Advertising is a necessary evil for any business that wants to stay competitive, but your campaign could pave the way to legal action if you’re not careful. Truth in advertising is mandated by the Federal Trade Commission; lying about a product or service outright isn’t just frowned upon – it’s illegal. But when does extolling the virtues of a product or service cross the line into actionable offense? The answer is different in almost every circumstance, but there are clear-cut examples of what not to do.
Bad ads cost big bucks
False advertising lawsuits don’t garner a huge amount of press attention; like transportation infrastructure or municipal sanitation, it’s not a sexy topic. Despite the lack of press, false advertising has affected some major companies in big ways in the recent past. You may have thought that a particular ad campaign just faded from the spotlight; instead, according to Business Insider, these companies shelved their ads after paying millions of dollars for defrauding consumers:
- Volkswagen did make headlines with their “environmentally friendly” diesel cars. After Dieselgate broke, the company faced fines for false advertising and could be forced to shell out up to $61 billion for violating the Clean Air Act.
- Jamie Lee Curtis lent her celebrity to Dannon’s Activia yogurt. Unfortunately, her script wasn’t just inaccurate; it was a flat out lie. The campaign claimed that the yogurt had special bacterial ingredients that were “clinically” and “scientifically proven” to boost your immune system and regulate digestion. The company paid a $45 million fine.
- Red Bull doesn’t actually “give you wings.” Aside from telling people that an energy drink would enable them to fly, the company claimed that Red Bull improved concentration and reaction speed. After drinking the product for 10 years, one customer brought a case against the company claiming that he had not improved intellectually or physically. Red Bull settled a class action suit for $13 million.
Kellogg’s paid $4 million because Frosted Mini-Wheats don’t actually make you smarter, Lumosity paid $2 million for falsely claiming to prevent dementia, Airborne paid more than $30 million for claiming to ward off harmful germs despite a complete lack of scientific evidence: the list goes on and on. What your advertising says can be used against you, regardless of the spirit or tone in which it was meant. Even regional pricing differences can cost you money if you promise something and forget or fail to deliver. So how can you make sure that your advertising doesn’t create a legal vulnerability for your company? Ask us.
Gertsburg Licata is a full-service, strategic growth advisory firm focusing on business transactions and litigation, M&A and executive talent solutions for start-up and middle-market enterprises. It is also the home of CoverMySix®, a unique, anti-litigation audit developed specifically for growing and middle-market companies.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.