How To Avoid A FTC/FDA Lawsuit

Even though I’m not a lawyer. I have learned a few things about what you are allowed to do and not allowed to do while advertising. At a high level, there are three fundamental rules: Advertisements must be truthful, cannot be misleading, and must have reliable substantiation.

The first rule, the requirement that an advertisement be truthful should be easy to understand.  You cannot make up an imaginary person or a fake testimonial.  You cannot make up an imaginary clinical study or an imaginary product origin story.  You cannot say that your product usually sells for “X” or that only “Y” items are in stock when this is not true.

The second rule, the requirement that an advertisement not be misleading can be a bit more complicated to appreciate.  The key here is to understand that, even a truthful statement, may be misleading.  For instance, if an ad describes that people “could lose up to X pounds” or that people “have the opportunity to make an extra YYYY dollars per week,” the FTC would assert that the claims – even if true – are nevertheless misleading if there is no track record that these are typical results from using the product or service.  It is not enough that the claim be true.

The third rule, the requirement that an advertisement have reliable substantiation is equally important.  While creativity and imagination are keys to successful advertising, the starting point for any advertising should always be “what evidence do I have about the product and how it helps people?”  With a dietary supplement for instance, this requires reliable clinical studies (ideally, double-blind, placebo-controlled, human studies) about the ingredients in the product and about the ingredients in similar doses and percentages as in the product.  With a business opportunity or business coaching offer, reliable substantiation might require a third-party survey of past participants and data about the success they experienced from the service.  The point is that the substantiation must match the claim and the claim must match the substantiation.  

Beyond these three fundamental rules, there are other important rules.  You cannot make any drug or disease claims about a dietary supplement.  You cannot claim that a cosmetic affects the structure or function of the body, e.g. “operates at the cellular level.”  You are required to disclose if an endorsement or testimonial is from someone who has a connection to your company or has received compensation or even free product for their testimonial.  You cannot claim that your product is “Made in the USA” unless nearly all the ingredients or product materials are sourced from the US.

Just like it would be incredibly stupid to play any sport without understanding the rules, it would be even more stupid to advertise and sell products to consumer without understanding the rules.  The consequences of violating them are also serious – an FTC or FDA enforcement action, or even a consumer class action, can ruin your life and your financial future.  If your goal is to make money and also sleep well at night (and it should be), my best advice is to retain an experienced and knowledgeable advertising lawyer to educate and protect you.  I really like Damon Wright at GRSM.  I also STRONGLY RECOMMEND you read his firm’s E-CommLegalGuide.pdf (grsm.com).  In fact, you should click the link right now before reading further.  It is GOLD!

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