Push for Enforcement of Truth in Advertising Laws Could Affect Your Business

January 14, 2016

“Forget about think before you drink. The new term is think before you Tweet!”

If you are running a business, you must be aware of truth-in-advertising laws, even if you do not engage in traditional forms of advertising. As of late, many businesses who fail to follow the law have been getting hit with not only warning letters from the FTC, but also fines that come out of a company’s bottom line. More specifically, those conducting business on social media are being put on notice. Failing to understand how these laws apply to your business could wind up costing you your livelihood.

“Truth-in-advertising” is a general term used not only for advertising, but general sales practices and can affect just about every aspect of your business. As always, I would advise you to consult with your legal team if you are unsure if any of these apply to you. However, I am willing to bet that only a minute percentage of people reading this will actually be exempt.

If you do not think that this applies to you, just ask Kim Kardashian her thoughts on the matter after a recent Tweet and Instagram post got her into some hot water (more on that later).

Overview of truth-in-advertising laws

Let’s get to know the Federal Trade Commission (FTC), the agency responsible for overseeing truth in advertising. Established in 1913, it enforces laws dealing with unfair or deceptive practices. It operates under the Federal Trade Commission Act (FTC Act) which gives it the authority as an administrative enforcement agency.

The purpose of the FTC and the Act is to ensure that there is fair competition and that consumers are not taken advantage of during a consumer transaction. Some of the earliest enforcement included door-to-door sales or “snake oil salesmen.” It is also the agency that must review notable mergers and acquisitions to ensure there is no monopoly.

In the United States, certain laws provide for private enforcement against you for violation. This means that not only will you face potential fines from the government, but anyone affected by your practices could bring a lawsuit against you.

In addition to federal law, several states, including California, have similar legislation.

Examples of truth-in-advertising violations

Last week I wrote about a California-based class-action lawsuit against DirecTV. The matter being discussed was actually about the right to bring litigation despite the presence of a mandatory arbitration agreement; however, the underlying case is for deceptive practices against DirecTV for what plaintiffs claim were hidden fees.

Failing to fully disclose fees in a consumer transaction is a violation of the law. In fact, thanks to the Internet, many companies have tried to manipulate electronic transactions by subscribing people for services when they were not aware about future charges. This is the “sign up for free” type bait where you will not be charged, but must leave your credit card information. If you do such tactics, you must be crystal clear to the consumer about what charges they will incur in the future and how they can opt out of such charges.

Misrepresenting a product or service is also a violation of the law. Just ask the eight sushi restaurants in Southern California who were ordered to pay fines for using crawfish, Pollock, and other fish in place of lobster. Normally this wouldn’t be an issue, except for the fact they were the main ingredients in their “lobster” rolls. One restaurant paid $14,000 while a ninth restaurant (and play close attention here) went out of business due to the violation. You can find similar cases online by searching the term “angel dusting.”

Thinking of paying someone to leave you positive reviews on Yelp? Think again! Doing so could be violating the law. If you are paying for someone to positively endorse your product or service, you are required to disclose such. If you fail to make that disclosure, you are creating an unfair advantage over your competition and also misleading consumers who believe the reviews are from unbiased people who already used your product or service.

The recent push by the FTC on social media

Advertising on social media is easily recognizable. Well….is it? The FTC has been cracking down on companies that use social media without full disclose of advertising terms. An example is celebrity brand ambassadors using Twitter to endorse a product without making notification that they are being paid to do so.

This type of “deceptive practice” is likely being targeted due to the influence of social media. After all, if your favorite celebrity endorses a particular restaurant, you are likely to go there. However, if you know they are being paid to endorse the same, you may think a little harder before you spend your hard earned money.

The FTC recently released amended guidelines for those using social media as a way to advertise or endorse a product. However, some people still don’t get it.

