Advertising Regulations and the Expanding Scope of Commercial Speech Protection

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329093.docxby Karen Witt329093.docxORIGINALITY
REPORT329093.docxWRITECHECK REPORT
11/6/2018 Chegg: The Law of Public Communication
https://ereader.chegg.com/#/books/9781351692342/cfi/6/32!/4/6
94/2/[email protected]:85.7 1/71
Chapter 8
Advertising’s Lower Status
-Part Test
Unfair and Deceptive Advertising
Unfairness
Deception
State Regulations
Federal Remedies
Prospective Remedies

Halting Advertisements
Required Statements
Competitor Remedies
Tobacco Advertising
Other Federal Regulations
Children’s Television
Broadcast Advertising
Personal Data
Other Consumer Protections
Money
Media’s Right to Refuse Advertising
Self-Regulation
National Advertising Division
Media Regulation 393
Securities Transactions
Mandated Disclosure

Fraud
Until the late nineteenth century, advertisements were usually
small notices to tell their patrons that
fabrics and other manufactured goods had arrived from abroad.
an issue because consumers could usually examine the products
https://jigsaw.chegg.com/books/9781351692342/epub/OEBPS/x
html/content.xhtml#bck_Ch08
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With the growth of mass production, advertising became more
sophisticated. By the beginning of the
twentieth century, manufacturers were using national
advertising to convince consumers in distant
markets to buy mass-produced, undifferentiated products. As
markets grew and became impersonal,

opportunities for profitable misrepresentations increased. Patent
medicine manufacturers, in particular,
were notorious for their exaggerated advertising promises. Some
patent medicine makers bragged that
with the right advertising, they could sell dishwater.
As mass marketing developed, truth in advertising took on new
importance to reputable companies.
producers of brand-name products wanted
consumers to have faith in the truth of national advertisements.
reputable national advertisers feared that false advertising by
one company damaged the credibility of the
others.
Manufacturers’ concerns for truth in advertising led to the
formation of regulatory organizations within
the business community. Truth in advertising was a major theme
at the 1911 convention of the Associated
Advertising Clubs of America. In 1912, the National Vigilance
—
Bureau—was created. By the 1930s, a movement within the
industry to clean up advertising had resulted
in several codes discouraging false and misleading advertising.2

New legal regulations were an important tool in the effort to
keep advertising honest. Most states
adopted a law similar to one proposed in 1911 by the trade
made it a misdemeanor to disseminate
misleading advertising. On the national level, the Federal Trade
Commission Act of 1914 established
federal authority to outlaw deceptive acts and practices,
including false advertising. Later, the Food and
Drug Administration was established to oversee labeling of
food, drugs, cosmetics, and medical devices
and to regulate the advertising
of Alcohol, Tobacco and Firearms (ATF),
a division of the Treasury Department, oversees advertising and
promotion of alcoholic beverages.
For many years, state and federal regulation of advertising
evolved without raising questions of freedom
of expression. Until the mid-1970s, commercial advertising was
outside First Amendment consideration.
Today, however, the Supreme Court has established limited
First Amendment protections for commercial
advertising, recognizing the important right of advertisers and
publicists to communicate truthful

information about products and services to consumers, balanced
with the people’s interests in being
protected from untruthful, misleading or incomplete information
ing decisions.
advertising enjoys constitutional protection in a
1976 case involving advertising for prescription drugs. In
Virginia State Board of Pharmacy v. Virginia
statute prohibiting pharmacists from
advertising the prices of prescription drugs. Since then, the
Court has developed a complicated
nt
regulation of billboards, “For Sale” signs,
lawyers’ advertisements, and other commercial messages,
including advertisements for abortion referral
Supreme Court ruling in 2015 that government
ef
town ordinance restricting the size of political, religious and
business signs on First Amendment grounds
(see Chapter 3).4 However, until shortly before the Virginia

Pharmacy decision, commercial advertising
had always been outside constitutional consideration.
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protection in 1942, in a case called
Valentine v. Chrestensen.5 In that case, the Court ruled that F.
J. Chrestensen had no First Amendment
right to distribute handbills advertising tours of a former Navy
submarine. Chrestensen distributed
handbills to pedestrians in lower Man -
cent tours of his $2 million submarine moored
at a state-

handbills promised visitors a glimpse of the
the S-49 submarine, also known as the
“fighting monster.” Children could take the tour for 15 cents.
City officials, however, told Chrestensen to stop distributing his
handbills because he was violating the
of “commercial and business advertising.”
protesting the restrictions imposed on him
under the sanitation code. With a “political” message on one
side of his submarine handbills, Chrestensen
sought an injunction barring police from interfering with
distribution of what he argued was
constitutionally protected expression.
-page decision, ruled that New
York officials could stop distribution of
Chrestensen’s fliers wi
Court said the fliers were “purely
commercial” advertising that fell outside constitutional
message appended to the fliers as a ruse not to be taken
seriously. With its curt decision in Valentine v.

protection to commercial advertising until the mid-1970s.
In 1964, the Supreme Court took a small step toward
constitutional protection for advertising when it
ruled in New York Times Co. v. Sullivan that political criticism
of public officials is protected by the First
Amendment, even if it is paid for (see Chapter 4 for more detail
rejected Police Commissioner Sullivan’s argument that the
criticism of Alabama law enforcement officers
should have no constitutional status because the criticism was
part of a paid advertisement. Another
commercial element of the advertisement, according to Sullivan,
was its solicitation of funds to support the
was “immaterial” whether the editorial
information, expressed opinion, recited grievances, protested
claimed abuses, and sought financial support
on behalf of a movement whose existence and objectives are
concern.”6

Although Times v. Sullivan established that paid political
case did not create constitutional protection for “purely
closer to protecting com
1973 when it suggested in Pittsburgh Press Co. v. Pittsburgh
Commission on Human Relations that it might
be willing to grant constitutional status to “an ordinary
commercial proposal.”7 But the Court in Pittsburgh
Press upheld an advertising regulation that prohibited
unnecessary discrimination by gender in newspaper
classified advertisements.
down a state statute that prohibited
advertising of abortion referral services. But ads for abortion
referral services too were not “purely
ads contained factual material similar to the
political content of editorials and news columns. For example,
the ad at issue in Bigelow declared,
also different from purely commercial

advertisements because the service advertised was itself
Wade decision in 1973.9 It is more difficult to square
advertising restrictions with the First Amendment if
the service advertised is itself constitutionally protected.
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blished First Amendment protection for
“purely commercial” advertisements in
Virginia State Board of Pharmacy v. Virginia Citizens
pharmacists from advertising the prices of

because they did “no more than propose
a commercial transaction,” the Court said.
prohibition on price advertisements for
prescription drugs did not violate the First Amendment because
protected by the First Amendment since Valentine v.
price competition among pharmacists would harm consumers
because pharmacists would have less time
the board said, would force conscientious
pharmacists either to diminish their painstaking professional
services or to go out of business.
Furthermore, the Board of Pharmacy argued that competitive
advertising would not necessarily result in
the lower drug prices anticipated by the Virginia Citizens
Consumer Council.
drug users, particularly the elderly and
infirm, argued that the Virginia statute was a violation of
consumers’ First Amendment right to receive

Council also argued that prohibitions on
advertising forced consumers to spend more time and money
In Virginia Pharmacy, the Supreme Court recognized a
constitutional protection for purely commercial
writing for the Court, said that the price
advertising of prescription drugs is protected by the First
Amendment even though a pharmacist does not
wish to editorialize on any subject, cultural, philosophical, or
political. He does not wish to report any
particularly news-worthy fact, or to make generalized
“idea” he wishes to communicate is simply this: “I will sell you
the X prescription drug at the Y price.”
Although price advertising for drugs is “purely commercial,”
the Court said commercial advertising, like
editorial comment, contributes to democratic decision making
served by the First Amendment. In a
statement merging the commercial marketplace and the
marketplace of ideas, the Court said,
Advertising, however tasteless and excessive it sometimes may
seem, is nonetheless dissemination of information
as to who is producing and selling what product, for what

reason, and at what price. So long as we preserve a
predominantly free enterprise economy, the allocation of our
resources in large measure will be made through
interest that those decisions in the aggregate be
intelligent and well informed. To this end, the free flow of
commercial information is indispensable.
association representing pharmacists opposed
more importance to the Court
than a right to speak was the consumer’s
constitutional interest in receiving information about drug
interest “in the free flow of commercial
information may be as keen, if not keener by far, than his
interest in the day’s most urgent political
Pharmacy’s claim that allowing
pharmacists to advertise prices of prescription drugs would
undermine their professionalism and thereby
hurt consumers.

