FTC Guide Advertising and Marketing on the Internet- The Rules of the Road (December 2000)

Advertising and Marketing on the Internet: Rules of the Road

December 2000

In December 2000, the Federal Trade Commission (“FTC”) issued guidance on advertising and marketing on the Internet, emphasizing that traditional advertising rules also apply in the digital space to protect consumers and maintain integrity. Advertisers must ensure that claims are truthful, not misleading, and substantiated, particularly regarding health, safety, or performance. The FTC defines deceptive practices as those likely to mislead consumers or influence their decisions, while unfair practices cause substantial harm without justified benefits.

Both sellers and third parties, such as advertising agencies, can be held liable for deceptive claims, with agencies required to verify claims instead of relying solely on advertisers' assurances. Disclaimers and disclosures must be clear, and advertisements should demonstrate accurate product performance, while promised refunds must be honored. Special care is necessary when advertising to children, who may struggle to evaluate claims critically.

The FTC also highlights consumer privacy protection, noting growing concerns about the security of personal information online. Many consumers hesitate to engage in online commerce due to fears of data misuse, prompting the FTC to encourage businesses to adopt effective privacy practices. Reports to Congress revealed that while many websites collect personal information, few provide adequate transparency about their practices, with only 14 percent disclosing information collection methods in 1998 and minimal improvement by 2000.

The Children's Online Privacy Protection Act (“COPPA”) mandates that websites targeting children under 13 obtain parental consent before collecting personal data, with resources available for children, parents, and site operators to understand their rights.

The FTC outlines various laws governing online advertising practices, including the Franchise and Business Opportunity Rule, which requires detailed disclosure to potential buyers at least ten days before financial commitment. In multi-level marketing (“MLM”), the FTC distinguishes legitimate practices from illegal pyramid schemes, emphasizing that MLMs must focus on retail sales and comply with disclosure requirements.

In financial matters, the Truth in Lending Act mandates clear disclosure of finance charges, while the Fair Credit Billing Act protects consumers from billing errors. The Fair Credit Reporting Act ensures the accuracy and confidentiality of credit information, and the Equal Credit Opportunity Act prohibits discrimination in lending. The Electronic Fund Transfer Act outlines rights and responsibilities in electronic transactions, and the Consumer Leasing Act mandates transparency in lease agreements.

The FTC warns against misleading environmental claims, requiring substantiation for any general claims of environmental benefit. When advertising "free" products with purchases, all terms must be clearly disclosed.

The FTC's Jewelry Guides provide specifics on accurate representation, requiring sellers to disclose if gemstones are synthetic or imitation. The Mail or Telephone Order Merchandise Rule requires sellers to have reasonable shipping timelines and to communicate any delays. The Negative Option Rule mandates clear disclosure of subscription service terms, while the 900-Number Rule requires cost disclosures for pay-per-call services and prohibits targeting children under twelve unless for educational purposes.

Telemarketing ads for credit repair or advance fee loans must adhere to the Telemarketing Sales Rule, which includes specific disclosure requirements. Testimonials and endorsements must reflect typical consumer experiences, and any connections between endorsers and companies must be disclosed.

Warranties must be available before purchase for products over $15, with guarantees offering full refunds and clear terms. The Textile and Wool Acts require accurate country of origin and fiber content disclosures. Products labeled "Made in the U.S.A." must be primarily manufactured in the United States.

The FTC collaborates with law enforcement to monitor online advertising for deceptive claims. Non-compliance can lead to serious consequences, including cease-and-desist orders, fines up to $51,744 per violation, federal injunctions, and potential refunds to consumers in civil lawsuits. Adherence to these regulations is crucial for avoiding enforcement actions and financial repercussions.

 

For more information, see here:  https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road

 

These materials were obtained directly from the Federal Government public websites and are posted here for your review and reference only.  No Claim to Original U.S. Government Works.  These may not be the most recent versions.  The U.S. Government may have more current information.  We make no guarantees or warranties about the accuracy or completeness of this information, or the information linked to.  Please check the linked sources directly.