There are two recent examples thanks to Kim Kardashian. Yes, everyone wants to keep up with the Kardashians and companies know this. That is the reason why they employ them to push products. In 2015, Kim endorsed a drug called “Diclegis” in an interesting post on Instagram:

“OMG. Have you heard about this? As you guys know my #morningsickness has been pretty bad. I tried changing things about my lifestyle, including my diet, but nothing helped, so I talked to my doctor. He prescribed me #Diclegis, I felt a lot better and most importantly, it’s been studied and there was no increased risk to the baby.” – Kim Kardashian

The FDA did not find the post amusing and sent a warning letter to the drug manufacturer. The post was deleted soon thereafter and the fact that she failed to disclose her paid endorsement is considered by many as a violation of truth in advertising.

The warning shows that Kim still doesn’t quite get it. In 2013, she was accused of a similar incident for Tweeting an endorsement for EOS lip balm. The funny part is that now EOS is being sued for its lip balm, with plaintiff’s stating that it allegedly causes people’s skin to break out. The lawsuit actually cites celebrity endorsements in the original complaint.

This Kardashian incident was documented in The Business Insider along with other incidents by celebrities such as Justin Bieber and Miley Cirus. It also discussed how the FTC is starting to come down hard on those like Kardashian who simply fail to understand or simply don’t care about the laws.

What truth-in-advertising means for you

I like to tell people to use a common sense approach. If it walks like a duck, talks like a duck……then it’s probably something you shouldn’t do. If you feel like your terms and conditions are too small to read or are buried within a document, you are likely correct and could be in violation. If you feel that your product description is misleading, then it probably is.

In addition to breaking the law, giving an appearance of impropriety can be just as bad. Being transparent as a business will earn you trust from consumers who are more than likely to purchase from you because of your integrity.

As always, seek advice from your legal team if you are unsure if something you are doing is in violation. You can also find more information on the Federal Trade Commission website.

Have any examples other than Kardashian? Would love to hear them below.

Social Media for Your Business
Mike Wood

By

Mike Wood is an online marketing expert and owner of Legalmorning.com. He specializes in content writing, brand management, and professional Wikipedia editing. Wood is a regular contributor to many online publications that have included AllBusiness Experts, Business Insider, Business2Community, and Social Media Today. He is also the host of the Marketing Impact podcast.

Get Business Legal Updates

Please provide your full name.
Please provide a valid email address.
We respect your privacy, and we will never share your information. Unsubscribe at any time.

Related Publications

The SEC fined Kim Kardashian $1.26 million for touting cryptocurrency on her social media. It’s typically fine for celebrities and influencers to endorse investment opportunities. We often see many celebrities promoting headphones or makeup with the #ad in the post.

Kim Kardashian crossed the line when she endorsed a crypto asset security. If you’re promoting the company, the only rules that apply are the ones from the FTC. If you’re touting a cryptocurrency, different laws will apply. Disclosing that you were paid — as Kim did with an #AD hashtag — is not enough; you also need to disclose how much you were paid.

October 4, 2022

Netflix is suing two TikTok users for intellectual property infringement. Abigail Barlow and Emily Bear have been found to have created TikTok content that is based on the popular Netflix show, Bridgerton. This content acquired a lot of attention on the social media app, which attracted Netflix. The content creators went on to create an album with Grammy-winning recordings. Eventually, these two artists created the “Unofficial Bridgerton Musical” on broadway which would sell out quickly. Netflix saw the growth and profit that they were making from this and slapped them with a lawsuit.

August 24, 2022

Two independent contract moderators are suing TikTok for negligence in a class-action lawsuit. In the filing, the plaintiffs claim that they were “subjected to extremely traumatic videos and images with no warning, training, or means to cope.” These moderators contend that they suffer from PTSD and other psychological damage from their experience.

March 29, 2022

A social media influencer, Brittany Dawn Davis, is in hot water with the Attorney General for allegedly deceiving her customers. Davis promotes her health and fitness services as personalized for each individual. However, from a Facebook group that Davis created herself, the customers found out that the services were not personalized at all. Stay tuned as Nasir follows along with this case.

