted over 40 years ago, provides a private right of action in federal court for a firm injured by a competitor’s advertising.

• Most states have “little FTC Acts,” modeled after the Federal Trade Commission Act, that are used to regulate advertising.

SOURCE: CTFA Labeling Manual: A Guide to Cosmetic and OTC Drug Labeling and Advertising, Eighth Edition 2006.