FTC's Truth In Advertising Regulations: Definition & Benefit

Instructor: Brianna Whiting

Brianna has a masters of education in educational leadership, a DBA business management, and a BS in animal science.

False advertisement is unfair to consumers and can even be harmful. In order to protect consumers the government has an agency that regulates advertisements. In this lesson we will learn about Federal Trade Commission regulations.

Federal Trade Commission

What was the last commercial you saw on television? Did the commercial make you want to go out and buy the product? What were the techniques used in the ad? In the advertising world, the goal is to gain the attention of the target audience and persuade consumers to buy products. Because simply showing a picture of the product is usually not enough to make a sale, many companies engage in the use of advertising techniques. For example, a company might have a celebrity endorse their products, or they may make a claim about their product. They may even create an ad that appeals to children if they are the ones that will enjoy the product. While these techniques are beneficial and often necessary to sell products, sometimes companies are less than honest. To protect consumers from fraudulent ads, a federal agency known as the Federal Trade Commission enforces laws that prohibit harmful business techniques. The agency also handles complaints that are made against businesses involved in scams or advertising that is deceptive. Come along as we learn about advertising regulations and why they are important to follow for business owners.

Types of Advertising

So what types of advertising must adhere to the rules mandated by the Federal Trade Commission? Well, if you see an ad on the television, hear it on the radio, see it on the internet or in a magazine, even receive it in the mail, it must follow the advertising laws of the FTC. The FTC is extremely concerned with those ads that pertain to the health of consumers, particularly those that make claims about food or diets, alcohol, or over the counter drugs because misleading ads can be dangerous for the consumer.

What Do the Regulations of the FTC State?

By now you must be wondering what types of regulations do businesses need to follow when advertising. Below you will find a list of the basic elements.

1. All advertisements must be truthful. This means that businesses cannot give false information to consumers or omit information.

2. Advertisements cannot be misleading. Companies cannot try to confuse the customer so that they will buy their products.

3. Advertisements should have evidence. Scientific evidence or support is needed when companies make claims. This proves that the company behind the advertisement is being honest about their products.

4. Advertisements cannot be unfair. Advertisements of products that cause unavoidable injury or cause harm that is higher than the benefits, are considered unfair.

Determining Deceptive Ads

While it would be great if all companies created honest ads that followed all the regulations set by the FTC, this is not true. In this section we will learn how the FTC determines whether or not an ad is deceptive.

1. First, the FTC considers the point of view of the actual consumer or the person that would typically look at the ad. This helps them understand what the ad is trying to say to the consumer.

2. It then considers all expressed and implied claims. Express claims are those that actual state a claim in the ad. An example might be: Rabbit Tennis Shoes make you run faster. This is an express claim because it states that the shoes will make you run faster. Those claims that are implied are those that make implications but are not actually stated. For example: Rabbit Tennis Shoes are worn by athletes that have qualified for the Olympics. This claim still makes the consumer think they will run faster if they wear Rabbit Tennis Shoes, but doesn't actually state it. A consumer can make the connection that if they wear these shoes they will run faster. The FTC will then make sure that any claims they state, including both expressed and implied are supported and have proof.

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