CHICAGO — Knowing the rules for truthful advertising is only half the job. The other half, says Mary K. Engle, executive vice president of policy at BBB National Programs, is understanding just how many parties can act on a misleading claim.
This was a topic explored during a National Federation of Independent Business (NFIB) Small Business Legal Center webinar, “Advertising and Privacy Law Basics for Building Consumer Trust,” presented by Engle.
In Part 1 of this series, we examined the importance of ensuring that the message of advertising is clear to reasonable consumers and that claims can be backed up. Today, we’ll look at who can bring advertising challenges and claims regulators are currently watching closely.
“Little FTC” Acts
Engle laid out the sources that can bring challenges to advertising: the Federal Trade Commission (FTC), state attorneys general operating under their own “little FTC Acts,” competitor lawsuits under the federal Lanham Act, the advertising industry’s own National Advertising Division, class actions and private plaintiffs, and advocacy groups that monitor consumer issues.
“The FTC is less likely to go after small businesses, but it’s not that they never go after small businesses,” Engle says. “If the practices are particularly egregious, the FTC might go after them or initiate an investigation.” Even an investigation that gets closed once regulators realize a company is too small to bother with can be costly to respond to.
Self-Regulation: The National Advertising Division
One of those risk sources is unusual in that the advertising industry built it itself. The National Advertising Division, known as NAD, started in 1971 after the industry decided it needed to police its own ads before the FTC did it for them.
Competitors can challenge each other’s claims, Engle says, or NAD can open a case on its own based on what it’s monitoring in the marketplace. Cases move through one of three tracks, including a Fast Track SWIFT option that resolves single, well-defined issues in under 20 business days, faster and cheaper than going to court. The burden falls on the advertiser to support the challenged claims, and NAD attorneys write the final decision after meeting separately with each side.
Losing parties can appeal to the National Advertising Review Board, made up of people who work in advertising and marketing academia rather than NAD’s own attorneys. Participation is voluntary, but companies that skip the process or ignore a decision face a real consequence: NAD refers the matter to the FTC or a state attorney general for possible enforcement.
Subscription Traps and Hidden Fees
Automatic renewals and surprise charges are drawing similar attention, Engle says. Regulators want it to be just as easy to unsubscribe as it was to sign up, and while a court struck down the FTC’s “click to cancel” rule on procedural grounds, the agency has already restarted the rulemaking process. In the meantime, a federal statute called ROSCA and the FTC’s general authority against unfair practices still apply, and several states have their own rules.
Hidden fees work the same way in reverse: an advertised price that turns out to have mandatory add-ons buried further down. The FTC’s specific rule on this only covers live event tickets and short-term lodging, but Engle says the underlying complaint law reaches further. “It’s the kind of thing that really does annoy customers and frustrate them,” she says.
Fake and Misleading Reviews
The newest area of enforcement covers consumer reviews. A 2024 FTC rule, backed by real monetary penalties, now prohibits company insiders from posting reviews without disclosing their connection to the business, bans companies from creating review sites or seals that look independent but aren’t, and makes fake or false reviews illegal outright, including AI-generated ones. Penalties run “a little over $50,000” per violation, adjusted for inflation each year, Engle says, and the FTC can also seek refunds for affected consumers. The agency has already used its existing authority against one AI-enabled review platform it accused of misrepresenting where its reviews came from and inflating star ratings.
Fake negative reviews are a harder problem to solve. “It is illegal; it is a deceptive practice for someone to post a fake negative review,” Engle says, but proving who’s behind it is the real obstacle. “It’s usually more a competitor who’s hiding, like they’re trying to say something negative about their competitor to draw business back to themselves. You can complain to the FTC, complain to the BBB or complain to the Attorney General of your state, but unless you can figure out who is behind it, it’s going to be hard to effectively prosecute that.”
Come back Tuesday for the conclusion of this series, where we’ll examine areas of focus for the FTC, as well as practical steps for cleaners to protect themselves from online privacy concerns. For Part 1 of this series, click HERE.
Have a question or comment? E-mail our editor Dave Davis at [email protected].
