The Federal
Trade Commission (TFC) gets the power to monitor advertising from the 1914
Federal Trade Commission Act’s section 5 (Kubasek, 2016). The section forbids
practices in commerce that demonstrate unfairness and deceptive tendencies.
Although the definition of what is “unfair” or “deceptive” is left to the
courts and TFC, the Act instructs that investigation should focus on the
impression the consumers get from the advertisement. According to Federal Trade
Commission (2021), an ad becomes “deceptive” if it either leaves out or
contains information with the potential to mislead consumers.
The case becomes stronger if
the “material” information is critical for the consumer’s purchase and/or
utilisation of the concerned product. On the other hand, the Federal Trade
Commission considers an advertisement “unfair” if it could harm the consumer or
when the product’s disadvantages exceed its benefits. Therefore, it is
inappropriate to simply judge the advertisement by concentrating on the
particular words and phrases it contains. The Act allows the Commission to
utilize its understanding of the effect of the advertisement to determine it is
deceptive.
- FTC has concerns about the impliedly false (or misleading) advertisements
According to Holmes
(1981), both the non-stated and
written information of an advertisement could mislead consumers. As it is,
therefore, even if the written statements are true, an advertisement can still
be deceptive if the information availed is not conclusive. This particularly
happens in instances where the advertiser withholds the unfavourable details to
avoid discrediting or contradicting the prior explanations (Federal Trade Commission, 2021). The
unspoken information may as well be deceptive if the Commission finds out that
the hidden intention of the advertiser is to mislead consumers.
An example is the P. Lorillard
Co. v. FTC case in which the
Commission brought before the Fourth Circuit on allegations that the company
deceived consumers by only revealing a section of the truth in its
advertisement. In this case, the fact was that a particular study published in
Reader’s Digest that Lorillard’s Old Gold cigarettes had lower nicotine and tar
content than its competitors, which is the exact thing Lorillard told
consumers. Still, the company was sued for not including the second part of the
study which stated that the difference was little enough and was as good as
insignificant. The Fourth Circuit concluded that the company violated section 5
of the FTC Act.
- The second type of advertisements sought by FTC consists of directly false (or misleading) advertisements
A company that shares false information to mislead its
target audiences breaches the terms of the FTC Act’s section
5 (Kubasek, 2016). It does not matter if the involved firm is not aware of
the ads’ deceptive state or even if the company had no intention to deceive
(Holmes, 1981). The Commission will not be required to present evidence if the
ads’ tendency to deceive is apparent. Other than verbal, the deceptive features
may be in the nonverbal forms like pictures or illustrations.
In
2003, the Commission had major concerns over dietary supplements (like Slim
Down Solution) whose manufacturers, claimed had fat absorption ability and
could lead the absorbed fat out of the human body without dieting or following
some routine exercising. The ad was so convincing that a viewer would want to
grab the supplement right away. However, the
Commission alleged that claims were false (Swindle, 2003). Another example
is the FTC v. Colgate-Palmolive Co. In this case, FTC accused the
manufacturer together with its advertising agency of production of a misleading
commercial.
The
television commercial illustrated how the company made a shaving cream with the
capability to “soften” anything even sandpaper. In the visual presentation,
however, the advertiser made use of a Plexiglas layer containing loose sand in
the place of sandpaper. The Supreme Court decided that the lack of disclosure
that the advertiser used mock-up and the fact that they made viewers think they
watched a true experiment, was deceptive. The Commission did not even need
testimonies of consumers to confirm that the commercial content was misleading.
- FTC has concerns over material non-disclosure
If an organisation or its advertiser fails to provide
consumers with material information, the advertisement can be defined as
deceptive or unfair. Here, material
information refers to a range of facts that if not revealed to consumers
the advertisement qualifies to be a misleading one. Even then, the term is not
very clear hence it is often applied alongside other doctrines that describe
misleading and false or half-truth innuendos (Holmes, 1981). The Lorillard
case, thus, belongs to this category as well because the company deceived
potential buyers when it stated that its cigarettes had the least tar and
nicotine while hiding the fact that the difference between these components in
its cigarettes and those of competitors was quite minimal.
- FTC watches out for commercials with unsubstantiated advertising declarations
This doctrine of “ad substantiation” demands that
advertisers should use substantial data to support the claims made on a product
that is advertised. In fact, the advertiser should refer to the data before
formulating the product claims. The consumers will check the proof to decide if
the claims are factual. In other words, the FTC Act states that section 5 is
violated if the advertiser does not have reasonable evidence to support the
product claims that it makes (Kubasek, 2016).
There
are specific strategies that the Commission expects to be followed when dealing
with this type of advertisement. One, check for the reasonable basis upon which
the advertisement claims are founded. In this process, the Commission’s model
checks for the specific information that may convince a “reasonably prudent
entrepreneur” with positive intentions that the claims he or she makes are
backed by adequate proof (Federal
Trade Commission, 2021).
Holmes
(1981) argued that some of the factors that must be considered in this process
include the nature and precision of the statements, features of the product, the
potential effect on consumers in the event that the indicated claims are false,
the level to which consumers may independently confirm the claims’ validity, and
the accessibility of advertising (in case the need to substantiate the claims
arises). Two, it is FTC’s duty to determine the evidence that is substantial
enough to confirm the concerned claims.
Next, FTC expects the advertiser to have the same evidence so that he or
she relies on it when coming up with the advertisement claims. Other than
supporting evidence, the advertiser is required to express good faith and
satisfactory prudence.