In a very sharp dissent, Justice Rehnquist feared that the
“logical consequences” of the Virginia
Pharmacy decision would be to elevate “commercial intercourse
between a seller hawking his wares and a
buyer seeking to strike a bargain to the same plane as has been
previously reserved for the free
marketplace of ideas.” Rehnquist did not agree with the
majority’s assertion that commercial advertising
should be protecte
decisions based on advertising contribute
to public decision making in a democracy. To Justice Rehnquist,
the First Amendment protects public
decision making on political, social, and other public issues. It
does not protect “the decision of a particular
shampoo.” Justice Rehnquist thought the
Court’s decision in Virginia Pharmacy devalued the First
Amendment.

Advertising’s Lower Status
According constitutional status to advertising has not
necessarily devalued the First Amendment, but
advertising itself still does not enjoy the full First Amendment
majority of justices in Virginia Pharmacy appeared to equate
commercial advertising wit
umbrella in Virginia Pharmacy as a second-class
form of expression. Starting in Virginia Pharmacy and
any regulations on
demonstrate a compelling interest to justify
demonstrate a lesser “substantial” or “important”
need to justify restraints on commercial advertising.
A major difference in the protection of political and commercial
the political arena because
government censorship is considered worse than false political

Pharmacy that the government may constitutionally ban
commercial promotions that are “false or
misleading in any way” or that promote products or services
political arena, may be invoked to halt
expression may not be compelled, the
Court said that commercial advertisers might be required to
disseminate warnings, disclaimers, and other
Since Virginia Pharmacy was decided, the
Supreme Court has ruled that even truthful advertising may be
prohibited to serve a substantial
government interest.11
Supreme Court said, because of “common sense” differences
betwee
kinds of expression because of the need
of businesses to advertise in a market economy. Advertisers will
not be as intimidated by government

regulations as political speakers might be, the Court said,
because of the unrelenting economic pressure on
businesses to advertise. In other words, commercial advertising
may be regulated more than political
ation.
is more easily verified. Advertisers, the Court said, know their
statements that can be proven objectively, perhaps by scientific
test. Political statements, in contrast, are
should not have to be. But because
advertisers easily may verify their statements, the Court said
there is less reason to tolerate false and
misleading statements in commercial ads than in political
debate.
-class status
constitutionally since Virginia
Pharmacy was decided in 1976, the Supreme Court has issued a
number of decisions broadening the range
of commercial content protected—at least partially—by the
First Amendment. In 1977, the Court ruled that

uncontested divorce.12
constitutional protection to illustrations and pictures in
houses,14 advertisements for contraceptives,15 and
promotions for electrical power by a utility.16 However, the
Supreme Court has also ruled that the First
Amendment does not protect ads for casinos17 or sales
promotions in college dormitories.18

being inconsistent and therefore
pro
whether government restrictions are
-part analysis when
determining the constitutionality of
advertising regulations.
-Part Test
-part test for determining the constitutionality of
by the Supreme Court in Central Hudson Gas & Electric Corp.
v. Public Service Commission,19 a case in
electricity. In Central Hudson, the Court
from running all advertisements promoting
conserve energy, barred ads promoting
efficient uses of electricity as well as those advocating
ruled that a blanket ban on all electricity ads violated the First
Amendment.

Under the four-part test promulgated in Central Hudson and
later cases, a court must determine first
Amendment protection. Second, a court
examines whether the government asserts a substantial interest
is eligible and the government asserts a substantial interest, a
court next considers whether the regulation
directly advances the governmental interest asserted. If so, the
court in the fourth step decides whether the
regulation is sufficiently narrow.
COMMERCIAL SPEECH ELIGIBLE FOR CONSTITUTIONAL
first part of the Central Hudson test and is eligible for
constitutional protection if it is accurate and
advertises a lawful product or service. False and misleading
advertising and advertising for illegal products
first task of a court, therefore, is to
for a lawful product or service.
is commercial
Pharmacy, if it does “no more than propose a commercial

interests of the speaker and its audience.”
Similarly, Justice Brennan once referred to “pure advertising”
as “an offer to buy or sell goods and services
definitions do not encompass all commercial
expressly offer a
product or service for sale, particularly at a
specific price.
Price advertising for prescription drugs, the Supreme Court said
in Virginia Pharmacy, was a purely
commercial proposal. Similarly, a lawyer’s offer to write a will
at a predetermined price, a homeowner’s
Tupperware in a university dormitory are purely
commercial transaction.”
Associating an advertisement with a political issue does not
Chrestensen’s commercial fliers for submarine tours
remained commercial advertisements, the Supreme Court said,
even though he appended a political protest

utility’s bill inserts promoting the efficient
inserts served a political plan, the state-
approved energy conservation program.
Likewise, in Bolger v. Youngs Drug Products Corp.,22 the
Court ruled that leaflets distributed by a
contained political and social
information about preventing venereal disease. Leaflets
distributed by a condom manufacturer were not
they “link a product to a current public

manufacturer’s “direct comments” on
sease would merit full
constitutional protection, but not statements “made
feared advertisers would try to immunize
false or misleading product information from government
regulation if commercial messages were
considered to be political when the two were blended.
that readers buy Youngs’ condoms. One
pamphlet discussed the use of condoms generally as a method of
preventing the spread of venereal disease.
At the end, the pamphlet identified Youngs as the distributor of
the flier. Another pamphlet about VD
described various Trojan-brand condoms manufactured by
Youngs without offering them for sale.
Nevertheless, the Court ruled the pamphlets were commercial
paid advertisements, (2) made reference to a specific product,
and (3) were economically motivated. Not all
of these three criteria must be met for an advertisement
proposing no commercial transaction to be

even though they mention no products, the Court said.
the Supreme Court let stand a California
—
subject to penalties if found to be false—rather than the more
Supreme Court had ruled that Marc Kasky, a consumer activist,
should be allowed to prove in court that
Nike Inc. violated a state consumer protection law by issuing
false statements about workers’ conditions in
the footwear company’s Southeast Asian manufacturing plants.
When the U.S. Supreme Court dismissed
educate workers, increase training, and
monitor manufacturing in Southeast Asia.24
Nike issued several press releases and comments in response to
rges that its manufacturing
operations in Southeast Asia were “sweatshops” that paid low

—like product advertising—because they
were directed “to an audience of persons who
transaction with the speaker.” Nike claimed its
to sell athletic footwear, but
responded to politically motivated criticism about its
manufacturing processes. (See excerpts from a Nike
release in Figure 8.1.) More than 40 entities, including
organizations, supported Nike’s claim.
html/Ch08.xhtml#fig8_1
Figure 8.1 Excerpts from a Nike press release responding to
sweatshop allegations.
When the U.S. Supreme Court dismissed the Nike appeal,
Justice Breyer dissented, arguing the high

about controversial public issues. Breyer,
ege
presidents and athletic directors was not in
contained facts, and responded to criticism
about Nike’s labor practices. Breyer warned that fear of
withhold a report on corporate responsibility.
Lawful Products and Services Once a court has determined that
whether the expression promotes a lawful product or service.
Under the first part of the Central Hudson
analysis, commercial expression entitled to constitutional
protection must promote products and services
that are themselves legal. Ads for prescription drugs, houses,
and lawyers’ services are eligible for
constitutional consideration because they promote lawful
products and activities. Similarly, ads promoting
electricity and condoms also meet the first part of the test.
However, ads for obscene materials, criminal
activities, and discriminatory job opportunities are outside
constitutional consideration because they

promote illegal products or services.
Federal appellate courts have disagreed whether housing ads
minorities discriminate in violation of federal
Fair Housing Act prohibits advertising
“indicat[ing] any preference… based on race.” In one case, the
U.S. Court of Appeals for the Second Circuit
refused to dismiss a discrimination suit against the New York
Times by minorities who claimed housing
ads in the newspaper violated the federal law. Plaintiffs in the
case, several African Americans joined by
estate ads published over a twenty-year
period violated the Fair Housing Act because they rarely
depicte
renters. In refusing to dismiss the case, the Second Circuit said
a jury “plausibly may conclude” that ads

with models of a particular race and not others violate the Fair
Housing Act by indicating a racial
preference. Ads demonstrating a racial preference would not be
protected by the First Amendment, the
court noted, because they would “further an illegal commercial
review the Second Circuit’s ruling to let the Times be sued.26
In contrast, the Sixth Circuit dismissed a similar discrimination
suit against the Cincinnati Enquirer,
ruling that the Fair Housing Act is not violated merely because
minority models are absent from housing
advertisements.27 Unlike the Second Circuit in the New York
Times case, the Sixth Circuit ruled that
housing ads would violate the Fair Housing Act only if they
constituted a discriminatory “campaign” by a
specific realtor or if the ads illegally promoted discrimination at
specific housing projects. But ads that are
independent of a campaign are not discriminatory merely
because they contain white models only, the
court said. Indeed, the Sixth Circuit concluded that independent
housing ads depicting whites only are
lawful statements protected by the First Amendment.
In another twist to the question of what constitutes commercial

