Overview
As consumer-facing product and service companies go head-to-head in an increasingly competitive marketplace, the risks of doing business are higher than ever before. Whether marketing your products to generate the highest return, navigating an increasingly aggressive enforcement environment or confronting complex litigation, it’s critical to avoid the abundant consumer protection roadblocks when charting the path to your business’s success.
This first webinar of the two-part virtual program “Consumer Protection: Establishing and Protecting Your Competitive Position”—co-presented by McDermott Will & Emery and the Association of Corporate Counsel Chicago (ACC Chicago)—provided attendees with an understanding of key advertising and marketing issues in this area. The panel also discussed recent enforcement activity and trends, information that can help listeners optimize the impact of their advertising and marketing efforts while mitigating legal risks.
Below are key takeaways from the session.
BASIC ADVERTISING REQUIREMENTS
- Advertising cannot be false or misleading or deceptive.
- False or misleading: Does not include appropriate content or context; misrepresent literature, data or quotes from other sources; use misleading headlines, pictures or graphics; or suggest something is more safe or effective than has been demonstrated
- Deceptive: Often involving material omissions regarding performance, features, safety, price, effectiveness or potential consequences of use
- All claims—whether express, implied or comparative—made in ads must be substantiated before they are made. The amount and type of support for the claim depends on the nature of the claim, the consequences of a false or misleading claim, the benefits of a truthful claim, the cost required to substantiate the claim, and experts’ opinions about reasonable substantiation.
- If ads can be reasonably interpreted in multiple ways, each of those interpretations and the net impression must be true.
- Reviewing advertisements from the perspective of a “reasonable consumer” places higher scrutiny on ads targeted at the elderly, disabled and other vulnerable groups by the Federal Trade Commission (FTC), state attorneys general and other agencies.
Key consideration: Disclosures may be necessary to prevent false or misleading ads, but such disclosures cannot contradict themselves and language must be clear, unambiguous and conspicuous.
SOCIAL MEDIA ENGAGEMENT
- Use of third-party media content and native advertising can trigger FTC advertising and promotions laws (see above) and create potential exposure, despite its growing popularity.
- Endorsements are held to the same prohibitions—against false, misleading or deceptive claims—as statements made by advertisers directly and must also have adequate substantiation.
- Endorsers must have been a bona fide user of and present their honest opinions, findings or beliefs about the product or service.
- Endorsers must also disclose material connections with the endorser (including financial, employment, personal or familial relationships), as well as receipt of free products or anything else of value.
- Disclosures must be clear and easy to identify (e.g., displayed in the first few lines of an ad and standing alone).
- Social media posts might give rise to other regulatory or legal requirements, including those involving sweepstakes and lotteries.
Key consideration: In contracts or agreements with influencers, endorsers and celebrities, be sure to include clear, appropriate provisions outlining the nature and timing of content, indemnifications and any other legal or regulatory requirements to which both parties will be held.
PROMOTIONS
- There are three primary types of promotions that offer prizes: sweepstakes, lotteries and contests.
- Promotions can give rise to numerous issues, including specific state-law requirements, intellectual property concerns (including rights of publicity) and compliance with federal and state privacy laws.
- Two key distinctions between sweepstakes, lotteries and contests include the following:
- Chance: Winners of sweepstakes and lotteries are chosen at random, whereas contest winners are chosen based on performance (highest score, best entry, etc.)
- Consideration: Lotteries and contests include some form of consideration, either money (e.g., purchase of a ticket or product) or something else of value (including, for example, something that requires effort to enter, such as watching a video, filling out a questionnaire, attending an event or making a social media post). Sweepstakes do not require consideration to enter and therefore may provide alternative free means to enter the sweepstake (for example, mailing in a postcard or sending an email).
Key consideration: Sponsors of promotions should document official rules involving eligibility, entry requirements, winner selection, prizes, promotion periods, limitations of liability, right to modify the promotion or change/substitute prizes. Short-form rules should be mentioned wherever advertised.
CUSTOMER REVIEWS
- Advertisers and companies cannot hide or suppress negative reviews (e.g., by sorting reviews from best to worst, as opposed to by date submitted), under FTC Act prohibitions of unfair and deceptive acts and practices.
- Any incentives for reviews or material connections between the reviewer and the reviewed product must be disclosed.
Key consideration: Businesses can remove reviews that contain confidential, sensitive or private information; are libelous, harassing, abusive, vulgar, sexually explicit, inappropriate with respect to intrinsic characteristics (e.g., race or gender); unrelated to the product or service; or false or misleading.
Want to learn more about establishing and protecting your competitive position? Check out the key takeaways from Part 2 of the webinar.
