Marketing Law and Legal Definition

Under the Federal Trade Commission Act:

  • advertising must be truthful and non-deceptive;
  • advertisers must have evidence to back up their claims; and
  • advertisements cannot be unfair.

Additional laws apply to ads for specialized products like consumer leases, credit, 900 telephone numbers, and products sold through mail order or telephone sales. And every state has consumer protection laws that govern ads running in that state. The FTC looks at both "express" and "implied" claims. Under the law, advertisers must have proof to back up express and implied claims that consumers take from an ad. The FTC looks at what the ad does not say - that is, if the failure to include information leaves consumers with a misimpression about the product. For example, if a company advertised a collection of books, the ad would be deceptive if it did not disclose that consumers actually would receive abridged versions of the books. The FTC looks at whether the claim would be "material" - that is, important to a consumer's decision to buy or use the product. Examples of material claims are representations about a product's performance, features, safety, price, or effectiveness. The FTC looks at whether the advertiser has sufficient evidence to support the claims in the ad. The law requires that advertisers have proof before the ad runs.

Federal and state multilevel marketing and anti-pyramid statutes are components of a comprehensive consumer protection umbrella. These laws are designed to protect individuals from being defrauded through illegitimate programs which lure participants with the promise of easy money by compensating them from the investments of additional participants rather than from legitimate product sales. These programs have been called "Ponzi schemes," "airplane plans," "pyramids," "chain letters," and many other names. Although known in the United States only during the twentieth century, such programs have cost their participants hundreds of millions of dollars. Federal and state regulatory agencies have sought to proscribe such illegal activity in multiple ways, including the use of anti-pyramid, mail fraud, business opportunity, franchise, lottery, and securities laws.