Children's Products: An Overview of Advertising Laws and Regulations
Like all businesses, manufacturers and retailers of children's products must comply with advertising laws and regulations. Advertising laws protect consumers by requiring advertisers to be truthful about their products. Failure to comply with advertising laws can result in costly enforcement actions and civil penalties.
Truth in Advertising Laws
The Federal Trade Commission (FTC) is the primary federal agency that enforces advertising laws and regulations. The Federal Trade Commission Act (FTCA) prohibits deceptive or unfair practices in advertising. See 15 U.S.C. § 45. Under the FTCA:
- Advertising must be truthful and non-deceptive;
- Advertisers must have evidence to back up their claims; and
- Advertisements cannot be unfair.
State and local governments also regulate advertising, and enforcement is usually the responsibility of a state's attorney general, a consumer protection agency or a local district attorney. Additionally, the Lanham Act is a federal false advertising statute that provides a key cause of action for a competitor. See 15 U.S.C. § 1125(a)(1)(B).
In determining whether an advertisement violates the FTCA, the FTC looks at an advertisement from the viewpoint of a "reasonable consumer," which is what a typical person looking at an ad understands is being communicated. The FTC looks at an advertisement in the context of its words, phrases, and pictures to determine what it conveys to consumers. Advertisements directed to children are evaluated from a child's point of view, as opposed to that of an adult. The FTC is particularly interested in advertisements aimed towards children because they may be more vulnerable to certain kinds of deception.
Advertisements cannot mislead consumers about the benefits of the product being sold. This standard applies to express claims stated in an advertisement, in addition to implied claims. For example, a television commercial showing a toy remote control car speeding through a house accompanied by the sound of a revving engine implies that the toy car makes the sounds represented in the commercial. Even if the commercial depicted a disclaimer stating "sound effects added, product makes no sounds," it is still misleading because the depiction of the toy car accompanied by revving engine sounds in the commercial implies that it does make sounds. This would be especially true when children in the target advertising demographic for the commercial are unable to read. The toy car would actually need to be able to make sounds in order for the advertisement to be truthful.
Advertisers of children's products who fail to comply with advertising laws risk receiving complaints by consumers, industry groups, and competitors, and investigation by the FTC. Remedies available to the FTC include injunctions enjoining certain types of advertising practices or certain types of products, corrective advertising, direct notifications to consumers, orders requiring disgorgement of profits, and civil penalties of up to $16,000 per violation in certain types of cases.
The prohibition against deceptive advertising applies to endorsements as well. The FTC's "Guides Concerning Use of Endorsements and Testimonials in Advertising" set forth the FTC's position on the use of consumer, celebrity, and expert endorsements in advertising. See 16 C.F.R. § 255.0-255.5. The FTC's Guides apply to all types of media, including blogs and social media, and provide that endorsements must be truthful, non-deceptive, and substantiated by the advertiser. Both advertisers and endorsers can be liable for false or unsubstantiated statements made in endorsements.
An endorsement is "any advertising message (including verbal statements, demonstrations, or depictions of the name, signature, likeness or other identifying personal characteristics of an individual or the name or seal of an organization) that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser." See § 255.0(b).
If there is a connection between an endorser and a marketer that consumers would not expect, and it would affect how consumers evaluate the endorsement, that connection should be disclosed. For example, if a video game company paid an endorser to produce YouTube videos endorsing a video game, but the endorser did not disclose that it was being paid for its seemingly objective opinions about the video games, this would be deceptive. Consumers should be able to determine whether they are looking at an authentic opinion or a paid marketing pitch.
Many industry groups have self-regulatory codes governing advertising and disputes within the industry. The National Advertising Division (NAD) of the Better Business Bureau is an industry group that reviews national advertising for truthfulness and resolves truth in advertising disputes. The Children's Advertising Review Unit (CARU) of the Council of Better Business Bureaus is the children's component of the advertising industry's self-regulation system. CARU publishes "Self-Regulatory Guidelines for Children's Advertising." The guidelines, which apply to national advertising primarily directed to children under 12 years of age in any medium, ensure that advertising directed to children is not deceptive, unfair or inappropriate for its intended audience. The guidelines take into account that children are uniquely impressionable and vulnerable. For example, in determining whether an advertisement is deceptive, CARU looks at the level of experience, sophistication, and maturity of the children in the intended audience, in addition to any limits on their cognitive abilities and their ability to evaluate the advertising claims. The guidelines also address online data collection and privacy-related practices targeting children under 13 years of age, consistent with COPPA, a federal law discussed below. CARU monitors television commercials and reviews advertisements in print, radio and online media. When CARU finds children's product advertising to be misleading, inaccurate, or inconsistent with its guidelines, it seeks change through the voluntary cooperation of advertisers.
Children's Online Privacy Protection Act
The Children's Online Privacy Protection Act (COPPA) is a federal law that prohibits unfair or deceptive acts or practices in connection with the collection, use, and disclosure of personal information from and about children on the Internet. See 15 U.S.C. 6501-6505. An FTC Rule implementing COPPA requires websites to obtain verifiable parental consent before collecting, using, or disclosing personal information from children, including their names, home addresses, email addresses, or hobbies. Websites and online services covered by COPPA must post privacy policies and provide parents with direct notice of their information practices. The Rule applies to operators of commercial websites and online services directed to children under 13, and general audience sites that know they are collecting personal information from a child.
The FTC pays the most attention to advertisements that make claims about health or safety, as well as advertisements that make claims that consumers would have trouble evaluating for themselves. The FTC generally concentrates on national advertising and usually refers local matters to local agencies. The amount of potential injury, either to consumers' health and safety or from a monetary perspective, is also a factor weighed by the FTC in determining which cases to pursue. To avoid enforcement actions by the FTC, manufacturers and retailers should make sure they are advertising children's products in compliance with the truth in advertising principles set forth in the FTCA.
For additional questions, please contact Michelle Corrigan, or the Stinson Leonard Street attorney with whom you regularly work.