Monday, April 26, 2010

Trade Association Settles FTC Charges of Misleading Advertising

Associations are as responsible for the advertising claims they make about services and products as for profit industry.  While many association "products" are training, peer professional networking, legislative advocacy, etc., some nonprofits also have services or products they sell to the general public.  Once they cross that line, they need to make sure they can support any statements about those products or risk the Federal Trade Commission stepping in.  See below.  Bunnie

Trade Association Settles FTC Charges of Misleading Advertising


by Jonathan L. Pompan, Esq., Venable LLP, Washington, D.C.

On January 26, 2010, the Federal Trade Commission (“FTC”) announced it had entered into a voluntary settlement, subject to final approval, with the Indoor Tanning Association (the “ITA”) over allegations that the ITA made misleading representations in its advertising and marketing for indoor tanning. Under the consent order, the ITA is restricted in the claims it may make in its future advertising, must send a notice to its members and recipients of its advertising materials, and must adopt a record keeping program.

The proposed order is significant in several respects. First, it makes clear an association’s obligation to adhere to advertising and marketing law. Second, the order illustrates how an association’s own advertising claims can result in obligations to disclose material risks. The FTC accused the ITA of failing to disclose facts related to health and safety risks that would be material to consumers in their purchase or use of the advertised product in light of the representations made. Third, the order focuses on point-of-sale and other consumer-facing advertising by the association that falls squarely in the commercial realm. The order does not cover representations made in non-commercial settings or contexts, such as communications to legislative or executive bodies.

Many associations advertise and market to develop and defend markets important to their membership. To help minimize legal risk, trade association staff should be well-educated in advertising and marketing law to ensure that their advertising claims are truthful and not misleading. In addition, claims must be substantiated, particularly when they concern health, safety or performance.

Association staff and legal counsel should consider the following pointers:

• Sellers are responsible for claims they make about their products and services. Third parties – such as advertising agencies or website designers – also may be liable for making or disseminating deceptive representations if they participate in the preparation or distribution of the advertising, or know about the deceptive claims.

• Stick to claims that can be supported. The type of evidence needed will depend on the product, the claims, and what experts believe necessary.

• Avoid disclaimers and disclosures that are difficult to notice, read or hear. However, a disclaimer cannot remedy a false or deceptive claim.

• Product and service demonstrations should show how the product will perform under normal use.

• FTC guidance suggests that association endorsements “must be reached by a process sufficient to ensure that the endorsement fairly reflects the collective judgment of the organization.”

• Certain regulated products and services trigger specific laws (e.g., Textile and Wool Acts, various consumer financial products and services) and regulations. Moreover, certain forms of advertising are subject to specific guidance (e.g., FTC Guide on Environmental Advertising, FTC Guides Concerning the Use of Endorsements and Testimonials in Advertising).

• Competitors may challenge advertising claims under self-regulatory programs, such as the Council of Better Business Bureau’s National Advertising Division, as well as under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).

• Obtain appropriate insurance for advertising and marketing activity.

* * * * * *
Jonathan L. Pompan, an attorney in the Washington, DC office of Venable LLP, represents nonprofit organizations and others in regulated industries in a wide variety of areas, including advertising and marketing law compliance, as well as in connection with Federal Trade Commission and state investigations and law enforcement actions. Prior to joining Venable, Mr. Pompan was an in-house counsel at a trade association where he reviewed advertising and marketing in advance of publication. For more information, please contact Mr. Pompan at 202.344.4383 or jlpompan@venable.com.

For more information about this and related industry topics, see www.venable.com/associations/publications.




This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to a specific fact situation.

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