Instead of teaching how to sell more, this article is about how to keep out of trouble while selling more.
To paraphrase marketing guru Dan Kennedy, “No success justifies having to share a cell with a big guy named Brutus who thinks you look good.”
Please be aware up front that I’m not a lawyer, and you shouldn’t consider what I write here to be legal advice. I’m encouraging you to get good legal advice from a qualified attorney for your marketing promotions. Think of this as friendly advice from “Uncle Mike.”
After looking at some FTC (Federal Trade Commission) ruling cases, it seems to me if they target you for deceptive advertising action, they can probably find a way to attack you. That can be an expensive proposition, even if you successfully defend yourself.
I believe the best way to keep out of trouble is to keep your customers happy. In a nutshell, deliver more than what you promise. Most FTC actions start with customer complaints. If your customers don’t complain, the FTC will probably leave you alone. Having a long-period unconditional money-back guarantee can help. The guarantee doesn’t insulate a business from customers complaining when they didn’t get the results they were promised, even if the investment for the product or service is minimal.
When your product or service has real benefits, the FTC can still say you are making claims of results that are unsubstantiated as typical. For example, NordicTrack® made a weight loss claim of “eighteen pounds in twelve weeks” for the NordicTrack® cross-country ski exerciser. The FTC found the studies on which the claim was based were flawed, so weight loss of eighteen pounds in twelve weeks wasn’t a typical result.
Having studies that support your claims of typical results isn’t sufficient when there are other studies that don’t support your claims.
You might be confident because you have testimonials that say past customers have had great results with your product. You might not be aware that the claims in your testimonials are considered to be claims of typical results of your business, even with a “not typical results” or “results may vary” disclaimer. One way to “fix” this situation is to include a statement of what the typical results really are, based on actual scientific studies.
Some people believe dietary supplements aren’t subject to FDA and FTC regulation. Under the Dietary Supplements Health and Education Act of 1994, the FDA preapproves health claims on supplement labels under a “significant scientific agreement” standard. Manufacturers must substantiate that structure and function claims are truthful and not misleading. The FTC seeks to ensure that claims made in advertising of supplements do not deceive consumers.
Using experts in advertisements can be risky. The expert must have the actual credentials and documentation to support the expert’s claims. Also, compensation of the expert with a share of the sales of the product or service must be disclosed.
When a celebrity endorses a product or service, the celebrity must have actually used the product or service. Statements by the celebrity are considered to be claims of typical results. Unusual compensation arrangements for the endorsement must be disclosed.
Contrary to the “Wild West” rumor, advertising claims on the internet are also subject to FTC advertising standards.
How about creating an “envelope” legal entity, for your business by incorporating or setting up a limited liability company? The FTC will likely “pierce the corporate veil” to include the principal and all legal entities in its action.
Although I encourage getting a legal review of your advertising, even that won’t insulate your business from deceptive advertising claims. Some attorneys give “clean opinions” because that’s what they believe their clients expect. Possibly you could get a malpractice recovery from the lawyer, but the malpractice insurance probably will have a lower policy limit than what you have to pay in refunds and penalties. Not all business attorneys are well-versed in the laws and legal environment of deceptive advertising litigation.
I hope this discussion has activated your “Spider Sense” to be more alert for exposure to deceptive advertising claims, especially relating to “typicality of claims” for your marketing promotions, and that you redouble your efforts to delight and not disappoint your customers.