Advertising Law – What You Need to Know

When it comes to advertising a quick way is a promotion, but it is important to keep advertising in line with federal regulation. The Federal Trade Commissions Act prohibits “unfair or deceptive acts or practices in or affecting commerce,” which includes statements made in advertisements and promotional materials. The Federal Trade Commission (FTC) has disseminated specific rules about offers using the word “free.” Because violations can result in fines of up to $10,000, it is important to know how to ensure your advertisements comply with the law. This guide provides some things to consider when determining if your use of “free” in an advertisement is in the clear.

Purchasers have the right to believe that an offer of free merchandise with a purchase means that the purchased item will be sold at its “regular” price—the price of the item in the thirty days leading up to the promotional offer. The purchased item cannot be marked up to compensate for providing the free merchandise.

When making a “free” offer, be sure that the terms and conditions are provided “clearly and conspicuously” at the outset. This means including any information necessary so that there is no reasonable chance of the offering being misunderstood. For example, print the terms in legible print on a promotional poster or directly on the packaging of a product. “Fine print” should not be so small that it is difficult to read. It is critical that the purchaser knows about the terms and conditions before making any purchase.

If you are offering a product for the first time, there are special rules to keep in mind. In that case, offers of a “free” product accompanying the new product must be open for a limited time only. Afterwards, the products must be sold separately, and the price of the purchased product must remain the same as it was when it was being offered with the free item.

The FTC wants to ensure that “free” offers are meaningful, so it limits the length and frequency of those offers. A free product or service should only be offered in a trade area for six months in a one year period, and separate “free” offers should be made at least thirty days apart.

Offering customers a “free” item, “free gift,” or “bonus item” with a purchase is a great way to earn revenue by exposing customers to a wider variety of your business’s goods or services or enticing first-time customers to your business, but only so long as offers comply with advertising laws. For more information, see the FTC’s “Guide Concerning Use of the Word ‘Free’ and Other Representations” and “Big Print. Little Print. What’s the Deal?” both available on the FTC’s website.

Jana Douglas