If you are a small-business owner, you know how important advertising is when it comes to getting customers through your door. However, advertising can also have some pitfalls, particularly if you aren't aware of the legal implications at play. In recent years, many states and localities have stepped up efforts to protect consumers of commercial advertising. Consequently, now more than ever it pays to understand the legal environment before embarking on an advertising campaign.
Unintended Contracts. One worry you might have is inadvertently making a contract through an ad. If you have made a contract and your product doesn't deliver on its promise, you might have a breach-of-contract suit on your hands. Suppose your store advertises that it will give a free gift or a special discount to "the first one hundred customers" or to a person who has made some other special effort. If so, you have made an offer to your potential customers. A customer can accept your offer by making the special effort successfully. This could constitute "consideration" and result in a binding contract. Although advertisements are rarely the basis of contracts, a contract can be formed when there is an offer, acceptance, and the exchange of something of value, or "consideration." Store advertisements usually do not meet the requirements of an offer. The law, perhaps somewhat artificially, classifies them as "invitations to bargain." But there are exceptions to this.
A major department store got into hot water many years ago by carelessly advertising, "Be among the first thousand shoppers at our store tomorrow to win a $1,000 shopping spree." The wording suggested to some people that all one thousand would win - a million-dollar proposition for the store. On the other hand, simply highlighting an upcoming sale or announcing the offering of a new service would not cause such problems and would allow you to keep the risk of an inadvertent contract on the back shelf of your worry closet.
Here's a checklist to keep in mind when creating your advertisements:
- Be careful of factual claims. It's one thing to puff your product - no one can really prove it isn't the "best." It's another thing to make a claim that can be disproved.
- Be doubly careful of claims you're making about the competition's product. You can try to disparage it, but be sure you have your facts in line before you do - your competitor has every incentive to dispute you, perhaps in court.
- Be clear about whatever offers you're making - don't accidentally mislead about price, special offers, "free" gifts, or other special promotions.
- Don't be caught in the bait-and-switch trap - make sure you have enough of the sale item you're offering and that your salespeople know to offer rain checks if you run out.
False Advertising. False or deceptive advertising has legal implications beyond contract law and is forbidden under federal law and in most states, notably under the consumer fraud laws. According to the law dealing with false or deceptive advertising, your intent isn't important. The overall impression conveyed by your ad is what counts. False or deceptive advertising may mislead a consumer about a products place of origin, nature or quality, or maker. The product being advertised can be property, services, or even credit.
An example of creating a misleading impression about a product's place of origin would be putting French labels on sweaters made in Arkansas. Similarly, promising first-quality socks and delivering irregulars or seconds is creating a misleading impression about an item's nature or quality. Claiming a cheap counterfeit watch as a Rolex is creating a misleading impression as to its maker. As for service, false advertising might lead consumers into thinking that someone has qualifications (such as being a master carpenter) that he or she actually does not have."
On the other hand, it's okay for an advertiser to claim that It makes the "best tasting" fried chicken on the market. In the law, this kind of claim is called puffing - that is, an exaggerated sales talk or statement of opinion that is unlikely to be mistaken for an enforceable promise. However, it might be deceptive advertising to portray an item in a way that suggests performance far beyond reality. And if a spark plug ad says the plugs will last 50,000 miles and they routinely fail early on, the advertisement was probably misleading.
Complaints about deceptive ads could land you in hot water with state or local consumer-protection offices, the state attorney general's office, or the National Advertising Division of the Council of Better Business Bureaus. Another advertising watchdog out there is the Federal Trade Commission, though it typically gets involved only in national or multistate ad campaigns. If a customer has complained about your advertising, or if you have any questions, talk to your attorney; you may even want to schedule regular check-ins with your attorney to review your advertising plans.