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Selling, but not overselling, your product

Advertising is the cornerstone of American marketing, the most direct way to tell large numbers of consumers about your goods or services, expand your market share and encourage customer loyalty. It is also the primary way in which you engage your major rivals in head-to-head competition.

As with any heated contest, advertising would quickly get out of hand without boundaries and rules. To allow deceptive or outright fraudulent claims to go unchecked only serves to undermine a medium whose very effectiveness depends so much on its credibility.

Step over the line in your print, electronic or Internet advertising and you may find yourself facing legal action from any number of quarters: the Federal Trade Commission, your state's attorney general, your local district attorney, consumer protection agencies, other businesses and even individual consumers.

As the main federal watchdog, the FTC works to keep advertisers in bounds largely through voluntary compliance, although it has the clout to stop questionable ads, initiate civil action and even force a company to run corrections.

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In addition to the federal guidelines, most states now have consumer fraud and deceptive practices statutes. Fudge on those and you could face fines, restitution and even a jail sentence depending on your state and local laws.

You want your advertising to work for you, right? Here's how to play by the rules.

The big three
Under FTC guidelines, your advertising generally will be bulletproof if it meets the big three criteria:

  • Fair
  • Truthful and nondeceptive
  • You must have evidence to back up your claims.

To meet the fairness test, your ad must not cause substantial, unavoidable physical or monetary injury to the consumer and its overall benefit should exceed its cost. Common fairness infractions include coercing consumers to buy unwanted goods, selling defective or unsafe goods and omission of information that would adversely affect the consumer's buying decision.

Your ad is truthful if it accurately presents the qualities and prices of your goods or services. Clearly, consumers, your competitors and the authorities will quickly determine if that new watch you're selling is waterproof or merely water resistant. Calling it a great watch is fine; just don't claim it can do what it can't.

A good final test for your ad is whether you back it up with hard evidence. In a worst-case scenario, you may have to do just that in court, and ignorance of the law won't get you off the hook.

Endorsements and testimonials
If your ad quotes written material, uses someone's picture or likeness or mentions any group or organization in an expressed or implied endorsement, U.S. copyright law, specifically the "fair use" doctrine, requires you to obtain permission beforehand, preferably in writing. One notable exception: You may use brief excerpts from favorable reviews or performance awards.

Baiting and deceptive pricing
Two of the quickest ways to get into trouble with an ad are to bait-and-switch and engage in deceptive pricing.

Bait advertising is an alluring but insincere offer to sell something you don't want or intend to sell just to lure consumers to buy something else, usually at a higher price or at a greater advantage to you. It is also illegal.

You may be exposed to bait advertising claims if you fail to have sufficient quantities of an advertised item in stock to meet reasonable demand. Your one out here is if your ad states that quantities are limited.

Deceptive pricing attempts to sweeten an offered price through misleading comparisons to your "regular" prices or those of competing merchants. There is considerable gray area here. Best self-test: Can you prove your facts and figures?

Beware the word "free"
Nothing flags whistleblowers faster than the word free. In a nutshell, if you offer something for free, make sure all terms, conditions and limitations are spelled out in the ad.

It is unfair and deceptive to pair a free item with the purchase of another product if the price or quality of that product has been manipulated without the consumer's knowledge to offset the cost of the free item.

Consumer credit claims
Ever noticed all the fine print at the end of those zero-percent-down car commercials? It's there because whenever you advertise specific credit terms, federal law requires that you clearly spell out the details, including the annual percentage rate, down payment and terms of repayment.

Specifics aside, it's also a good idea to avoid general statements like "easy credit" unless you really mean it. If you require a higher down payment, shorter repayment term or tighter collection policy for higher-risk customers, or don't extend credit to them at all, your offer doesn't qualify as easy credit.

Do unto others ...
It's generally a bad idea to advertise your goods or services by knocking your competition. After all, just by mentioning them, you're giving them some of your valuable ad time. But if you must compare, make certain you can substantiate every point, whether expressed or implied, about your product and theirs.

The FTC has specific statements for specialized goods and services, including food, jewelry, furniture, dietary supplements, eye-care surgery and vocational or distance education offerings. For a list of FTC guidelines, visit its Advertising Policy Statements and Guidance Web site.

Jay MacDonald is a contributing editor based in Florida.

-- Posted: Sept. 4, 2002

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See Also
Effective ads on a limited budget
Creating your first television ad
Tuning in the right radio ad
10 tricks for an effective print ad
More Small Biz stories

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