United States: Advertising Law Compliance For Start-Up Companies

Last Updated: May 30 2018
Article by Julia Huston

Publicly launching its first product or service is an exciting time in the life of a start-up company.  In this blog post, we provide some "rules of the road" that will hopefully prevent that all-important first product launch from turning into a legal disaster.  Elsewhere, we have blogged about trademark, patent, domain name, and copyright strategies for start-ups and early-stage companies.

What Rules Apply?

There is no single set of rules that govern advertising, but rather a hodgepodge of federal and state statutes and regulations issued by various agencies (some of which are industry-specific and some of which apply to everyone).  Let's start with the big picture principles.

Lanham Act

In order to comply with the federal Lanham Act, codified at 15 U.S.C. Sec. 1125(a)(1)(B), a company must not engage in false advertising, which can consist of making a false statement or making a statement that is misleading and is shown to actually deceive consumers.  Since few companies knowingly make false statements, most disputes involve fact patterns at the margin – such as statements that can be interpreted different ways, statements that imply something that may not be true, and statements that claim that studies establish something where the studies are of questionable reliability.

Your competitors can sue you for false advertising under the Lanham Act based on advertising claims that you make about their products or your own.  Comparative advertisements are particularly risky, as your competitor is unlikely to appreciate being poked in the eye.


The Federal Trade Commission (FTC) takes an even broader view of what constitutes unlawful advertising, and can open an investigation and/or file a lawsuit against a company that the FTC believes is engaging in unfair or deceptive advertising practices.  If there is anything worse than being sued by a competitor, this is it.  FTC cases often end in heavy fines and judgments or consent decrees that put the company under the supervision of the FTC for as long as 20 years.

Under the FTC Act, codified at 15 U.S.C. Secs. 45(a)(1) & 52(a), any unfair or deceptive advertising is unlawful.  The FTC takes the view that advertising claims must be substantiated at the time that they are made, meaning that the company must be in possession of reliable proof that any reasonable interpretation of its advertising claims is true.

Mini-FTC Acts

The states have adopted so-called mini-FTC Acts, which are largely designed to protect consumers from unfair and deceptive acts and practices. This is where the class action plaintiffs and their lawyers come in.  In general, if you are engaging in conduct that puts you at risk of liability under the federal laws described above, you should be prepared to defend against similar claims brought by groups of consumers.  Indeed, the risk of liability in class actions often informs the decision of how to settle false advertising claims brought by competitors or state or federal governments in other forums.

FTC's Guide to Endorsements and Testimonials

The FTC has issued detailed Guides Concerning the Use of Endorsements and Testimonials (16 C.F.R. Part 255).  This document contains many traps for the unwary, particularly for companies that make statements about their products or other topics on social media.  To summarize just a few of the key takeways:

  • You cannot retweet or otherwise disseminate a statement made by a consumer if you would not be able to make that statement yourself. Essentially, it becomes your own advertising claim and you must be able to substantiate it as readily as any other claim that you make.  This is not intuitive to many companies, as they think they should be able to disseminate truthful consumer statements even if the consumer is reporting results that are not typical.  Because that consumer's statement is true, right?  But the law requires more of you, as the advertiser, and you are at risk if you do not comply.
  • If someone is receiving a benefit in exchange for saying something nice about your product, even as trivial as a coupon or a chance to win something, that fact must be disclosed CLEARLY AND CONSPICUOUSLY. As you can imagine, the FTC has strong feelings about what that requires.  In general, hyperlinks to detailed disclosures will not be considered to be effective, and the FTC prefers that real-time disclosures such as #Ad, Sponsored or PaidAd appear at the beginning rather than at the end of social media posts, in part because they will not be cut off when they are recirculated by others.
  • If you pay or otherwise provide an incentive for a blogger or other third party to talk about your product, and they fail to make appropriate disclosures when they do so, you can be liable even if you never circulate that statement yourself.

If your company is going to engage with the public via social media and/or pay or incentivize endorsers, it is imperative that the people responsible for your advertising – which includes email blasts as well as posts on Facebook, Instagram and Twitter – be intimately familiar with the FTC guidelines regarding endorsements and testimonials.

FTC's Green Guides

If you will be adverting the environmentally friendly aspects of your products, be sure to comply with the FTC Green Guides (16 C.F.R. Part 260).  This guidance provides, in part:

  • Don't make broad, unqualified claims that your products are "eco-friendly" or "environmentally friendly" unless you can prove that they have specific and far-reaching environmental benefits in every way that consumers might perceive as important. Hint:  The FTC considers such claims to be nearly impossible to substantiate.
  • Don't make an unqualified degradable claim unless your entire product or package will completely return to nature within one year after customary disposal.
  • Don't make unqualified claims regarding compostable, recyclable, recycled content, or source reduction unless you know exactly what the FTC requires for such claims.
  • In case you are thinking of making up your own "seal of approval" that applies only to your products – don't. Or at least don't do it without the advice of counsel, as the FTC and the courts have not looked kindly upon this type of conduct and you will need to proceed carefully to mitigate the risk.

