Online Advertising for Your Small Business Text Size:

The Internet or "World Wide Web" is one of the fastest growing mediums being used today by business owners--big and small--to advertise and sell their goods and services. But, you need to be careful. Don't design your Web site and jump online too hastily. There are some legal issues you need to keep in mind, and particularly some federal laws, regarding online advertising for your small business.

In addition to federal laws, many states have consumer protection laws that might impact your online advertising. So, before you start promoting your goods online, be certain to check the laws in your area, or get some help from an experienced business law attorney.

Ads and the FTC Generally

The Federal Trade Commission (FTC) is the national consumer protection agency: it works to prevent fraud, deception, and unfair business practices in the marketplace. It governs things like advertising in traditional print, on television and the radio, and recently, with its increased use, the Internet.

Generally, all of the FTC's rules that apply to advertising in print or on television and radio apply to online advertisements as well. Under the Federal Trade Commission Act (FTCA), it's unlawful to engage in "unfair or deceptive acts or practices," which covers things like advertising claims and marketing and promotional activities. Basically, any advertisement must comply with three basic principles:

• Your ad must be truthful and not misleading. So, if an ad is likely to mislead an average consumer and that misperception influences a customer's decision to buy or use the product, it is considered deceptive
• Advertisers must be able to substantiate their claims. If you're going to run an ad, you must have support for the claims the ad conveys. For example, if your ad claims that tests show that one search engine is better than another, you should have some test results to back that up. If there is more than one reasonable interpretation a consumer can make, the ad has to substantiate each interpretation
• An ad cannot be unfair. It's unfair if, according to the FTC, it causes (or is likely to cause) serious consumer injury that couldn't have been reasonably avoided, and isn't justified by the potential benefit to consumers or competition. For example, you must disclose all hidden fees. It's also considered unfair if you don't admit that you paid individuals for endorsements

Online Ads and the FTC

The FTC has a guide for online advertising called Dot Com Disclosures. "Disclosures" are statements that are required to prevent an ad from being misleading or to ensure that your customers get important information about the terms of a transaction. Much of the publication discusses how disclosures must be "clear and conspicuous." The trick here is to pretend that you're a consumer and to ask yourself if the disclosure is presented in a way that you would both notice and understand.

There are a number of factors to consider, including:

• Whether a single disclosure is enough or whether the disclosure needs to be posted at various points throughout your Web site.
• Whether anything on the site distracts attention from the disclosure.
• The location of the disclosure, including where it is in relation to the advertisement. Generally, you should avoid requiring customers to click on a link to read the disclaimer.
• To help make a disclosure clear and conspicuous, place it near, and when possible, on the same screen as your claim about the product, service or transaction. Also, you can use text or visual cues to encourage consumers to scroll down your Web page when it's necessary to view a disclosure.

Also, use size, color, and graphics to help highlight the disclosure. There is no need for subtleties here; simply indicate that you are making a disclosure or disclaimer, and list those details that the consumer needs to know.

Enforcement

Ultimately, if you run an ad on your Web site that a reasonable consumer will understand and that won't deceive him or her, you should be fine. If, however, you run an ad that is even slightly deceptive or somewhat confusing, and you fail to "clearly and conspicuously" disclose, your ad might draw the attention of the FTC.

There are several things that could happen if the FTC determines that your online ad is deceptive and fails to contain the appropriate disclosures, such as:

• Being ordered to "cease and desist," or stop running the ad the online. If you don't comply with such an order, you could be fined up to $11,000 per violation.
• If you fail to comply with an FTC cease and desist order and the FTC takes you to court and the court orders you stop, you can be fined and held in contempt if you don't obey the court order. That can result in jail time and fines (in addition to fines imposed by the FTC).
• Having to issue refunds to customers who bought the goods or services you advertised.

Avoid these problems by following some simple rules:

• If your advertisement doesn't pass muster offline, don't bother posting it online
• If there's something your customers ought to know, like that the purchase price doesn't include a "hidden" fee, for instance, disclose it
• Make any disclosure clear and conspicuous

Questions for Your Attorney

• If I hire someone to design my Web site and ads, can I be held liable if the FTC finds the ads objectionable?
• I think one of my competitor's Web sites has misleading ads. What should I do?
• Will the FTC look at my ads and give me an opinion if they're misleading?
• How much will you charge me to look at my ads and make sure they comply with the FTC's requirements?

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