Client Alerts
October 16, 2014

Get Your Disclosures On! – The FTC and Operation Full Disclosure

Stites & Harbison Client Alert, October 16,. 2014

by Stites & Harbison, PLLC

Sixty companies received warning letters from the Federal Trade Commission in September advising that disclosures, the so-called “small print” in advertising, were inadequate to make otherwise misleading claims truthful.

The FTC’s “Operation Full Disclosure” likely foreshadows future enforcement actions against targets who do not voluntarily heed the agency’s warnings about the legal requirements for disclosures in advertising.

The general rule of thumb is that even an adequate disclosure cannot make an otherwise unlawful claim lawful under U.S. advertising law standards. But the rule is not as simple in its application. There are most certainly instances in which proper disclosures clarify the scope of the claim in a manner that put the advertisement as a whole “on the right side of the line.”

Disclosures can “get lost” for consumers in a variety of ways, some of which are difficult to fully assess in the context of an advertising “proof” – the form advertising generally takes when circulated to business decision makers and attorneys prior to taking its final form. In addition to the most obvious risk of the “too small” disclosure, there are the related concerns of the too-distant-from-the-primary-claim disclosure, the disclosure that is insufficiently prominent due to a similarly colored background or other visual distractions, and the disclosure that includes unclear wording.

Whether disclosures are sufficient as displayed in advertising should be evaluated in light of the importance of the disclosure to the primary claim. For example, the fact that an offer lasts for a limited but reasonable period of time is not nearly as important as the fact that only a specific segment of the advertiser’s products falls within the scope of the offer. Thus, an advertising disclosure informing consumers of the former fact may require less prominent presentation than a disclosure of the latter fact, all other considerations being equal.

By the same token, if the advertisement’s call out carries particular attention getting significance for consumers in the relevant market, e.g. “FREE product” or “Save $1000” then the limits on those claims become more critical to clearly and truthfully communicating the terms of the relevant offer -- given the marketplace power the advertisement as a whole will carry.

All of this being said, there are certainly instances in which no disclaimer will suffice to save a false or misleading advertising claim. For example, an advertisement that includes a picture of a new car accompanied by the claim “Save $10,000 on a new car” with even a reasonably conspicuous disclosure “Car subject to savings is toy model of actual car shown” would likely not pass FTC muster.

Although no advertiser wants to compromise an effective advertising message to unnecessary “legalese”, advertising is an area in which small changes to content and placement can make the difference between “lawful” and “unlawful” conduct, the cost of making the changes on the front end are relatively low, and the options for legal compliance are open-ended.

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