Court has ruled that ads and logos promoting unlawful uses of
lawful products may be unprotected by the
First Amendment. In Village of Hoffman Estates v. Flipside,
Hoffman Estates, the Court ruled that logos
other drug paraphernalia were outside First
Amendment protection because the paraphernalia were marketed
for illegal purposes.28 In Hoffman
Estates, drug paraphernalia were displayed next to books and
magazines entitled High Times, Marijuana
Grower’s Guide, A Child’s Garden of Grass, and The Pleasures
of Cocaine. A sign in the store referred to
the “head” supplies used by frequent drug users. A design on
drugs.
may be prohibited for all products
lead to prohibitions on almost all
banned,” a federal judge once observed, “just
because someone might throw a jar at the presidential
motorcade.”29 However, the commercial expression

in Hoffman
because it promoted the illegal use of drugs.
False, Misleading, and Deceptive Advertising To merit
constitutional consideration, commercial
also must
state has a legitimate interest, the Court said in Virginia
Pharmacy, in ensuring that the “stream of
Supreme Court ruled that ads offering
prescription drugs, simple legal services, and houses for sale
were eligible for constitutional protection
promotion of electricity by Central Hudson
Gas & Electric was also eligible for constitutional protection
because it did not mislead consumers. A later
section will discuss deception in detail.
Generally, ads mislead if they make important false statements
or leave the wrong impression. A federal
appeals court ruled that the term invoice in a car dealer’s
advertisement is inherently misleading because
many customers mistakenly believe that a car dealer’s profit is
the difference between the sale price to the
customer and the invoice price to the dealer. In fact, a dealer’s

to the
cost of a car to a dealer.30
simple legal procedure is not misleading
but that price advertising of complex services is. In Bates v.
State,31 the Court said that price
prohibited because they would be misleading. Ads for complex
services are misleading, the Court said,

begins on open-ended, time-consuming tasks.
Only routine legal services that take a fixed amount of time can
be accurately priced in advertising that
price might be advertised include
uncontested divorces and simple adoptions.
-person sales
talks can be prohibited because of the
potential for deception. In-person solicitations can be prohibited
because they, unlike lawyers’
advertisements in the media, present dangers of coercing,
intimidating, misleading, and invading the
-
person appeal for business—
vulnerable potential client who is distraught by a divorce, an
accident, or a death—is deceptive because it
without providing an opportunity for
comparison or reflection.”32
In 2003, Congress enacted the CAN-SPAM Act to reduce
law makes it illegal to send commercial email messages, known
as spam, with intent to deceive recipients

about who is sending the message or the subject of the message.
-SPAM Act also requires
commercial emailers to provide a functioning address and an
opportunity for recipients to stop the
warranty and safety information to
LEGITIMATE GOVERNMENT REGULATORY INTEREST
Once it has been determined that an
advertisement is eligible for constitutional consideration
because it accurately promotes a legal product or
service, a court’s analysis focuses on the constitutionality of the
second criterion of the Central Hudson test is whether a
regulation serves a legitimate or substantial
rather than commercial, government
suppression would require proof of a compelling state interest
relaxed standard that the government
demonstrate only a legitimate or substantial interest to justify
regulation.

Central Hudson test quite easily by
demonstrating an interest in preserving the health, safety,
morals, or aesthetic quality of the community.
In Central Hudson, the Supreme Court recognized the
legitimacy of the New York Public Service
Commission tried to curb Central Hudson’s
promotional advertising for electricity as part of a national
policy
Court declared the commission’s complete ban on the utility’s
electricity promotions to be
unconstitutionally broad but not before recognizing the
legitimacy of the Public Service Commission’s
Supreme Court also has said that
traffic safety and the physical appearance of a
city are sufficient state interests to justify banning commercial
billboards if the other criteria of the Central
Hudson test are met.34
In Posadas de Puerto Rico Associates v. Tourism Co., a case in
truthful casino advertising, the Court recognized as a legitimate
state interest a desire by the government
of Puerto Rico to preserve the morality and welfare of the
Puerto Rican people by discouraging gambling.35

Rehnquist said for the Court majority,
increase in local crime, the fostering of
prostitution, the development of corruption, and the infiltration
of organized crime.” Although the
of alcoholic beverages, the Court has
recognized that governments have a legitimate interest in
curbing the consumption of alcohol.36
DIRECT ADVANCEMENT OF THE GOVERNMENT’S
Central Hudson test is whether a regulation on commercial

government’s legitimate interest. It is one thing to conclude that
the government has a legitimate interest
in establishing a regulation; it is a more demanding requirement
for the government to then establish that
the proposed advertising regulation would directly advance the
state’s interest. In Central Hudson, the
Court said there is an “immediate connection between
ban on the electricity promotions would advance the state’s
interest in conserving electricit
energy advertising in Central Hudson, it was
not because the Court was convinced the ban would ill serve the
barring all advertising
for electricity, even ads that promoted
efficient uses of electricity.
Sometimes the Supreme Court has assumed, without hard
evidence, that a regulation on advertising
would advance a governmental interest. In the Posadas case, the
Court assumed, without concrete data or
anecdotes, that barring casino advertising in Puerto Rico would

serve the government goal of keeping
Puerto Ricans out of the casinos. Writing for the majority,
Justice Rehnquist said it was “reasonable” for
the Puerto Rican legislature to believe that advertising gambling
on the island would increase the number
advertising would directly advance the
state interest in curbing prostitution, crime, and other
demoralizing activities the legislature said gambling
spawned.
Since Posadas, the Supreme Court has been less willing to
assume, without evidence, that a government
regulation will serve a government interest. Instead of deferring
to state regulators, the Court now says
states must present evidence that a regulation will advance a
the Supreme Court has said, “is not satisfied by mere
speculation and conjecture; rather, a governmental
body seeking t
demonstrate that the harms it recites are
real and that its restriction will in fact alleviate them to a
material degree.”37
Federal courts have grappled with the requirements of proof in
several cases regarding compelled

disclosure requirements in marketing and labeling products. In
2015, for example, the U.S. Court of
Appeals for the District of Columbia Circuit reviewed a
requirement that companies trading in gold, tungsten, tin, and
tantalum from the Democratic Republic of
the Congo disclose that fact on their websites and reports.
Advocacy groups have opposed allowing
imports of these materials from the Congo and other war-torn
areas in a way that benefits militias that
commit genocide and other human rights atrocities. A trade
group, the National Association of
Manufacturers, sued to strike down the requirement, arguing
that the government had failed to prove any
benefits that the conflict minerals disclosure requirement would
advance.38
was the case when the court previously
upheld a U.S. Department of Agriculture regulation requiring
meat producers to put country-of-origin
labels on meat products.39 While the court recognized that
ameliorating the humanitarian crisis in the

