Managing Legal Risk in Marketing and Advertising: 5 Things Companies Should Know

4 minute read

Most companies follow a few key rules to market their offerings:

  • Advertisements should be truthful and should not mislead consumers.
  • Advertisements and the products being marketed should not harm consumers.
  • Advertisers should be able to back up marketing claims and substantiate them before they are made.

Here are five additional things companies should know to further reduce legal risk in advertising and marketing.

1. Consumers May Have Legal Rights to Control the Ads They Receive

Depending on jurisdiction and how an advertisement is communicated, companies may be obligated to offer consumers a choice in relation to the types of ads they receive.

  • Email Marketing: In the U.S., companies that market by email generally must provide recipients a way to opt out. The EU and UK require companies to obtain affirmative consent before sending marketing emails; some jurisdictions within the EU even require recipients to confirm consent in a separate communication.
  • Phone & Text Marketing: Complex rules in the U.S., UK and EU in most instances require companies to obtain affirmative consent before marketing to consumers by phone or text. Industry groups such as the CTIA often impose additional requirements on text campaigns, such as obligations to respect “STOP” commands.
  • Online Marketing: For online marketing that relies on pixels/cookies, the EU and UK typically require opt-in consent in the form of a “cookie banner.” Technology platforms, such as Apple through its App Tracking Transparency framework, also can require consent for the kind of “tracking” used in online ads. U.S. law has generally advocated an opt-out approach, but new state privacy laws are providing consumers additional rights to opt out of having certain data used for targeted ads or for building profiles about consumer preferences and interests. Industry groups such as the NAI and DAA also impose industry-wide transparency and opt-out requirements.

2. Consumers Should be Able to Recognize an Ad as an Ad

Companies could face unfair or deceptive advertising claims if consumers can’t tell whether content contains an ad.

  • Endorsements & Sponsored Content: Companies and other entities that pay someone to promote a product or service should include a disclosure about that relationship in the promotion – even on social media and on screens with limited space.
  • Native Advertising: Companies should identify promotional content as an ad if it looks like news, articles, reviews or other material that may surround it online (which otherwise could confuse the consumer).

3. Ads Can Create Contractual Terms and Generate Products Liability Claims

  • Contractual Terms: Consumers who relied on a marketing statement when deciding to buy a product or service may argue successfully that a particular statement is legally binding. Companies should only make those statements in ads they’re prepared to stand behind.
  • Products Liability: Consumers who use a product in a manner similar to how someone used it in an ad may be able to support a products liability claim alleging the use was “reasonable” and that the advertiser should have anticipated it. Companies should consider whether ads set unrealistic expectations for consumers and whether a disclaimer could reduce risk.

4. Landmines Abound in Comparative Advertising

Ads that distinguish a product or service from competitors can work, but they also can create consumer confusion and risk of legal challenge by regulators as well as competitors.

  • Intellectual Property Rights: The use of a third party’s name or product to compare objective differences in products/services is generally permitted, provided the ad is truthful and does not confuse consumers. Using a third party’s logo or custom content, however, even for comparative purposes, may amount to infringement.
  • Substantiation: Regulators often scrutinize comparative ad claims. Companies should consider relying solely on objectively measurable attributes, such as specifications or price, that are clearly supported by documented evidence.

5. Heightened Restrictions Apply to Heavily Regulated Industries and Ads for Children

  • Highly Regulated Industries: Companies that advertise alcohol, tobacco, medical products or financial services often face heightened restrictions on where, when and how they can advertise. Companies in highly regulated industries should confirm requirements with legal counsel before advertising.
  • Advertising to Children: Because children may be more vulnerable to advertising messages, regulators and media platforms have heightened content, disclosure and substantiation obligations for ads targeting children. Companies that advertise to children or have products that interest them should confirm requirements with legal counsel before advertising.