False advertising arises when a business competitor makes false or misleading statements about its competitor's goods, products, or commercial activities, causing marketplace harm to the target company. You might think this is so simple that there's no need for an Internet law twist. But amid the exploding content of the Internet era, it turns out we need a special rule for that most basic question: What is advertising or promotion?
The Business Law Basics
Commercial advertising is strictly regulated. The days when advertisements frequently promoted snake oil products and quack remedies are long gone. You'll still see hype and flimflam in ads, but it is legally allowed only in the context of "puffing," those inexact and exaggerated claims of superiority that most people can recognize as mere bluster.
Yet advertising claims that are reasonably understood as verifiable factual claims must indeed be accurate. (At least in the commercial world – somewhat counterintuitively, political ads are subject to no such accuracy requirement.)
More precisely, the Federal Trade Act prohibits all "unfair trade practices." In furtherance of that broad and vague standard, the Federal Trade Commission (FTC) issues scores of rulings, guidelines, and decisions on advertising in many media and fields of endeavor. Similarly, section 43(a) of the Lanham Act forbids making false descriptions of fact in interstate commerce regarding your own or another's goods, services, or commercial activities. Businesses enforce section 43(a) directly, through civil lawsuits against competitors who they believe are violating the law and thereby harming them. Finally, the National Advertising Division of the U.S. Chambers of Commerce, a private entity, decides many false advertising disputes as the advertising industry's self-regulatory adjudicatory arm.
The Internet Law Twist
Because of the trust consumers place in endorsements, the FTC has long expressed concern about the use of celebrity and consumer endorsements and testimonials in advertising. Since 1980, the agency has issued guidelines for endorsements in advertisements. In the Internet age, however, the FTC confronted a new problem. So much was being said about commercial products and services throughout the Internet, and, in particular, on privately authored blogs, that it became difficult to separate out commercial advertising from non-commercial comments and opinions.
As a result, in 2009, the FTC expanded its endorsement guidelines to cover new media and several other situations. The result is the first Internet twist in advertising law – special requirements with respect to evaluating whether content on the Internet, which may look like pure personal commentary, must be considered an advertisement.
The new guidelines specifically address the use of blogs and other new media in word-of-mouth advertising campaigns, and whether such activities will be viewed as advertising endorsements. The guidelines differentiate between situations where the blogger acts on his or her own, and those in which he or she acts on behalf an advertiser. Statements made independently (as when a blogger purchases a product with his own money and reviews it) aren't considered endorsements. Statements made "on behalf of" an advertiser (as when a blogger is paid to speak by the advertiser) would be. But "on behalf of" doesn't necessarily require that the advertiser control the blogger; advertisers can sometimes be liable for entanglement with a blogger even when they have no control over what the blogger ultimately writes about their product.
These "middle ground" situations where the advertiser and the blogger have fuzzy ties present the greatest difficulty. The FTC acknowledged that circumstances can vary tremendously, and cases will have to be decided individually. In one illustration, the FTC drew distinctions from the example of a blogger reviewing a pet product. In the first example, the blogger paid for the product. In the second, she got the product for free through a coupon program. In the third, she received a complimentary sample from a program meant to encourage reviews. The first two situations aren't considered advertising endorsements, but the last one is.
Put simply, the FTC has determined that you can't necessarily identify an advertising endorsement by the words that are used. In a twist of interpretation and definition, it actually takes some detective work to determine whether or not a blogger's comments are advertising endorsements.
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.