Democratic Republic of the Congo was sufficient as a
government interest, i
the government that the regulation would serve that interest. A
potential effect of the regulation, the court
suggested, would likely be billions of dollars in compliance
using minerals from those regions, perhaps preventing millions
of dollars from flowing into the region.
However, the court said this outcome was “entirely unproven
and rests on pure speculation.” Indeed, it was
unclear whether the rule either alleviated or aggravated the
human rights problems in the region. Because
“the SEC was unable to quantify any benefits of the forced
requirement.40
alcohol advertising would further the
government’s legitimate interest in curbing drinking. In Rubin
down a federal regulation prohibiting statements of alcohol
content on beer labels because the ban would
not sufficiently advance a government interest in preventing

content of their beverages. In an opinion
and joined by seven other
justices, the Court said that the government
ban on labels containing the alcohol content of beer would not
prevent strength wars because the
regulations were so contradictory as to be “irrational.”
e labels were accurate and that the
government had a substantial interest in
protecting the health, safety, and welfare of its citizens by
preventing brewers from competing on the basis
of alcohol strength, a competition that might increase
alcoholism. However, the Court said it could not

uphold the constitutionality of irrational regulations that
prohibited statements of alcohol content on
federal law would prohibit alcohol statements in beer labels but
permit them on labels of wines and spirits.
strength wars will advance its aim “while
other provisions of the same act directly undermine and
counteract its effects.”
advertising alcohol prices in part because the
government did not demonstrate that the ban would discourage
drinking. In 44 Liquormart, Inc. v. Rhode
Island, the government of Rhode Island argued, but did not
document, that competing advertisements
would lower the prices of alcohol, thus encouraging
consumption.42 In the principal opinion for the Court,
joined by three other justices, Justice John Paul Stevens said
that “without any findings of fact, or indeed
any evidentiary support whatsoever, we cannot agree with the
assertion that the price advertising ban will
significantly advance the State’s interest in promoting
temperance.” Furthermore, there was no evidence

that eliminating the ban on advertising would raise alcohol
consumption. With no evidence that the ban
would curb alcohol consumption, the Court was unwilling to
uphold what Stevens considered a
In 2011, the Supreme Court ruled pharmaceutical companies
have a First Amendment right to use data
identifying doctors’ drug prescriptions to market drugs to
doctors. Ruling that the prescription data is
ermont
statute prohibiting use of the data for
state interests in protecting public health
and reducing health costs.43
NARROWLY DRAWN BAN Besides directly advancing a
legitimate state interest, a constitutional
must be narrowly drawn. Courts have
sometimes interpreted the fourth Central Hudson requirement to
mean that a regulation on commercial
ive” possible. However, the
Supreme Court ruled in Board of Trustees v.

even if they are not the least restrictive.44
legislative interests and the regulations
university regulations barring all private
commercial activities in dorm rooms represented the proper fit
of legislative goal and regulatory means.
selling housewares in university dorms.
regulations, designed to prevent commercial
exploitation of students and to create an educational atmosphere
recognized the legitimacy of the state’s goals but returned the
case to the lower courts for determination of
the reasonableness of the ban.
In Central Hudson, the Court found the ban on electricity
promotions to be unconstitutionally broad
because it was more extensive than necessary to further the
government interest in energy conservation.
Commission had a legitimate interest in regulating

advertising to conserve energy. But the ban was
unconstitutional, the Court said, because it barred
promotional information about efficient as well as inefficient
uses of electricity.
demonstrate that its interest in energy
conservation could not be advanced adequately by more limited
regulation. Rather than ban all
promotions, the Court said the Public Service Commission
might further its conservation policy by
ensuring that the utility’s advertisements include information
about the relative efficiency and expense of
different uses of electricity.
regulation to a legitimate government goal.

In Cincinnati v. Discovery Network, Inc., the Supreme Court
ruled unconstitutional a city ordinance that
companies that distribute real estate and adult
education booklets.
preserving the safety and aesthetics of the
Court saw no relationship between the
preserving safety and aesthetics. Removal
vement, the Court
said, if more than 1,500 equally ugly
unsuccessfully to find a clear distinction
between noncommercial newspapers and “commercial” real
estate and education promotions, the Court
was “unwilling to recognize Cincinnati’s bare assertion that the
sufficient justification for its selective and categorical ban on
news-
handbills.’”

In a case of alcohol advertisements, eight justices of the
Supreme Court agreed that Rhode Island’s total
ban on truthful price advertising for alcohol did not fit properly
with the state’s goal of reducing drinking.
Rhode Island had several alternatives to a ban on price
advertising, alternatives that would reduce
discourage drinking by raising prices of
escription drugs, and conducting
education campaigns to discourage drinking.
While striking down the Rhode Island law, the Supreme Court
rejected a contention from the Posadas
case that the government’s power to regulate the sale of a
product includes the right to ban commercial
cannot be treated as simply another means
that the government ma
Stevens wrote in Liquormart. Under the Twenty-
First Amendment, states may regulate—even prohibit—the sale
of alcohol. But the Twenty-First

about a lawful product, the Court said.
Tobacco Company v. Reilly, the Court found that
terest in protecting the health
advertising of cigars and smokeless tobacco products within
fourth prong of the Central Hudson test.46
Writing for the Court, Justice O’Connor held that the breadth
and scope of the outdoor restrictions did
considered the varying impact of the 1,000-foot boundary in
rural, suburban, and urban locations. In a
would be unable to advertise in 87 percent
to 91 percent of the city. To Justice O’Connor, the geographic
nearly a complete ban on the communication of truthful
information about smokeless tobacco and cigars

to adult consumers.”
indoor smokeless tobacco and cigar
regulation failed both the third and fourth
5 feet tall, and those who are certainly
have the ability to look up and take in their surroundings,”
O’Connor said.
Although states have the authority to enact narrowly tailored
advertising restrictions on smokeless
tobacco and cigars, a federal statute governing the advertising
-service

displays of tobacco products was found to be constitutional.
A federal appeals court did find a “reasonable fit” between a
ban on all “junk faxes” and a legislative
advertising to consumers.47 Upholding a section of
unsolicited faxed advertising, the Ninth
Circuit ruled the ban advances the government’s substantial
interest in protecting consumers from having
to pay to receive unsolicited messages that tie up their fax
companies from burdening consumers with paper costs and loss
of time, the court said, even though
instantaneously at no cost.
Furthermore, the court said the law is not too broad, even
though it prohibits all unsolicited commercial
evenhanded,” the court said, “in that it
applies to commercial solicitation by any organization, be it a
multinational corporation or the Girl
Scouts.”
■ Summary ■

degree than it protects political
lesser constitutional protections on advertising than on political
and social commentary. Commercial
transaction.
Under a four-part test developed by the Supreme Court,
even if the expression is accurate and promotes a lawful product
or service. Under the four-part test,
asserts a substantial interest that will be
tailored to serve government objectives.
Unfair and Deceptive Advertising
Because false and deceptive commercial advertisements are
outside constitutional protection, they may be
banned. Advertisers also may be ordered to alter ads so that
they cease t
alterations may include warnings, disclosures, and corrections
of earlier deceptive ads. Advertisers are also

required to substantiate advertising claims.
Advertisements are regulated under a number of federal and
state laws.
Act of 1914 and is a five-person commission
whose members are appointed by the president to staggered
seven-
economists, and accountants who originate
inquiries, issue reports, and conduct
investigations.
federal regulation but also determine
standards for state and industry regulatory bodies. In some
states, an advertiser who complies with the
Federal Trade Commission Act may not be penalized under state
antideception laws.
or deceptive market practices and to
promote vigorous competition.
for the FTC’s activities is the Federal Trade

and unfair or deceptive acts or practices
in or aff
gives the FTC authority not only over
advertising but also over monopolistic and other anticompetitive
activities. In recent years, the FTC has
been especially concerned with preventing deception in
advertisements claiming environmental,
nutritional, and other health benefits.
of Justice, the Food and Drug
Administration, the Environmental Protection Agency, the
Consumer Product Safety Commission, and
agencies, notably the National
over unfair and deceptive acts or
practices that hurt competing companies. In 1938, however, the
scope of the Federal Trade Commission Act

was broadened to provide protection for consumers as well as
competitors.48 At the heart of FTC
advertising regulation is its power to require that advertisers
substantiate the accuracy of advertising
claims.49 Since the 1980s, the FTC has narrowed the definition
of deception and demanded more empirical
evidence than before to establish that an advertisement is
deceptive or misleading.
Unfairness
fair and deceptive advertising. Section
5 of the Federal Trade Commission Act
declares unfair competition and unfair or deceptive acts or
Federal Trade Commission has referred to its authority to stop
unfairness as its “general law of consumer
particularly important application.”51
In the early 1970s, unfairness was described very broadly as
whether a practice offended public policy,
was immoral or unethical, or caused substantial injury to
consumers or businesses.52 In 1980, the FTC
narrowed the focus of its unfairness inquiries to whether an
advertisement or commercial practice causes

substantial consumer injury.53 In 1994, Congress defined an
unfair act or practice as one that “causes or is
reasonably avoidable by consumers themselves
and not outweighed by countervailing benefits to consumers or
Commission Act permits the FTC to issue broad rules curbing
unfairness in a whole industry if the
Regulation Rules” and the advertising industry’s
resentment of them will be discussed in a later section.
Unfairness is more likely to arise in a company’s treatment of
customers than in advertising. Because
the commission looks for substantial harm, the FTC is not
concerned with trivial or merely speculative
harms. In most cases of unfairness, substantial injury involves
monetary harm, as when sellers coerce
case, a company acted unfairly by
requiring consumers to buy expensive parts before company
service personnel would reassemble furnaces
they had dismantled.55
Unwarranted health and safety risks also may support a finding
of unfairness. A razor blade

manufacturer was found to have acted unfairly when it
distributed free samples of blades in newspapers,
ldren might hurt
themselves.56 A tractor manufacturer also was
found to have acted unfairly when it failed to tell customers that
hot might result in dangerous “geysering” of gasoline.57
company was unfair and deceptive in its
—
Friends lists—from private to public without warning or user
approval; representing that apps would not
have access to most user information when they did; sharing
“Friends Only” data more widely than

