Section five of the Federal Trade Commission Act, prohibits “unfair or deceptive acts or practices.” This prohibition covers:
- Advertising claims;
- Marketing and promotional activities; and
- General sales methods
This Act ensures consumer protection online as well as in traditional print, television and other communication modes. In fact, since about 1999, the commission has taken a number of actions to prevent online fraud and deception.
The contents of an advertisement must comply with three basic principles:
- An ad must be truthful and not misleading. So, if an ad is likely to mislead an average consumer and that misperception influences a customer’s decision to buy or use the product, it is considered deceptive.
- Advertisers must be able to substantiate their claims. If you’re going to run an ad, you must have support for the claims the ad conveys. For example, if your ad claims that tests show xyz.com is a better search engine than abcd.com, you should have some test results to back that up. If there is more than one reasonable interpretation a consumer can make, the ad has to substantiate each interpretation.
- An ad cannot be unfair. It’s unfair if, according to the FTC, it causes (or is likely to cause) serious consumer injury that couldn’t have been reasonably avoided, and isn’t justified by the potential benefit to consumers or competition. For example, you must disclose all hidden fees. It’s also considered unfair if you don’t admit that you paid individuals for endorsements.