The Federal Trade Commission Act prohibits advertising that is untruthful, deceptive or unfair, and it requires advertisers to have evidence to back up their claims. There are also other federal laws applicable to advertisements for specific types of products and state laws that apply to ads running in particular states. An advertisement is unfair if it causes "consumer injury." The Federal Trade Commission (FTC) uses a three-part test to determine if a consumer injury has occurred or is likely to occur as a result of an advertisement.
The FTC test is as follows:
Any injury may be substantial because of monetary harm or unwarranted health and safety risks. More subject effects, such as offending the tastes or opinions of consumers, generally will not constitute a substantial injury. The FTC will also consider whether a challenged practice violates established public policies and whether the conduct is immoral, unethical, oppressive or unscrupulous in deciding whether it is "unfair."
The Act recognizes that, in general, the government expects the marketplace to be self-correcting, with informed consumers making purchasing decisions without regulatory intervention. The FTC may step in, however, when sellers use practices that distort free market decisions, such as by withholding critical information from consumers or pitching questionable products to highly susceptible and vulnerable classes or purchasers, such as the terminally ill.
Experienced marketing professionals who typically consult with business entities, or experienced business marketing professional employees and executives with companies, are typically well versed with respect to the limits and regulations regarding deceptive advertising practices. In the event you encounter a circumstance where you need additional advice, you should consult with your legal advisor to determine the legality of any potential advertising materials on behalf of your business.