Facebook policy stated; sharing information with advertisers
In the agreement, Facebook agreed to establish a comprehensive
privacy program, to obtain consumer
prohibit access to user information more
Facebook is liable for penalties of $16,000 a da
assessments of its privacy practices by
independent auditors for 20 years.61

In 2014, Google agreed to refund at least $19 million the FTC
said the company unfairly billed to
Google agreed to reimburse parents for
Google Play app store. It was unfair, the FTC
said, to bill
express, informed consent from account holders for all in-app
earlier to pay at least $32.5 million for unauthorized in-app
Deception
Although deception is not defined in the
Federal Trade Commission Act, the FTC has defined a deceptive
ad as one that is likely to mislead a
reasonable consumer with a material statement or omission.63
LIKELY TO MISLEAD Deceptive advertisements are those that
either contain express falsehoods or create
false impressions that tend to mislead. Courts and the FTC have
long held that ads do not have to deceive
someone to be deceptive; rather, ads must possess a “tendency,”
or “capacity,” or be “likely” to mislead a

advertiser intends to mislead; an advertisement may
have a tendency to deceive regardless of the advertiser’s intent.
Deceptiveness is determined by the overall
impression of an advertisement, not by isolated statements
within it. Statements that might be susceptible
to both a misleading and a nonmisleading interpretation will be
considered deceptive.
REASONABLE CONSUMER Whether an advertisement is
deceptive depends on the likelihood the ad will
deceive a consumer “acting reasonably in the circumstances.”65
An advertisement is not deceptive if it
would mislead only a few particularly gullible co
all, the FTC has said, a company “cannot
far-
does not help the consumer who thinks Danish pastry is always
made in Denmark.67
Sometimes the FTC determines an advertisement is deceptive
simply by reading or viewing it. However,
of consumer surveys to determine the
likelihood of deception. An ad is deceptive if it is likely to
deceive a “substantial number” of consumers in

20 percent to 25 percent of the consumers in
a survey is said to deceive a “substantial number.”
Although many ads are aimed at the reasonable consumer in the
general public, others are targeted at
exaggerates the medicinal powers of a product
might not deceive average, healthy adults but could be
deceptive if directed to terminally ill consumers
desperately seeking a cure.69 Misleading promises of easy
weight loss might not deceive the consumer of
average weight but could deceive the obese consumer to whom
it is directed.70
age or experience to anticipate or appreciate the possibility that
representations may be exaggerated or
advertisements for Galoob Toys were
deceptive because they falsely represented the company’s Micro

advertising agency also dec

by misrepresenting the ability of a doll to twirl on one foot and
of a missile to travel a long way.
advertising that appears to threaten youth.73
In one case, the FTC halted the use of logos and messages for
Redman smokeless tobacco in televised
tractor- -
commission said televising Redman
logos, flags, and other commercial symbols at the contests
violated the federal law prohibiting televised
advertising of smokeless tobacco products.74 Similarly, the
Philip Morris Company agreed to stop placing
signs behind scoring tables and other locations at baseball,
television cameras would fix on them.75
will run up large phone bills by calling 900 telephone numbers.
Audio Communications and at least one
other company agreed to explain in television ads aimed at
before placing a call to hear a message, buy

Advertisers are not liable if accurate ads aimed at doctors,
lawyers, and other specialists are
misunderstood by the average consumer. Laypersons read at
directed to experts.77
MATERIALITY To be deceptive, advertising that has a
tendency to deceive the average consumer must be
material. A material statement in advertising, like a material
statement in corporate securities transactions,
advertising claim need not actually influence
a consumer’s decision to buy a product; nor must the consumer
lose money for the ad to be considered
deceptive. An ad is deceptive if it is likely to, or has the
Material statements include express claims and deliberately
implied claims about a product or service.
An omission in an advertisement may also be material if the
seller knows or should know that consumers
omissions about health, safety, durability, performance,
warranties, quality, and cost to be material.

Indeed, the FTC considers most factual advertising claims about
commission has observed, advertisers would not make factual
claims if the advertisers did not intend to
Consumer decisions would be affected, for example, by a
material claim that only one brand of air
conditioner ensures cooling on extra hot, humid days.79
Likewise, a claim that aspirin relie
than other pain relievers is material,80 as is a claim that a skin
cream contains aspirin. However, it would
not be material to say in a tire advertisement that the tire
manufacturer’s main office is red when it is
building would not be germane to a
consumer’s decision to buy tires.
Material statements that are likely to deceive may consist of
ads contain statements that are literally true but create a false
implication.
EXPRESS FALSEHOODS Expressly false statements about

falsehoods, like the meaning of libel per se, can be determined
message is stated unequivocally. Express falsehoods include
is not old enough to qualify as antique,82 that coffee is
“caffeine free” when the brew contains caffeine, or
that goods are “fireproof” when they are only fire resistant.83
Explicit falsity has also been found when
imitation.84
An ad also is deceptive if it contains an expressly false
demonstration of a product. In the famous
sandpaper shave case, Rapid Shave was made to appear in a
television commercial to have the moistening
television commercial told viewers they
were seeing proof that Rapid Shave could shave “tough dry
sandpaper.” However, viewers were not shown

sandpaper being shaved. Instead, they saw a piece of Plexiglas
Shave was applied, a razor whisked the sand away.85
at least if considerable time was
FTC and the Supreme Court ruled the
-up was materially deceptive because it was used

as “actual proof of an advertising claim.”
Even though Rapid Shave could shave sandpaper if enough
soaking time were allowed, the Supreme Court
said the demonstration was deceptive because it falsely told
viewers they were seeing objective proof of a
was similar to false testimony by a
celebrity or expert.
Colgate-Palmolive, the makers of Rapid Shave, said it
substituted Plexiglas for sandpaper only to
-
Palmolive said sandpaper on television
rown paper. But the Court said
simulations should not be employed if they
indicates, the Court said, “that television is not
a medium that lends itself to this type of commercial, not that
the commercial must survive at all costs.”
-ups to
-ups may be used if they are not employed
falsely to prove a product claim. For example,
an advertiser could use mashed potatoes to represent ice cream
in an ad for table linen if ice cream would

potatoes should not be used in an ice cream
advertisement to demonstrate the velvety texture and enticing
colors of ice cream. Props are deceptive if
they are used falsely as proof of a product claim.
IMPLIED FALSEHOODS More common and more difficult to
identify than express falsehoods are
statements or omissions in advertisements that create a false
imp
implied claims circularly as claims that are not express.86 An
implication can be thought of as a false
meaning added to a truthful advertisement by the reader or
viewer because of an impression the
advertisement creates. For example, a consumer might infer that
tires’ superior stopping power. If no
scientific tests support the tire manufacturer’s claims, the
advertiser’s use of white-
creates a false implication of scientific validity. Advertising
because they create a false implication can be divided into at
egories

