Fair business practice and truth-in-advertising standards

Of all the questions budding business owners ask the Small Business Administration online, questions about building credibility and the integrity of potential partners appear to be the most common.  Take these points as part of the minimum legal standard for ethical behavior, and understand that the public expects better.

• Under the Federal Trade Commission Act, advertising must be truthful and non-deceptive, advertisers must have evidence to back up their claims and advertisements cannot be unfair.

• “Deceptive” according to the FTC's Deception Policy Statement, means an ad contains a statement - or omits information – that is likely to mislead consumers acting reasonably under the circumstances and is "material" - that is, important to a consumer's decision to buy or use the product.

• “Unfair” means it causes or is likely to cause substantial consumer injury which a consumer could not reasonably avoid and it is not outweighed by the benefit to consumers.

• If you offer something for "free" that’s tied to the purchase of another product, the price of the purchased product should not be increased from its regular price.

• The FTC rules work the same online for advertising as they would on TV or in a magazine. Ad claims on the Internet must be truthful and substantiated.

• Make no claims without a "reasonable basis" for it. A "reasonable basis" means objective evidence that supports the claim. Statements from satisfied customers usually won’t cut it you make a health or safety claim, or any other claim, that requires objective evaluation.

• The FTC's Guides for the Use of Environmental Claims cover how words like biodegradable, recyclable, and environmentally friendly can be used in ads. In addition, some states have laws governing environmental claims.

• Food labeling and advertising is a special case – if you sell food, you want to read Enforcement Policy Statement on Food Advertising.