Your new startup has to advertise and market in order to seize market share. If your business wants to retain market share, you are going to need to market your products or services and advertise as well. Marketing is supposed to be fun. But, truth is, advertising is a minefield of potential legal violations. If you make a false statement via advertising, you could go to jail under California law. You will likely want to seek some guidance from an experienced corporate attorney.

Here a few federal and California laws you should familiarize yourself with:

Federal Trade Commission Act

The Federal Trade Commission Act regulates unfair and deceptive business practices, including advertising. If you advertise or market unfairly or in a deceptive manner, you may be hit with a massive lawsuit by the Federal Trade Commission (‘FTC”). The FTC regulates internet advertising, too, including deceptive use and fraudulent use of social media. In September 2017, the FTC revised its guides for use of online endorsements, testimonials, reviews, rating systems, and the solicitation of “likes” and “retweets” and “thumbsUp” on sites like Facebook, Instagram, and Twitter. See FTC information page here.

If your company is relying on blogs and internet “word of mouth,” and you do it wrong, you may be engaging in unfair and deceptive advertising. If you have or allow your employees to “like” and “share” and “retweet,” again, if you do it wrong, you may be engaging in unfair and deceptive advertising.

The FTC Act and the new endorsement Guides apply to every category of advertising including:

• Television;
• Print;
• Radio;
• Blogs; and
• Word-of-mouth marketing.

California Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq.

First enacted in 1872, the California Unfair Competition Law (“UCL”) is California’s equivalent of the Federal Trade Commission Act. The UCL prohibits unfair business acts or practices and unfair, deceptive, untrue, or misleading advertising. The FTC Act only allows lawsuits to be brought by the FTC, but consumers have a private right of action under the UCL.

California Consumers Legal Remedies Act, Cal. Civil Code §§ 1750 et seq.

The California Consumers Legal Remedies Act (“CLRA”) prohibits 23 specific types of business practices, including certain types of advertising. Prohibited practices include:

• False statements with respect to the source of goods or services;
• Falsely claiming a product is new when it is actually reconditioned or refurbished;
• Bait and switch type advertising; and
• Falsely stating some repair is needed when no repair is needed.

Violating the CLRA can be expensive for a business. Consumers can sue under the CLRA and obtain actual damages, injunctive relief, restitution, punitive damages, attorneys’ fees, and court costs.

California Business and Professions Code § 17500 et seq.

California also prohibits deceptive advertising under other parts of the California Business and Professions Code. In fact, false advertising is a crime. Section 17500, prohibits false statements generally and violation by false advertisement is punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding $2,500, or by both. Section 17500.5 prohibits false claims related to the quality of your goods and services and, like the CLRA, prohibits “bait and switch” behavior where you lure customers into your store by promising a certain product at a certain price, but the product is unavailable or not available in sufficient quantities to meet expected demand.

Contact San Diego Corporate Law

Advertising is not a simple as it seems. Seek guidance from an experienced corporate attorney like Michael J. Leonard, Esq., of San Diego Corporate Law. Contact Mr. Leonard by email or by calling (858) 483-9200.