are discussed in the following sections.
requires that advertisers have a
reasonable basis for the objective claims in their
advertisements. Advertisers should be able to support all
material claims with results from scientific tests or other
says its tires stop faster than others should have scientific
evidence to substantiate the claim.
An advertiser’s ability to support substantive claims is a
deceptive. Consumers, the FTC says, are less likely to rely on
claims for products and services if they know
that the advertisers have no reasonable basis for making
ent
deceptive, even if the claim is true, if the advertiser has no
reasonable basis for making the claim.
it ruled that an advertising claim by
89 Although
FTC has frequently cited Pfizer for the proposition that
advertising claims must be substantiated if an
advertiser is to avoid deception.90 In Pfizer, the FTC was not

satisfied that the pharmaceutical company
had adequate substantiation for its claims that Unburn suntan
lotion “actually anesthetizes nerves” to
relieve pain. In fact, the company could offer no scientific data
to support the claim.
on amounts to a
is an unfair act or practice under Section 5” of the Federal
that substantiation might be provided through scientific studies,
existing medical literature, tests

conducted by makers of similar competing products, or in some
cases, the successful wide use of a product.
Pfizer, however, had virtually no evidence for its claims for
Unburn tanning lotion.
Advertisers should possess substantiation before they make
claims about safety, performance, efficiency,
quality, and price. If an advertisement asserts a certain level of
scientific support by saying “tests prove” or
“studies show,” the advertiser must be able to provide
supportive results for the claim from two
scientifically valid tests. If an ad does not claim a certain level
of supporting data, the FTC determines a
reasonable basis for claims by considering the type of claim, the
product, and the consequences for
to consumers of a truthful claim, the cost
to the company of developing substantiation and the amount of
substantiation experts in the field believe
is reasonable.91
deceptive and unfair advertisements by
failing to substantiate a claim that the company’s Super Sport
.”

scientific test data” to prove that the tires performed
conditions American motorists encounter.92 Similarly, a
company marketing Acne-Satin, a skin medication
claims that the product “cures acne, eliminates
blemishes.”93
reconsider a substantiation ruling if scientific
prohibited the Sterling Drug Company from claiming that Lysol
FTC’s ruling was based on the best scientific evidence of the
ti
Lysol. Lysol was thought to have no effect
on airborne viruses because it was used to clean counters, tables
and other surfaces. However, the
d its ban when new scientific evidence
contact with surfaces that can be cleaned with Lysol. As new
Sterling could advertise that Lysol can prevent colds as long as

successive claims were supported by
“competent and reliable scientific evidence.”94
Proof Implication Another deceptive advertisement is one that
falsely creates the impression that
evidence presented proves a claim. A false implication of proof
is created if an advertiser misrepresents the
evidence presented to substantiate an advertising claim. Ads are
deceptive if they misuse test data, create a
phony aura of scientific support or otherwise imply proof that
does not exist. In the Firestone
advertisement just mentioned, the company created a false
implication of proof by saying that the
deceptive because, although the company had conducted tests, it
had no tests comparing the ability of
Firestone and other tires to stop a car under normal driving
conditions.95
Bayer Corporation agreed to undertake a $1 million campaign
telling viewers the company had made
unsubstantiated claims for Bayer Aspirin.
Commission said Bayer had no substantiation
for its advertised claims that taking an aspirin daily can prevent

regular aspirin regime will not benefit some adults and others
will be adversely affected by taking an
-a-day advertisements ran for
three years. Bayer consented to distributing
information about aspirin’s effectiveness in
d strokes.96
Demonstration Implication Product demonstrations in
advertisements may also create deceptive
-
up was misleading because it falsely
demonstrated the moistening power of a shaving cream. More
nevertheless creates a false impression about how the product
kept dry under water in a Baggies lu
demonstration was accurate, but it falsely

implied that Baggies were superio
keeping food fresh in a refrigerator or
swishing them vigorously… is not proof of the
comparative abilities of the two bags to prevent food spoilage,”
the FTC said.97
e Standard Oil Company of California falsely implied through
a demonstration of clean air and a
pollution meter that Chevron gasoline with F-310 removed all
or most pollutants from engine exhaust. In
one ad, a car burning Chevron with F- exhaust
into a large see-through balloon tied to
the exhaust pipe of the car. In another ad, the exhaust was
contained in a transparent bag encircling the
car. In a third, a meter dial labeled “exhaust emissions” pointed
to “100” at the “dirty” end of the scale

before Chevron with F-
the meter pointed to “20,” four-
way toward “0” at the “clean” end of the scale. Meanwhile,
another car in the ads, a car whose gasoline did
not contain F-310, continued to emit dirty exhaust that clouded
the balloon and bag.
Chevron exhaust appeared to contain no
pollutants, when in fact it contained invisible but significant
amounts of carbon monoxide and
hydrocarbons. Independent scientific tests revealed that the F-
310 additive did reduce pollutants but not as
were deceptive, the FTC said, “because of
the substantial disparity between the visual impact of the
because the drop of 80 units from the dirty
percentage reduction in pollutants a typical
motorist would experience from using Chevron with F-310.
BBD&O, the advertising agency in the

Chevron case, bore responsibility for the deceptive
demonstrations. It is not enough that an advertising
agency know that products will perform as the manufacturer
responsibility to represent that performance accurately. BBD&O
argued that it should not be liable because
it based the ads on information that had been validated by
independent tests and approved by several
law.
However, the Ninth Circuit said it was not sufficient for
BBD&O to satisfy itself only that F-310 did in
fac
ensure the accuracy of the implicit
representations the ads conveyed. Said the court:
No specialized engineer was needed to put BBD&O on notice
(“dirty”) to 20 (“clean”) implies a sweeping representation with
participation in developing this advertising, it was BBD&O’s
responsibility to assure itself not only that the gauge was not
rigged, but also that use of the gauge did not convey
a distorted impression.99

if they omit a necessary
stone tire
advertisement was misleading because it
the statement that Firestone tires pass all of the company’s
inspections.100
However, although it was true that Firestone marketed no tires
that failed company inspections, the FTC
ruled that the unqualified claim that Firestone tires were “safe”
was deceptive because it falsely implied
that the tires were free of all defects. Indeed, 15 percent of the
respondents in a consumer survey thought
the company was claiming that its tires were free of defects. But
tests available at the time of the
advertisement were insufficiently accurate to detect all defects
in a tire.
Consumers are always
warned to read the small type in an
advertisement for qualifications, but the FTC says ads may be
deceptive even if they contain accurate but
ineffective qualifications. “A qualification presented weakly has
the same impact as a qualification

completely absent,” Professor Ivan Preston observes.101
F-310 were deceptive not only because
the clear bags belied scientific tests for pollution, but also
because the visual impact of the clear bags
the Chevron exhaust was completely
“clean,” only that it was “cleaner” than the other exhaust. Nor
did the ads claim that Chevron eliminated
pollution, only that it reduced it. Despite this qualifying

language, the Federal Trade Commission ruled
that the ads were misleading because the “strong, predominant
visual message” of the clear balloons and
impression,” the FTC said, “is overwhelmingly
influenced by the striking visual portions of the
advertisements.”102
Significance Implication Insignificant facts stated so that they
appear to be significant also create a
false implication in advertising. In one case, advertisements for
though they truthfully claimed that Old Golds were found
“lowest in throat-irritating tars and resins.”
over other brands.103
reported in Reader’s Digest. In its report of
the study, Reader’s Digest concluded that the difference in tar
about as good as another” to “nail down” a
smoker’s coffin, the Digest said.