February 9, 2022

Social Media is on the rise and being smart on your social media is more important now than ever. Many companies are taking that extra step during the background check to search for your social media accounts. In this episode of Legally Sound | Smart Business by Pasha Law PC, Nasir discusses the new normal…

November 22, 2021

Kim Kardashian and a Paparrazi were involved in a legal dispute as Kim posted a photo on her Instagram that a Paparrazi took of her. Photographs, videos & content on social media “rules” are not just black and white. There are many different guidelines when it comes to the ownership of the contents that are…

November 17, 2021

With the new wave of technology, companies are reaching out directly to influencers instead of the traditional route for endorsements & sponsorships. However, many of these influencers break the law without even knowing it. In this clip of Legally Sound | Smart Business by Pasha Law PC, Nasir breakdown the guidelines that all influencers should…

November 11, 2021

Companies around the nation may risk themselves being in a legal issue if their Company Policy is too broad. When the policy is too broad, it may frighten employees from speaking out. In this episode of Legally Sound | Smart Business by Pasha Law PC. Nasir discusses what happened to a renowned company around the…

November 8, 2021

In our latest episode, Nasir and Matt are covering the legal issues on Social Media. The average person spends most of their day on social media, whether they are scrolling for hours or publishing their own content. However, just because you publish your own content on Instagram does not equate to you owning that image….

October 12, 2021

Happy Social Media Day! If you’re a social media influencer, or use influencers or social promotions in your marketing, don’t miss our Legally Sound | Smart Business podcast episode on The Ultimate Legal Breakdown of Social Media Marketing: https://www.pashalaw.com/ultimate-legal-breakdown-social-media-marketing-e287/

June 30, 2021

Happy Selfie Day! Did you know that the Legally Sound | Smart Business by Pasha Law podcast has a whole episode on – you guessed it – selfies? If you haven’t listened, you’re missing out. Listen to learn about viral Oscar selfies, Facebook updates that cost $80,000, and more: https://www.pashalaw.com/ep-21-taking-selfies/

June 21, 2021

Did you know we’re hosting a fun business law pop quiz every Thursday (that’s TODAY) in our Instagram stories? Don’t miss out on the fun! Follow us @PashaLaw.

May 27, 2021
Legally Sound Smart Business cover art

Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
Apple Podcast badge
Google Podcast badge
Spotify Podcast badge

Latest Episodes

October 28, 2022

Full Podcast Transcript NASIR: Finally, my two favorite worlds have collided – both the law and the chess – right here at Memorial Park in Houston, Texas. Windy day. We have some background noise – ambient noise. What are the two worlds that collided? Well, Hans Neimann has sued Magnus Carlsen for defamation in one…

September 26, 2022

Through a five-round championship bout, Matt travels to Texas from California to determine which state is better for business. Will it be a knockout with a clear winner or will it go to the scorecards?

July 7, 2022

Whether you are buying or selling a business, the transaction goes through the same steps. However, they are viewed from different perspectives. Sellers may not want to fully disclose all the blind spots while Buyers will want otherwise. Nasir and Matt battle it out in this Buyer vs. Seller to determine who has the advantage!…

May 12, 2022

When it comes to Restrictive Covenants, employers are fighting to keep their company safe while employees may use them to their advantage. Keep listening to find out if the Employer or the Employee wins this battle. Round 1: Trade Secrets A company’s trade secrets encompass a whole range of information and are one of the…

February 14, 2022

The Supreme Court rejected the nation’s vaccine mandate. Businesses with 100 or more employees are NOT required to have their employees vaccinated or go through weekly testings. However, this policy remains in effect for health care facilities. In this episode of Legally Sound | Smart Business, the team sat down to discuss their thoughts on this ruling.

December 1, 2021

In this episode of Legally Sound | Smart Business by Pasha Law PC, Nasir and Matt cover the Business of Healthcare. There is more to the healthcare industry than just doctors and nurses. Many Americans have health insurance to cover their yearly needs, but most Americans are not aware of what really goes on behind…

October 12, 2021

In our latest episode, Nasir and Matt are covering the legal issues on Social Media. The average person spends most of their day on social media, whether they are scrolling for hours or publishing their own content. However, just because you publish your own content on Instagram does not equate to you owning that image….

September 28, 2021

What is a Non-Disclosure Agreement, and when do I need one? In this episode, Nasir and Matt shares why you need to use Non-Disclosure Agreements, basic facts about NDA’s, and discuss about the infamous Jenner-Woods story. Having the right Non-Disclosure Agreement in place not only protects you and your business, but it also makes the…

June 16, 2021

Covered in this episode of Legally Sound Smart Business are some typical business mistakes blunders small businesses often make and how to avoid them. Blunder #1: Copying and pasting agreements It may sound like a good idea at the time, but this blunder comes with hidden pitfalls. Having an attorney draft terms that are specific…

February 4, 2021

How you terminate an employee can make the difference between a graceful transition to avoidable negative outcomes like a dramatic exit or even a lawsuit. We gathered a panel of experts and asked them – is there a “right way” to fire an employee? We would like to thank our guests for this episode: Amr…

December 2, 2020

The COVID-19 pandemic has turned nearly every aspect of life on its head, and that certainly holds true for the business world. In this episode, Matt and Nasir explain how the early days of the pandemic felt like the Wild West and how the shifting legal playing field left a lot open to interpretation and…

November 16, 2020

After plenty of ups and downs, our buyer has finally closed on the purchase of their business. While we’re marking this down in the ‘wins’ column, it never hurts to review the game tape. In this final episode, our hosts, Matt Staub and Nasir Pasha, return to the deal almost a year later to reflect…

September 15, 2020

The ink is drying on the signature line and things are looking great for our buyer. After so much hard work, the finish line is in sight and the cheering within ear shot.   Though the landlord is still serving friction, things seem safe to move forward and for now, our buyer will be keeping…

July 31, 2020

Though things are coming along well, the journey would not be interesting if it was purely smooth sailing. After our buyer opens escrow, they are forced to push the closing date back when suddenly a letter from an attorney was received claiming the business, we are buying has a trade mark on the name!  Now…

June 12, 2020

With frustration at an all-time high and professionalism at an all-time low, our friend the Buyer has “had it” with the Seller and quite frankly their lack of knowledge. At present our Buyer is rightfully concerned that the latest misstep from our loose-lipped Seller will threaten not only the entire operation of the businesses but…

May 11, 2020

As we go deeper into the buying process, we start to uncover more challenges from our seller and encounter some of the wrenches they are tossing our way. When we last left off in episode three our team was knee deep in due diligence for our buyer, had already penned and signed the Letter of…

April 4, 2020

One word–interloper! When a new mysterious broker enters the transaction and starts to kick up dust, Nasir and Matt take the reins. The seller signed off on the letter of intent (see episode 2), yet this “business broker” serves only friction and challenges by refusing to send financials, whilst demanding more of a firm commitment…

April 4, 2020

Just as most stories and deals start out, everyone is optimistic, idealistic and full of hope for clear skies. It’s a perfect outlook with a perfect setup for the ups and downs yet to come. Peek further behind the curtain and into the first steps of buying a business: the letter of intent. After the…

April 4, 2020

When a savvy buyer hears opportunity knocking to purchase a prime positioned business, she decides not to go it alone and taps in the professionals to help navigate what could potentially be a fruitful acquisition. “Behind the Buy” is a truly rare and exclusive peak into the actual process, dangers, pitfalls and achievements, that can…

August 7, 2019

GrubHub is subject to two “matters of controversy” that have likely become common knowledge to business owners: “fake” orders and unfriendly microsites.

May 28, 2019

In this podcast episode, Matt and Nasir breakdown the legal issues of the subscription industry’s business on the internet. Resources A good 50-state survey for data breach notifications as of July 2018. California Auto-Renewal Law (July 2018) Privacy Policies Law by State Why Users of Ashley Madison May Not Sue for Data Breach [e210] Ultimate…

March 12, 2019

In recording this episode’s topic on the business buying process, Matt’s metaphor, in comparing the process to getting married probably went too far, but they do resemble one another. Listen to the episode for legal advice on buying a business.

December 3, 2018

Nasir and Matt return to discuss the different options available to companies looking to raise funds through general solicitation and crowdfunding. They discuss the rules associated with the various offerings under SEC regulations and state laws, as well as more informal arrangements. The two also discuss the intriguing story about a couple who raised over…

July 24, 2018

Flight Sim Labs, a software add-on creator for flight simulators, stepped into a PR disaster and possibly some substantial legal issues when it allegedly included a Trojan horse of sorts as malware to combat pirating of its $100 Airbus A320 software. The hidden test.exe file triggered anti-virus software for good reason as it was actually…

April 17, 2018

Attorneys Matt Staub and Nasir Pasha examine Mark Zuckerberg’s congressional hearings about the state of Facebook. The two also discuss Cambridge Analytica and the series of events that led to the congressional hearings, the former and current versions of Facebook’s Terms of Service, and how businesses should be handling data privacy. Full Podcast Transcript NASIR:…

March 10, 2018

The Trump presidency has led to a major increase in ICE immigration enforcement. It’s critical for business owners to both comply with and know their rights when it comes to an ICE audit or raid. Nasir, Matt, and Pasha Law attorney Karen McConville discuss how businesses can prepare for potential ICE action and how to…

February 5, 2018

New years always bring new laws. Effective January 1, 2018, California has made general contractors jointly liable for the unpaid wages, fringe benefits, and other benefit payments of a subcontractor. Nasir and Matt discuss who the new law applies to and how this affects all tiers in the general contractor-subcontractor relationship. Click here to learn…

January 2, 2018

With a seemingly endless amount of new mattress options becoming available, it is unsurprising that the market has become increasingly aggressive. As companies invest in more innovative solutions to get in front of customers, review sites, blogs and YouTube videos have moved to the forefront of how customers are deciding on their mattresses and how…

December 7, 2017

In recent months explosive amounts of high profile allegations of sexual harassment, assault, and varying acts of inappropriate behavior have transcended every sector of our professional world. With a deluge from Hollywood and politics, and the private workforce, accusations have inundated our feeds and mass media. This harassment watershed has not only been felt within…

November 16, 2017

If you are not familiar with the EB-5 program started in 1990 to give green cards to certain qualified investors in the United States, then you may not have been alone a few years ago. Currently, the EB-5 program has since exploded since its inception and now hits its quotas consistently each year. The program…

October 10, 2017

Government requests come in multiple forms. They can come in as requests for client information or even in the form of investigating your company or your employees. Requests for Client Information General Rule to Follow Without understanding the nuances of criminal and constitutional law and having to cite Supreme Court cases, any government requests for…

August 24, 2017

Nasir and Matt suit up to talk about everything pertaining to employee dress codes. They discuss the Federal laws that govern many rules for employers, as well as state specific nuances in California and other states. The two also emphasize the difficulty in identifyingreligious expression in dress and appearance, how gender-related dress codes have evolved…

June 28, 2017

Nasir and Matt discuss the life cycle of a negative online review. They talk about how businesses should properly respond, how to determine if the review is defamatory, the options available to seek removal of the review, how to identify anonymous reviewers, whether businesses can require clients to agree not to write negative reviews, and…

June 7, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Mattbreak down social media marketing withguests Tyler Sickmeyer and Kyle Weberof Fidelitas Development. They first discuss contests and promotionsand talk about where social media promotions can go wrong,when businesses are actually running an illegal lottery, and the importance of a soundterms and conditions. Next, they…

April 3, 2017

On this episode of the Ultimate Legal Breakdown, Nasir and Matt go in depth with the subscription box business. They discuss where subscription box companies have gone wrong(4:30), the importance of a specifically tailored terms and conditions(6:30), how to structure return policies (11:45), product liability concerns (14:45),the offensive and defensive side of intellectual property (19:00),…

February 1, 2017

Nasir and Matt discuss the suit against Apple that resultedfrom a car crashed caused by the use of FaceTime while driving. They also discuss howforeseeable use of apps can increase liability for companies. Full Podcast Transcript NASIR: Hi and welcome to Legally Sound Smart Business! I’m Nasir Pasha. MATT: And I’m Matt Staub. Two attorneys…

January 5, 2017

The guys kick in the new year by first discussing Cinnabon’s portrayal of Carrie Fisher as Princess Leia soon after her death, as well as other gaffes involving Prince and David Bowie. They alsotalk about right of publicity claims companies could be held liable for based on using someone’s name or likeness for commercial gain.

December 22, 2016

Nasir and Matt discuss the recent incidentat a Victoria’s Secret store where the store manager kicked out all black women after one black woman was caught shoplifting. They then each present dueling steps businesses should take when employees are accused of harassment.

December 8, 2016

Nasir and Matt return to talk about the different types of clients that may have outstanding invoices and how businesses can convert unpaid bills to getting paid.

November 10, 2016

After a long break, Nasir and Matt are back to discuss a Milwaukee frozen custard stand that is now revising it’s English only policy for employees. The guys also discuss how similar policies could be grounds for discrimination and what employers can do to revise their policies.

October 6, 2016

The guys discuss the new California law that allows actors to request the removal of their date of birth and birthdays on their IMDB page and why they think the law won’t last. They also discuss how age discrimination claims arise for business owner.

September 29, 2016

Nasir and Matt discuss the racial discrimination claims surroundingAirbnb and how it’s handled the situation. They also discuss some practical tips for businesses experiencing similar issues.

September 8, 2016

Nasir and Matt discuss whyAmazon seller accounts are getting suspended and banned without notice and how business owners can rectify this situation through a Corrective Action Plan.

August 25, 2016

Nasir and Matt talk about the accusations surroundingfashion giant Zararipping off the designs of independent artists like Tuesday Bassen and howsmaller companies can battle the industry giants.

August 18, 2016

Nasir and Matt discuss Brave Software’s ad replacing technology that has caught the eye of almost every national newspaper and has a potential copyright infringement claim looming. They also welcome digital marketing expert Matt Michaelree to speak on the specifics of what Brave is attempting to do and whether it has the answers moving forward.

July 28, 2016

Nasir and Matt discuss the sexual harassment lawsuit filed by Gretchen Carlson against Fox CEO Roger Ailes. They also talk aboutthe importance of sexual harassment training and properly handling such allegations in the office.

July 15, 2016

Nasir and Matt talk about the changes at Starbucks that have led to many disgruntled employees and customers.

June 23, 2016

Nasir and Matt discuss the criminal charges facing FedExinvolving the alleged transportation of illegal drugs. They also talk about how business owners should address working with customers that may be breaking the law.

June 15, 2016

The guys return after a long break to discuss why Yahoo is auctioning off over 3,000 patents and how this decision will affect the longevity of the company.

May 25, 2016

Nasir and Matt discuss the increase in the salary thresholdfor exempt employees and how employerscan try to avoid paying overtime as a result.

We represent businesses.
That’s all we do.

Oh, and we love it.

We love our work. We love reviewing that lease for your new location. We thrive on closing that acquisition that nearly fell through. We’re fulfilled when we structure a business to grow, raise capital, and be legally protected.

We focus on developing close relationships with our clients by being like business partners. A partner who provides essential, personalized, proactive legal support.

We do all of this without utilizing the traditional billable hour model. You pay for the value we bring, not the time spent on calls, emails, and meetings.

Our team is made up of attorneys and staff that share these values and we are retained by clients who want the same.

Pasha Law PC operates in the states of California, Illinois, New York, and Texas.

Meet Our Team

Fractional General Counsel Services

Pasha Law Select offers the expertise of a high-end general counsel legal team for every aspect of your business at a fixed monthly rate. Pasha Law Select is deliberately designed to allow our legal team to be proactive, to anticipate, and to be comprehensive in serving our clients. To be great lawyers, we need to know our clients. We can’t know our clients unless we represent a select number of clients in the long-term. This is Pasha Law Select.

Learn More