Advertising in the United States involves various rules and restrictions that control advertising content and protect certain intellectual property rights. In addition, many advertisements are subject to industry-specific regulations. There are also special restrictions on advertisements targeting children and the use of endorsements in advertisements.
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Regulatory and Legal Framework
Advertising is regulated by a combination of laws at the federal, state, and local levels. Some of the main laws include the Federal Trade Commission Act (FTC Act), the laws implemented by the Federal Communications Commission (FCC), the Food, Drug, and Cosmetic Act (FD&C Act), and Section 43(a) of the Lanham Trademark Act.
There is also industry-specific regulation to governs advertising for goods and services such as tobacco, alcohol, and financial services.
The Federal Trade Commission (FTC) is the primary federal consumer agency in charge of regulating advertisements in the United States. The FTC is responsible for investigating and bringing lawsuits for violations of the FTC Act.
The FTC Act’s key tenets include:
- Advertising must be truthful and non-deceptive
- Advertisements cannot be unfair
- Advertisers must have evidence to back up their claims
Companies, organizations, and members of the public have the ability to submit a complaint with the FTC for an alleged violation of the FTC Act. The FTC will conduct an investigation and may initiate an enforcement action. The FTC has a variety of legal remedies at its disposal, including imposing cease and desist orders, civil penalties, and corrective advertising and disclosures.
In order to bring a claim of false advertising under Section 43(a) of the Lanham Trademark Act, the parties must show:
- The buyers were actually deceived by the false advertising
- There is a direct casual connection between the false advertising and the harm
Controls on Advertising Content and Methods
With the list of non-traditional advertising methods growing, regulators have enacted regulations to address new concerns that are not dealt with under existing laws.
For example, under Section 317 of the Communications Act of 1934, the FCC requires radio and television network broadcasters to disclose to listeners any matter that is being broadcast in exchange for money or other valuable consideration. In 2021, the FCC amended its broadcast sponsorship identification rules to require disclosure of programming sponsored by foreign governments and foreign political parties.
Outdoor advertisements are largely self-regulated by four industry organizations—the Outdoor Advertising Association of America, Institute of Outdoor Advertising, Traffic Audit Bureau for Media Measurement, and National Outdoor Advertising Bureau.
There are also a variety of controls on advertising content. These rules address advertising content issues in connection with bait advertising, false or misleading advertising, obscene material, and comparative advertising.
Bait advertising, or the offer to sell a product or service that the advertiser does not actually want to sell, is prohibited by the FTC. The ultimate intent of bait advertisements is usually to persuade the potential buyer to purchase another product or service from the advertiser. Bait schemes are usually characterized by excessive disparagement of the advertised product.
The FTC does allow comparative advertising under certain circumstances when the content is truthful and non-deceptive. The advertiser must compare the alternative brands using objective criteria such as price and measurable features.
Restrictions on Advertising to Children
The FTC has many restrictions in place to regulate advertisements targeting children. The FTC implemented the Children’s Online Privacy Protection Act (COPPA) in order to restrict the collection of personal information from children. Under COPPA, internet operators must collect parental consents before using or disclosing personal information obtained from children.
Rules on Endorsements in Advertisements
For advertisers using endorsements, the advertising message of the endorser must reflect their truthful beliefs and opinions. The endorsement must not be deceptive or be presented out of context in an effort to distort the endorser’s message. Also any material relationship between the endorser and the advertiser must be disclosed to viewers.
Public figures such as celebrities may protect their name, physical likeness, or voice under trademark laws. The estates of deceased celebrities sometimes also claim proprietary rights in the names and likenesses of celebrities.
Public figures may also enforce the misappropriation of their personas by bringing a cause of action that their right of publicity has been violated. This right of publicity is violated when an individual can demonstrate that the right in their likeness was used for commercial benefit without consent.