that the Old Gold ads were deceptive
because they falsely implied a significant difference among
used the truth in a perverted way “to cause the reader to believe
the exact opposite of what was intended”
in the Reader’s Digest article.
Similarly, advertisements for Carnation Instant Breakfast were
ruled to be misleading when they
as
two strips of bacon.” Bacon, it turns out, is
not a good source of the most commonly recommended
minerals.104 Likewise, claims that Gainesburgers
dog food provides all the milk protein a dog needs were of
misleading significance because dogs do not
need milk protein.105
Puffery Implication Although advertising claims are supposed
to be factual and represent the
experience of the people making them, the law of advertising,
like the law of libel, leaves room for
subjective statements of opinion. Advertisers may exaggerate or
assumes that ordinary consumers do not take

puffery seriously.
It is acceptable puffery for an advertiser to say that a foreign
sports car is “the sexiest European,”106 that
“Bayer works wonders,”107 or that a motor oil is the “perfect”
lubrication, allowing a car to travel an
know,” a federal appeals court said, “there is
nothing more than that the product is good or of
creates no false implication.
Puffery becomes deception when exaggerated claims falsely
imply material assertions of superiority.
However, determining when puffery becomes a materially
ruled that Jay Norris Company went beyond acceptable puffery
when it advertised that a television
antenna
was one of several exaggerated claims
that could lead consumers to believe falsely that the antenna
was generally superior.109
consumers, experts, organizations and

celebrities, requiring disclosure of “material connections”
requires advertisers to inform consumers if product
endorsements are paid for with money or products. An
endorsement is misleading if consumers would think the product
evaluation is independent when in fact
statements are sponsored advertising messages. FTC
endorsement guidelines revised in 2015110 extend

disclosure requirements to bloggers and others in social media
who endorse products. It may be
particularly difficult for consumers to distinguish independent
product evaluations from paid
endorsement-advertisements in informal, interactive social
media. Companies increasingly send products
to bloggers to generate buzz about new commercial offerings.
blogger who receives cash or in-kind payment to review a
product is considered an endorsement,” the FTC
the material connections they share with
the seller of the product or service.”111 A member of
Elevenmoms.com, a bloggers group organized by Wal-
-Mart
retailers and suppliers if they review
Wal-
favorable review must disclose the material
connection to the sponsor. A blogger who receives a free book
probably does not.
Celebrities do not have to disclose their relationship to an
advertiser if the relationship would be

obvious to a consumer, as when a celebrity endorses a product
in a prime-time television commercial. But
the celebrity must disclose his or her material relationship to an
advertiser if the celebrity is paid to
endorse a product during a talk-show conversation or other
favorable comment about a product was paid for. Under the new
guidelines, celebrity endorsers as well as
advertisers may be liable for false or unsubstantiated claims in
an endorsement.
An expert is someone who has acquired superior knowledge of a
subject as a result of experience, study
or training. If experts claim in an advertisement that a product
is superior, FTC guidelines require that the
experts have expertise relevant to their product endorsements.
Experts are also supposed to have compared
a product they endorse with others. Astronaut Gordon Cooper’s
endorsement of a fuel-saving automobile
astronaut’s expertise was not in the field of
automobile engines.112
If an organization endorses a product, the product should meet
professional standards set by the

association should perform to standards set by
the profession. Neither celebrities nor ordinary citizens need to
possess special expertise to endorse a
product.
Twin Star Productions, Inc., agreed to pay $1.5 million to
consumers deceived by program-length
false and unsubstantiated endorsements
-loss product and Y-
Bron impotence treatment.114 At the
conclusion of an FTC proceeding, Twin Star agreed to stop
airing infomercials as independent consumer
programs when, in fact, they were paid advertisements.
Besides halting false statements about the ability of the
products to reduce weight, restore hair and
revive potency, Twin Star agreed to discontinue the deceptive
ordinary, independent consumers expressing honest opinions
about the products. All future Twin Star
info
officers also were ordered to pay the FTC

Foliplexx, and Y-Bron.
pay influencers to promote their
had paid individual YouTubers hundreds to thousands of dollars
to promote its Middle Earth: Shadow of
estimated 5.5 million times, did not
include any clear disclosure that they were sponsored. A text
box that revealed the video was sponsored
clearer endorsement disclosures by Warner Bros. in future
videos.115
and Vice, as well as traditional news

of thousands of dollars for content to be published that has the
appearance of being an independent
journalism effort.116 However, studies have shown that,
regardless of efforts by publishers to make
sponsorship of content transparent, readers and viewers are
still confused about whether content is
an advertisement.117 In 2015, the FTC released guidelines
regarding native advertising—
as “sponsored content” or “brand publishing”—to ensure that
the relationship between sponsor and
publisher is made clear to the audience. In the policy statement,
the FTC noted that native advertisements
“are deceptive if they mislead consumers into believing they are
independent, impartial, or not from the
le,
publishing advertisements that are in the same

same font and column width as a news
story or a video that resembles other video content usually
produced by journalists on a news site. To
avoid confusion, the FTC recommends native advertisements
make the sponsorship relationship clear, with
the word “advertisement” featured prominently.118
online magazine Nylon to publish an article and to post photos
of its fashion collections on Instagram
without requiring Nylon to disclose the connections. In
addition, Lord & Taylor paid 50 “influencers”
between $1,000 and $4,000 to wear dresses from the collection
and post photos of themselves on Instagram,
also without requiring disclosure of the payments. As part of a
and conspicuous.119
State Regulations
All 50 states have enacted legislation that, like the Federal
Trade Commission Act, prohibits unfair
competition and unfair acts and practices or otherwise allows

citizens and companies to sue over deceptive
advertising.120 Under many state laws, consumers as well as
competitors can sue not only to stop deceptive
Although states can regulate advertising only within their
borders, regulations in important commercial
or Florida, have a national impact. During
the many years of deregulation by the
aggressive, suing airlines, car rental companies
and other corporations over advertising that violated state laws,
laws that sometimes reflected guidelines
National advertisers objected that they could not
general also enforce regulations on tobacco
marketing.
In a blow to state efforts to regulate national advertising, the
Supreme Court ruled that states could not
regulate airline advertising because federal airline rules preempt
state law.121 Because Congress claimed
federal jurisdiction for regulation of airline advertising, the
Court said that states could not sue airlines for

advertisements. Congress has not claimed
exclusive federal jurisdiction over all national advertisements.
Plaintiffs have been allowed to sue under
state law for a variety of claims, including one that national ads
falsely claimed a diet plan was safe when,
in fact, it caused gallbladder disease.122
ONLINE CHALLENGES Enforcing state and federal
because of the safe harbor provisions for providers and users of
interactive computer services under
Section 230 of the Communications Decency Act (see Chapter
4), by not treating them as a “publisher or
speaker” of information provided by others. While this
immunity from liability has been broadly applied
in the context of libel claims, some courts have found ways
around the shield to allow civil and criminal
investigations of web hosts to proceed.
A website may lose its immunity under Section 230 if it creates
or helps third parties to develop
defamatory or other illegal content. A federal appeals court
ruled that Roommate.com was not immune

html/Ch04.xhtml
http://roommate.com/
from liability under Section 230 because it required subscribers
to state possibly discriminatory preferences
roommate to those offering a room for rent.123
Roommate.com required subscribers to answer a questionnaire
disclosing their sex, sexual orientation

-down menus built into the
Roommate.com lost its
immunity under Section 230 by becoming a content provider,
helping to create content that was possibly
discriminatory in violation of federal and California fair
housing laws.
Writing for the majority, Judge Alex Kozinski said Section 230
does not grant immunity for “inducing”
third parties to express illegal preferences. “By requiring
subscribers to provide the information as a
information provided by others,” Kozinski wrote. “It becomes
the developer, at least in part, of that
Kozinski said: “If you don’t encourage illegal
content, or design your website to require users to input illegal
content, you will be immune.”
While Roommate.com lost its immunity under Section 230 for
inducing possibly discriminatory
preferences, it did not lose its immunity for encouraging
subscribers to provide “Additional Comments”
that were sometimes provocative. Roommate.com was not
responsible when subscribers wrote that they

preferred white male roommates, only “BLACK, GAY, MALE”
roommates, no “drugs, kids or animals,” or,
in one posting, a woman who “hopefully wont mind having a
nter [sic] with my
boyfriend and I.”
and largely seems to be limited to its
host in forcing consumers to reveal
discriminatory information that violated fair housing laws.
Roommate.com was found not to have violated housing
discrimination laws, rendering the Section 230
question of potential liability for illegality moot.124
Typically, under Section 230, web hosts will not be held liable
for the acts of their users, even if it allows
victims and advocates have long tried to
aws, targeting
websites that run advertisements enabling
connections between sex dealers and buyers. Craigslist shut
down its adult services advertising section in
“adult entertainment” and “escorts,” using