For more information about the current state of the law in this area, see David Kluft's excellent blog post titled Environmental False Advertising in 2017/2018.

FTC's .Com Disclosures

Any company that advertises on the internet – which is pretty much every company – needs to comply with the FTC's .Com Disclosures.  This guidance provides detailed information regarding how to make clear and conspicuous disclosures on websites, blogs, social media posts and the like and provides some useful examples in an appendix.

Importantly, the FTC does not really care if you can't fit your entire disclosure within the allowable number of characters on Twitter.  If a disclosure is required, the FTC says that you should do it right or not at all.  In most cases, that means including the most important elements of the disclosure in the same visual display as the advertising claim, as opposed to providing a hypertext link to another document.

Industry-Specific Statutes and Regulations

You should be familiar with the rules of every federal and state agency that might regulate your products and comply with them.  For example, the Food and Drug Administration (FDA) has issued very specific regulations about what is required to make "less sugar" claims in foods.  But, for God's sake, under no circumstances should you approach the agencies and ask their advice unless you are looking to take "no" for an answer.

For example, some companies make the mistake of asking the FDA whether they can make certain statements in their advertising and customer communications about the benefits of their products that might be considered "off label."  Bad idea.  If you have to ask, there is a high risk that the FDA will say no, and as a practical matter no agency is incentivized to find a path forward to help you market your product in the most effective manner.

Mark Mansour has set forth more tips for food and dietary supplement makers, with particular attention to the FDA and FTC, in a prior blog post here.  Other blog posts have summarized recent advertising cases involving weight loss and cognitive functioning claims.

In connection with a widely publicized case involving so-called toning shoes, Neil Austin observed that the FTC's substantiation standard of requirement of "competent and reliable scientific evidence" for certain health and fitness-related claims depends on the nature of the claim and can be difficult to predict.  In that case, the FTC held that muscle strengthening claims must be supported by "at least one adequate and well-controlled human clinical study . . . that conforms to acceptable designs and protocols [and] is of at least six-weeks duration," whereas weight loss claims require "at least two adequate and well-controlled human clinical studies . . . conducted by different researchers, independently of each other, that conform to acceptable designs and protocols" (without any mention of duration).  You get the idea.  It is extremely easy for an advertiser to misstep in this area.

Given the risks involved, it is important for the sellers of regulated products to vet their advertising claims with an attorney experienced in advertising law if they feel they may be operating in the "gray area" or want to evaluate their potential liability.

Do's and Don'ts

For most start-up companies, pragmatism and risk management are the guiding principles.  With that in mind, here are some tips for your first product launch:

  • Assume that anything you say publicly will be considered advertising, and make sure that your advertising complies with all of the applicable rules. Your advertising includes:
    • Email blasts
    • Posts on Facebook, LinkedIn, Instagram, Twitter, and other platforms
    • Product packaging
    • Your website
    • Blogs
    • Flyers and materials that you disseminate to customers
  • Make sure that every statement in your advertising is true and substantiated, and that every reasonable interpretation or "takeaway" from your ad is likewise true and substantiated.
  • Closely supervise the 20-somethings that are drafting your social media posts and other advertising content.
  • Don't let your advertising firm, if you are lucky enough to afford one, run your campaign without satisfying yourself that the ads comply with the applicable rules. Ask questions and challenge assumptions.
  • Establish protocols for reviewing and approving social media posts and other public-facing communications from the outset. Once individuals feel empowered to speak on behalf of the company, it can create a permissive culture that is difficult to change.
  • Refrain from high-risk conduct unless you conduct a risk assessment and are prepared to weather any storms that result. The following conduct is more likely to draw objections than more run-of-the mill advertising:
    • Comparative advertisements
    • Advertisements that say negative things about your competitors
    • Inflammatory rhetoric, even if you think it is puffery
    • Reliance on studies/facts as to which there is not consensus in the industry
    • Ambiguous statements where not all interpretations can be proven true
  • Confer with experienced advertising counsel in close cases.
  • Respond promptly and courteously in the event that you get an objection.
  • Be aware that your insurance policies, including for general liability and director/officer liability, may provide coverage for advertising-based claims. If you receive an objection and you think insurance coverage may apply, put your insurer on notice immediately.
  • If you wish to bring a false advertising claim against a competitor, be aware of the different procedures and venues that are available, including the National Advertising Division of the Council of Better Business Bureaus.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
30 Oct 2019, Panel, New York, United States

Energy storage will play a key role in achieving New York State’s bold climate vision, set in motion in June 2019 with the passage of The Climate Leadership and Clean Energy Protection Act, the nation-leading law which calls for economy-wide emissions reductions to reach net-zero by 2050,100% clean electricity by 2040, and 70% renewable electricity by 2030.

19 Nov 2019, Panel, Massachusetts, United States

Don’t be blindsided by risks you didn’t see coming!

Improve your awareness and understanding of your company’s key risk exposures, and learn how to mitigate and insure them:

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions