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<\/a><\/p>\nThat\u2019s pretty basic stuff.<\/p>\n
What\u2019s an Earnings Claim?<\/p>\n
The FTC also has a definition for a special type of ad claim known as an \u201cearnings claim\u201d which relates to products or services that show consumers how to make money or promise a financial benefit.<\/p>\n
This is how the FTC defines \u201cearnings claim\u201d:<\/p>\n
* An oral, written, or visual representation<\/p>\n
* That states a specific level of potential sales, income, gross or net profit, or<\/p>\n
* Facts which suggest a specific level of the above.<\/p>\n
Examples of earnings claim include statements regarding future financial benefits when coupled with \u2013<\/p>\n
* A photo of a marketer standing by a new Mercedes automobile (facts that suggest a specific level of financial benefit, i.e. sufficient to purchase a similar automobile); and<\/p>\n
* Screen shots of the marketer\u2019s PayPal account showing a large number of sales transactions (facts that suggest a similar level of financial benefit).
\nTip: The important thing to remember here is that ad claims are regulated by the FTC. If the ad claim does not follow FTC rules, it gives the FTC grounds to file a lawsuit for false advertising.<\/p>\n
It\u2019s important to distinguish and ad claim from \u201cpuffery\u201d.<\/p>\n
Why is this important? The short answer is that \u201cpuffery\u201d is not considered to be an ad claim. So, \u201cpuffery\u201d is not regulated by FTC rules, and therefore can\u2019t be deceptive.
\nTip: \u201cPuffery\u201d is always legal in all circumstances. And ad claims many not be. That\u2019s it. That\u2019s why it\u2019s important to have a clear understanding of what amounts to \u201cpuffery\u201d. Ad claims (if they amount to false advertising) can get you into big trouble with the FTC. Puffery can\u2019t.<\/p>\n
What Is Puffery?<\/p>\n
\u201cPuffery\u201d is a legal term that for an exaggerated statement made for promotional purposes which states subjective rather objective views, and is so exaggerated that consumers are not likely to be mislead, deceived, or confused.<\/p>\n
Two U.S Circuit Courts of Appeals have defined puffery as \u201cexaggerated advertising, blustering and boasting upon which no reasonable buyer would rely.\u201d<\/p>\n
One of the keys for distinguishing puffery from and a regulated ad claim is whether the claim at issue \u2013<\/p>\n
* is quantifiable, and<\/p>\n
* capable of being proven false using scientific methods.<\/p>\n
An Example of Puffery<\/p>\n
A great example of puffery involves the claim made by Papa John\u2019s \u201cBetter Ingredients. Better Pizza.\u201d<\/p>\n
In the case of Pizza Hut, Inc. v Papa John\u2019s Intern., Inc., the 5th Circuit Court of Appeals found that the claim was puffery, not an ad claim. The Court found the claim to be the epitomy of puffery \u2013 boasting and exaggeration. In addition, the Court pointed out that the statement was generic in that it did not \u2013<\/p>\n
* identify any specifics regarding \u201cbetter\u201d, and<\/p>\n
* did not offer any comparison with a competitor\u2019s product.<\/p>\n
It\u2019s also fair to conclude that the claim was not quantifiable, nor was it capable of being proven false using scientific methods.<\/p>\n
What Is NAD?<\/p>\n
NAD is an acronym that stands for the National Advertising Division of the Council of Better Business Bureaus.<\/p>\n
NAD is a self-regulatory organization that reviews truth in advertising issues, specifically factual ad claims for accuracy.<\/p>\n
NAD\u2019s decisions regarding advertising issues assist advertisers in evaluating their ad claims. Compliance with NAD\u2019s decisions in voluntary.<\/p>\n
So, even though NAD decisions are voluntary, they should be given considerable weight in evaluation of ad claims, and ads that may be puffery.<\/p>\n
Examples of NAD Decisions Re Puffery<\/p>\n
Here is a collection of 4 NAD decisions that should provide some valuable insight regarding how to determine the difference between puffery and an regulated ad claim.<\/p>\n
* Exaggeration\/Boastful Statements \u2013 Issue is whether the statement can be proven true or false, or is it so vague that no one will treat it as factual \u2013<\/p>\n
o Puffery:<\/p>\n
* \u201cAmerica\u2019s Favorite Pizza\u201d
\n* \u201cAmerica\u2019s Best Loved Coffee\u201d
\n* \u201cThe Earth\u2019s Most Comfortable Shoes\u201d<\/p>\n
o Not Puffery (Regulated Ad Claim)<\/p>\n
* \u201cThe Antioxidant Superpower\u201d
\n* \u201cTrusted By Moms\u201d
\n* \u201cLeading Brand\u201d<\/p>\n
* Comparative Ad That Identifies Competitors \u2013 Issue is whether the statement identifies competitors or certain aspects of the competitor\u2019s products \u2013<\/p>\n
o Puffery:<\/p>\n
* \u201cBeech-Nut is a better choice\u201d<\/p>\n
o Not Puffery (Regulated Ad Claim)<\/p>\n
* \u201cTaste The Best at a Sensible Price\u201d (when shown next to the competitor\u2019s products)<\/p>\n
* Comparative Ad That Identifies Measurable Results \u2013 Issue is whether the advertiser claims superiority of a specific attribute of product that a specific attribute of another product \u2013<\/p>\n
o Puffery<\/p>\n
* \u201cBetter Ingredients. Better Pizza.\u201d (when no specific ingredients are identified)<\/p>\n
o Not Puffery (Regulated Ad Claim)<\/p>\n
* \u201cTastes Most Like Butter Even Better\u201d
\n* \u201cThe best Compact Coffee Solution\u201d
\n* Discover The Better Taste of Progresso\u201d<\/p>\n
* Statement Placed Near Product Performance or Disease Prevention Claims \u2013 Issue is whether the exaggerated claim is located close to other quantifiable claims \u2013<\/p>\n
o Puffery<\/p>\n
* \u201cWorld\u2019s Most Effective Energy Drinks\u201d (placed on top of product website and not next to any performance claims of product)<\/p>\n
o Not Puffery (Regulated Ad Claim)<\/p>\n
* \u201cCheat Death\u201d, \u201cLive Preserver\u201d, \u201cThe New Shape of Protection\u201d (placed beside a statement describing the horrors of cancer)<\/p>\n
(The foregoing analysis is based on an article by Gurnani, Abhishk K. and Talati, Ashish R., FDLI, \u201cThe World\u2019s Most Trusted Article on Puffery\u201d, American Bar Association, November\/December, 2008.)
\nTip: If you\u2019re going to be aggressive with marketing statements, you should be careful to stay on the side of puffery. Don\u2019t cross the line to regulated ad claims. If you do cross the line, you\u2019ll be subject to the Prior Substantiation Rule.<\/p>\n
Regulated Ad Claims \u2013 The Prior Substantiation Rule<\/p>\n
The basic ides is that if you make a regulated and claim, then you must, prior to disseminating the ad, develop substantiation for the claim either by \u2013<\/p>\n * scientific data, or<\/p>\n * results determined though consumer surveys. \u201cBefore disseminating an advertisement, the advertiser must substantiate all claims \u2013 express and implied \u2013 that the ad conveys to reasonable consumers\u201d.<\/p>\n As discussed above, the Prior Substantiation Rule does not apply to puffery.<\/p>\n Back in 1984, the FTC issued a statement regarding its policy for prior substantiation of ad claims:<\/p>\n * \u201cFirst, we reaffirm our commitment to the underlying legal requirement of advertising substantiation that advertisers and ad agencies have a reasonable basis for advertising claims before they are disseminated.\u201d<\/p>\n * \u201cThe Commission intends to continue vigorous enforcement of this existing legal requirement that advertisers substantiate express and implied claims, however conveyed, that make objective assertions about the item or service advertised.\u201d<\/p>\n * \u201cObjective claims for products or services represent explicitly or by implication that the advertiser has a reasonable basis supporting these claims.\u201d<\/p>\n * \u201cThese representations of substantiation are material to consumers. That is, consumers would be less likely to rely on claims for products and services if they knew the advertiser did not have a reasonable basis for believing them to be true.\u201d<\/p>\n * \u201cTherefore, a firm's failure to possess and rely upon a reasonable basis for objective claims constitutes an unfair and deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act.\u201d<\/p>\n You should understand that the FTC often makes inquiries to advertisers in cases where the FTC wants to see prior substantiation. This inquiry may be made prior to filing a lawsuit.<\/p>\n The FTC may either initiate a \u2013 * an informal information request seeking voluntary cooperation such as with the issuance of an \u201caccess letter\u201d.<\/p>\n After an investigation, if the FTC determines that there is \u201creason to believe\u201d that the ad in question amounts to false advertising, the FTC may sue you \u2013 either by filing an administrative complaint or a complaint in a U.S. District Court. In both cases, the FTC has the burden of proving its false advertising allegations.<\/p>\n How To Substantiate Your Ad Claims<\/p>\n A detailed discussion of ad claim substantiation is beyond the scope of this book. However, the general principles discussed below should point you in the right direction.<\/p>\n Remember, both direct (absolute and express) claims and implied claims are required to be substantiated.<\/p>\n An example of an implied claim would be a claim using a comparative approach, such as \u201cBetter Than All The Rest\u201d (implying that the product is better than the remainder of the specific products in the category).<\/p>\n Substantiation of these claims means the verification, confirmation, and evidence or proof that an ad claim is true. Consumers need to have confidence that an advertiser has a reasonable basis for making a claim.<\/p>\n Here are some examples of direct claims and the related challenges regarding substantiation and back-up:<\/p>\n * If you claim \u201cBest Value\u201d, understand that it\u2019s a bold promise – essentially, you\u2019re promising that your offer is worth more than the asking price – if you're going to make this claim, you'd better have the proof on your product\/service description page.<\/p>\n * If you claim \u201cWe\u2019re No. 1\u201d, you need to be very specific regarding how you determine no. 1 \u2013 no. 1 at what? – in gross sales, in sales growth for a specific period, in the number of widgets sold?<\/p>\n * If you claim the \u201cLatest And Greatest\u201d, \u201cNext Generation\u201d or words to that effect, you should substantiate how the claim is true \u2013 explain specifically how you justify the claim in relation to other competitive products on the market.<\/p>\n * If you claim \u201cUser Friendly\u201d or \u201cEasy-To-Use\u201d, you need to be specific regarding substantiation of specifically how much time a certain task routinely takes, exactly which steps are automated, etc.<\/p>\n For claims that advertise a level of substantiation \u2013 \u201cTests Prove\u201d or \u201cStudies Show\u201d \u2013 you need at least the advertised level of substantiation.<\/p>\n For scientific claims \u2013 such as for weight loss or dietary supplements \u2013 the FTC requires \u201ccompetent and reliable scientific evidence\u201d including \u2013<\/p>\n * Tests, analyses, research, studies, or other * That have been conducted and evaluated in an objective manner by persons qualified to do so, and<\/p>\n * Using procedures generally accepted in the profession to yield accurate and reliable results<\/p>\n The following is not \u201ccompetent\u201d scientific evidence and\/or does not constitute adequate substantiation:<\/p>\n * Anecdotal evidence alone from customers (for example, non-factual evidence based on the experiences of a few people, for example, a person tells how his breath feels fresher after using a certain brand of toothpaste); however, anectdotal evidence when coupled with a few well-controlled studies may be sufficient);<\/p>\n * Newspaper, magazine, or Wikipedia articles;<\/p>\n * Sales materials from the manufacturer;<\/p>\n * Low rate of product returns or money-back guarantee;<\/p>\n * Testimonials.<\/p>\n Testimonials Are Considered To Be Ad Claims<\/p>\n Testimonials are essentially the other side of the ad claim coin \u2013<\/p>\n * Ad claims are made by you, the marketer about your products or services;<\/p>\n * Testimonials are made by others for you and your products and services.<\/p>\n The FTC has made it clear that testimonials and expert endorsements must be substantiated –<\/p>\n * as though they were made by the marketer itself, or<\/p>\n * be properly disclaimed.<\/p>\n A testimonial or endorsement must represent \u2013<\/p>\n * the experience that is representative of a typical customer can expect with the product or service, or<\/p>\n * be properly disclaimed.<\/p>\n o There is no exception for personal opinion of a person giving a testimonial.<\/p>\n o The testimonial must give the honest opinions, findings, beliefs, or experience of the testimonials.<\/p>\n o Any material connection between the testimonialist and the marketer must be disclosed (as discussed in the next chapter).<\/p>\n How To Make Sure Your Testimonials Are \u201cProperly Disclaimed\u201d<\/p>\n A clear and conspicuous disclaimer is required for testimonials that do not reflect experience that is representative of what a typical customer can expect.<\/p>\n An example of a proper disclaimer for a weight loss claim would be: \u201cOn Average, Users Reported Positive Effect<\/p>\n After 12 Weeks of Use\u201d.<\/p>\n Vague, non-specific disclaimers won\u2019t work any more, such as \u2013<\/p>\n * \u201cResults Not Typical\u201d, or<\/p>\n * \u201cYour Results May Vary\u201d.<\/p>\n Three quick and easy ways to get into trouble with deceptive testimonials \u2013<\/p>\n * The testimonialist may not have experienced the reported result;<\/p>\n * The result may be attributable to other factors, such as (i) diet or exercise for weight loss, or (ii) prior experience with making money products;<\/p>\n * If a testimonial claims results that are not typical without a proper disclaimer.<\/p>\n * If the testimonialist falsely states or implies that he\/she actually used the product or service.<\/p>\n Beware of Earnings Disclaimers!<\/p>\n Earnings disclaimers are commonly used to qualify earnings claims. Most earnings disclaimers may be boiled down the these elements \u2013<\/p>\n * No promise you will make money;<\/p>\n * No promise you will not lose money;<\/p>\n * Internet businesses are risky; and<\/p>\n * Seek professional advice before purchasing any money-making scheme.<\/p>\n The problem with the way many Earnings Disclaimers \u2013 and a serious trap for the unwary – is that they\u2019re offered to contradict earnings claims.<\/p>\n The FTC has made it very clear:<\/p>\n \u201c[Disclaimers] should be presented clearly and conspicuously so that consumers can actually notice and understand it…. [A]dvertisers [cannot] use fine print to contradict other statements in an ad or to clear up misimpressions that the ad would leave otherwise.\u201d<\/p>\n The NAD also weighed in:<\/p>\n \u201cWhile disclosures may be used in advertising to reduce the potential for consumer confusion, they cannot be used to change the express meaning of a claim or to render truthful and otherwise misleading advertising claim.<\/p>\n And the 3rd Circuit Court of Appeals added this:<\/p>\n \u201cOne cannot escape liability for a literally false claim by pointing to a later disclaimer.\u201d<\/p>\n Tip: Be very careful to not fall into the trap of believing that you can promise the moon with earnings claims, and it will all be legal if you simply post an Earnings Disclaimer to your website. Your Earnings Disclaimer will not be effective to \u201csanitize\u201d or cure an otherwise deceptive ad claim. And the FTC may also claim that your attempt to render a deceptive ad claim to be truthful with the Earnings Disclaimer is, itself, a deceptive marketing practice.<\/p>\n What To Do If You Use Experts As Endorsers<\/p>\n * You must provide the qualifications that support the expert\u2019s standing to be represented as an expert in the specific field of the endorsement.<\/p>\n * The expert must have a reasonable basis to provide the opinion expressed in the endorsement.<\/p>\n * The expert must actually use his\/her expertise in evaluating the features or characteristics of product or service.<\/p>\n * The features or characteristics featured in the endorsement must be relevant to an ordinary consumer\u2019s use of, or experience with, the product or service and which are also available to the ordinary consumer.<\/p>\n Ad Claims Come In All Shapes, Sizes, and Places<\/p>\n Don\u2019t be lulled into sleep by thinking that ad claims only appear on your website\u2019s sales pages.<\/p>\n Ad claims may appear in all shapes, sizes, and places. No matter what form the ad takes, the advertiser still must substantiate all ad claims before substantiation.<\/p>\n Ad claims may appear in other forms and places, such as:<\/p>\n * Website pages other than sales pages;<\/p>\n * Social media pages;<\/p>\n * Blogs;<\/p>\n * YouTube videos and other videos; and<\/p>\n * Contests (for example, an Oracle ad stating that its Exadata server is \u201c5X Faster Than IBM… Or You Win $10,000,000\u201d).<\/p>\n Also, be very careful with these hazards \u2013<\/p>\n * Website reviews posted by customers;<\/p>\n * Social media pages;<\/p>\n * Guarantees;<\/p>\n * \u201cFree\u201d trials where customers have to cancel within a stated time period or their credit cards will be charged. Conclusion<\/p>\n The rules for substantiation are very complex.<\/p>\n For this reason, a good way to start with compliance is to ensure that you have a clear understanding of \u2013<\/p>\n * puffery and how puffery is different from an ad claim, and<\/p>\n * the fact that ad claims are not just on your sales page; they may be other website pages, social media pages, blogs, videos.<\/p>\n Then you can stay clearly on the side of puffery until you determine that you need to cross the line to making an ad claim. At that time, you can review the substantiation rules and proceed with the ad claim and substantiation.<\/p>\n The worst of all situations would be to unintentionally make ad claims. Because if you make ad claims unintentionally, you certainly wouldn\u2019t be substantiating them.<\/p>\n By now it should be clear how important it is for you to be FTC compliant. But how can you do that without spending $7,500-$8,000 or more on Internet Attorneys?<\/p>\n Smart business owners around the world are doing it with the help of FTC Guardian.<\/p>\n FTC Guardian is a service that is 100% focused on helping to keep you get and stay FTC compliant and fully protected.\u00a0And right now, we are offering a free training to give you the knowledge, information, and guidance that you need to stay out of trouble with the Federal Trade Commission.<\/a><\/p>\n![\"\"](\"\/images\/button_banner-Big_Data_Report.png\")
<\/a><\/p>\n
\nPrior Substantiation Rule: This is the FTC\u2019s statement of the \u201cprior substantiation rule taken from an actual case:<\/p>\n
\n* a compulsory inquiry by subpoena or civil investigative, or<\/p>\n
\nevidence based on the expertise of professionals in
\nthe relevant area,<\/p>\n
\nTip: If you\u2019re not really sure about how to substantiate ad claims, the best approach is to clearly understand puffery, and then to always stay on the side of puffery without crossing the line to regulated ad claims.<\/p>\nHere\u2019s How To Make Sure You,\u00a0Your Business & Website Is FTC Compliant<\/h2>\n