FTC Issues New Disclaimer Rules – Clear and Conspicuous Requirement

The FTC is issuing new rules applicable to online businesses this March 2013. In this article, we take a close look at the changes to the clear and conspicuous requirement companies must now comply with online.

BasicsTruth In Advertising

To understand the new rules, it helps to first cover the basics of online advertising from a legal perspective. Your advertisements must comply with three concepts:

  • Advertising must be truthful and not mislead consumers,
  • You must be able to substantiate the claims you make with objective evidence, and
  • Your ads cannot be unfair.

If you meet these three prongs, you are generally in good shape. However, most advertising requires disclaimers to avoid situations where the advertising will be considered misleading.

Consider the Subway advertisements featuring Jared. Jared lost a massive amount of weight supposedly by just eating Subway sandwiches. In truth, he also spent significant time walking each day. Subway was forced to use two disclaimers in this scenario. First, eating Subway sandwiches alone would not help you lose weight. One also needs to exercise. Second, the results experienced by Jared were not typical. With these disclaimers in place, the marketing of Subway passed muster with the FTC.

Clear and Conspicuous

You cannot bury disclaimers in the minutia of a marketing piece or website. If you watch the Jared Subway television commercials, the disclosure is printed out in text on the bottom half of the picture. Put another way, the disclaimers are “clear and conspicuous” as required by the FTC.

The problem, of course, is what does clear and conspicuous mean on the web? Most online advertisements are small, particularly with social media messages. How can you possible fit a disclaimer in them? The answer for most online businesses has been to link to a disclaimer buried on their site. The new FTC rules make it clear this approach no longer will suffice.

New Standard

The FTC is now requiring businesses locate disclaimers “as close as possible to the claim they qualify.” It is no longer sufficient to place the disclosure on the same page. Linking to a disclaimer on a separate page is also verboten.

One thing the FTC is making very clear is when it says “as close as possible”, it means it. In most cases, this means immediately following the claim being disclaimed. An example would be:

¾ Carat Diamond Earrings
Quality diamond earrings make the perfect anniversary gift for her this year.
** Diamond weight may be between .72 and .78 a carat.

Disclaimer Is Too Large

What if your disclaimer is too large for the advertising piece or a product listing on your site? The answer of the FTC is simple – don’t use it.

In Closing

The new FTC rules for online businesses represent a severe clampdown. How the FTC plans to enforce these rules is anyone’s guess. The Commission will undoubtedly make an example out of a few companies, but one has to question the long-term ability of the Commission to police these issues.

If you are selling online, you need to get your house in order given these new rules. A lawyer in your state should check all your on-site pages and off-site advertisements to make sure you are in compliance with the new FTC requirements. Contact me today for a review.

Richard A. Chapo, Esq.