Section 230 as a shield from civil liability. In 2016, a federal
court of appeals bolstered Section 230
the time they were being featured in the “escorts” section and
and collected additional fees for “sponsored advertisements”
elsewhere on its site. Despite the court’s
obvious sympathy for the victims, it said the law was clear in
—Section 230 does not allow
-party content
on its website. While the court agreed that
the plaintiffs had made a persuasi
it noted
Congress did not sound an uncertain trumpet when it enacted
internet publishers. Showing that a website operates through a
meretricious business model is not enough to strip
away those protections.125
■ Summary ■

http://backpage.com/
http://backpage.com/
A number of federal and state agencies prohibit harmful trade
practices. However, the Federal Trade
Commission is the main enforcer of truth in advertising.
Deceptive advertisements contain material
statements or omissions that are likely to mislead reasonable
consumers. Ads are deceptive if they contain
expressly false statements or demonstrations. Ads are also
deceptive if they contain true statements that
convey a misleading implication. Deceptive implications may be

proofs or demonstrations, imply false
significance, puff excessively, and rely misleadingly on
expertise and endorsements. Plaintiffs may also
bring suits for deceptive advertising under state law. Web hosts
of advertising, however, are largely
Communications Decency Act.
Federal Remedies
advertising. Some are future-looking,
providing guidance to advertisers so that they can avoid
opinio
include consent decrees, cease-and-desist
orders, affirmative disclosure, and corrective advertising. In
addition, the FTC, advertisers, and consumers
can seek court injunctions to halt deceptive ads. One of the
FTC’s most important powers is the authority
to require advertisers to substantiate advertising claims before
they are disseminated.

has issued no special regulations to prevent fraud and
deception on the rapidly expanding
Internet. However, the FTC has sued several Internet advertisers
for violating current law on deceptive or
fraudulent advertising. Most large national and international
corporations, as well as smaller businesses,
marketing opportunities on the Internet, including
posting advertisements, emailing customers and contacting them
through wireless media. Online
marketers also collect extensive digital data on consumer
relationships with customers through social media.
Prospective Remedies
and trade regulation rules are broad
statements that tell advertisers before they disseminate
advertisements the kinds of statements and
-
looking, guidelines that help advertisers to
avoid deceptive practices.
S

commission. If an advertiser wants an informal
opinion on whether an ad might violate the law, the advertiser
commission.
ADVISORY OPINIONS If advertisers want to know more than
about whether a contemplated activity would be legal, they can
write to the FTC for an advisory opinion.
protects the requesting party who follows the advice from
ough the advertiser
who follows an advisory opinion is protected
from a suit, an advertiser might find the commission’s advice
burdensome because the commission tends
to be stricter in its advisory opinions than in its litigation.

INDUSTRY GUIDES Under Section 18 of the Federal Trade
Commission Act, the FTC may prescribe
“interpretive rules and general statements of policy with respect
to unfair or deceptive acts or practices.”
One form of general statement is an industry guide. Unlike an
advisory opinion, an industry guide is
interpretation of federal law but does not
itself have the force of law. An advertiser who violates an
deception or some other violation of federal law.127
acceptable advertising and labeling of products as
diverse as adhesives,128 dog food,129 and toupees.130 FTC
regulations on product endorsements and
testimonials are issued in the form of industry guidelines, as are
regulations on deceptive pricing, fuel
economy advertising for new automobiles, the women’s
Sometimes industry guides are required by Congress. For
example, a section of the Fur Products Labeling
Act required the FTC to establish a fur products name guide so

that animals used for furs would be
uniformly identified. One FTC industry guide specifies that the
word free may be used in an advertisement
handling.132
advertisers claim environmental benefits from
s prohibit general environmental
-Safe” if the
environmental benefits are not specifically listed. Use of the
term biodegradable, the FTC said, should be
reserved for advertising claims that can be substantiated with
competent scientific evidence that the
product will decompose in nature within a reasonably short
period.
will consider health and nutrition
misleading.
regulations issued by the Food and Drug Administration (FDA)
for the labeling of foods.135 Under FDA
regulations, food labels must tell consumers what nutrients, fat,
contained in labeled food, and the FDA sets criteria allowing

food manufacturers to describe a food as
guidance when determining whether health and
nutrition claims in food advertising are deceptive.
In 2013 the FTC updated its “Dot Com Disclosures,” guides
telling advertisers how to avoid deceptive
advertising on smart phones and social media. Disclosures
necessary to avoid deception must be “clear and
conspicuous” on any device, large or small, the FTC said. If a
disclosure cannot be made clearly on a small
screen, then that platform should not be used. It would be
deceptive, the FTC said, if smart phone users
had to zoom and scroll to read small type disclosing the
monthly fee for a house-monitoring camera, or
keep food safe in a hot car.
Further, the Dot Com Disclosures guide gave examples for
advertisements on social networking sites
make full
disclosures in the 140-
platforms. It is inadequate to merely link
to the advertiser’s website for full disclosures because readers
h.

disclosure in the next may not be adequate because
the delay could make the two disconnected on the reader’s
timeline or stream. Instead, the FTC
recommends beginning the tweet with “Ad:” or using #ad or
#sponsored in the tweet.136
RULES A more sweeping and legally potent FTC power is the
agency’s rule-making authority. Rules may
be required by statute or may be issued under the FTC’s broad
authority to prevent unfair and deceptive
commission favors rules, like industry guides,
because they allow for a more uniform and
efficient policy than individual commission decisions. Rules,
like industry guides, affect whole industries,
not just an individual company or advertiser.
Rules are more potent than industry guides because they have
the force of law. Advertisers who violate
a rule may be sued for engaging in deceptive acts or practices in
violation of Section 5 of the Federal Trade
Commission Act. Violators may be required to refund money,
return property, pay damages, and pay civil
penalties of up to $10,000 a day.137

When the FTC wishes to issue a rule, it must publish the text of
the rule and reasons for proposing the
rule. Advertisers, manufacturers, and the public can then
court within 60 days of its promulgation.

Several rules are mandated by statute. For example, the
Comprehensive Smokeless Tobacco Health
Education Act of 1986 requires health warnings on smokeless
Hobby Protection Act of 1973 requires that imitation political
with the year of publication.139
d a rule required by statute to curb misleading
telemarketing. Under the
Telemarketing Sales Rule, telemarketers must disclose
“promptly and clearly” in their telephone calls their
caller must also disclose the nature of the
using any good or service must also be
and intimidation, profane or obscene language, and repeated
calling that abuses or harasses. However, the
rule does permit telemarketers, including publishers and cable
operators, to call more than once within
any three-month period.
In 2008, the FTC amended its Telemarketing Sales Rule to

allow consumers to easily opt out of receiving
automated, recorded voice messages from commercial and
National Do-Not-Call Registry allows consumers to refuse
future recorded messages by pressing a key or
saying a particular word as the message is delivered. Consumers
who find recorded solicitations on their
-
messages. Telemarketers must acquire
rules do not allow consumers to opt out of
recorded political calls and market surveys because those calls
law forbids automated calls or text messages to cell phones.
Besides issuing rules mandated by statute, the FTC also issues
to issue trade rules in the early 1960s,
when it issued the rule requiring a health warning on cigar
must be included in advertising about the power output of home
amplifier143 and how the size of television

screens is to be measured (diagonally).144
FTC in the 1970s issued several broad rules
to prevent unfairness in advertising for eyeglasses, vocational
products and services. Businesses objected, arguing that rules
based on “unfairness” were too vague to
follow without undue uncertainty and expense. Opposition to
the FTC prevailed when the agency
ban was justified, the FTC argued,
because the relationship between powerful, sophisticated
manufacturers, with $661 million in advertising
r
is inherently unfair, they asked, why isn’t
of Madison Avenue professionals with millions to spend on an
ad campaign?
Responding to the criticism of the FTC’s aggressive campaign
against unfairness, Congress passed

legislation requiring the FTC to halt issuing broad unfairness
rules, including its proposed ban on televised
Congress again authorized the FTC to issue
now authorized to issue trade regulation rules to halt unfair acts
and practices that cause or are likely to
cause “substantial injury” to consumers, when consumers cannot
reasonably avoid the injury, and when
the injury is not outweighed by countervailing benefits to
consumers or to competition.148
To reduce the likelihood of vague rules, Congress limited FTC
discretion in two ways. First, the Federal
Trade Commission Act bars the FTC from relying on “policy”
considerations alone in determining what is

n rule on a likelihood
of substantial injury that the consumer
cannot avoid.
Second, the Federal Trade Commission Act permits the FTC to
issue a trade regulation rule only to halt
that presen
or deceptive acts or practices.”149
Halting Advertisements
If the FTC’s warnings in advisory opinions, industry guides,
and rules fail to prevent deceptive advertising,
the FTC can halt illegal ads through the use of consent decrees

Advertising Regulations and the Expanding Scope of Commercial Speech Protection

Advertising Regulations and the Expanding Scope of Commercial Speech Protection

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