Blog #7: Legal Issues of Advertising

The advertising industry operates within strict federal regulations which are monitored by the Federal Trade Commission. They regulate on many different levels here in the US. There are rules published on mail orders, the Internet, telephone sales, gaming, deceptions in advertising, product labeling, and so much more. Even with truth-in-advertising laws in place, advertisers still have an immense amount of leeway to violate the ethical standards of a wide range of consumers.

All of these types of advertising are pretty well known and the laws that go along with them are pretty obvious. Online advertising is becoming more and more popular as the years move along and technology advances. I want to focus on some of the not-so-obvious laws about online advertising out there including things like click fraud, keyword spamming, and false advertising.

Click Fraud:

Pay per click is a search engine’s simplest form of advertising. Each time someone searches a word and clicks the link to follow to your website, you agree to pay a certain amount to the search engine as compensation. (Click Fraud)

Click fraud comes into play when a competitor intentionally, repeatedly clicks on your ad and follows it to your website without any intention to buy anything. They do this to run up your bill without you getting any business as well as an attempt to cut into the company’s advertising budget. This is illegal; in fact, committing such a crime is considered a felony in many jurisdictions.

Proving click fraud is very difficult since it is hard to determine the culprit behind the computer and what their intentions are. One option relies on the search engine themselves. They can closely watch clicks to determine which ones are most likely fraudulent and not charge the account of the advertising. Another option is, the advertiser could register their website with pay-per click auditing services which would be an outside source closely watching your account to determine potential fraudsters. Of course such protection comes with a fee, though. (The Legal Issues of Advertising Online)

Keyword Spamming:

Spamming:Trademarks are a good way to gain consumers attention and get them to recognize your brand. It is important for a company to use their trademark in search engines so that people see your website first. A keyword spammer comes into play when an outside source tries using your trademark to veer consumers away from your business. They may do things like outbid you for your trademark or use it in invisible metatags. (The Legal Issues of Advertising Online)

To solve this issue, most of the time, a company has to take legal action directly against the spammer. In some rare cases, the search engine will just remove a keyword spammers listing if you complain.

False Advertising:

False advertising is a type of deceptive advertising. It is when someone uses false or misleading information or statements in advertising to maximize profits/consumer base. False advertising is illegal, and in most countries there is regulation to control false, deceptive or misleading advertising. It all comes down to the consumers’ right to know what they are buying and that their safety has been taken into consideration.  Although it is illegal, many still find ways to deceive consumers in ways that are not illegal. (False Advertising)

Below are a few different examples false advertising:

Undefined Terms: Uundefined terms comes into play when a terms meaning is not legally defined which leads to the words abuse in advertising. A perfect example of this was the word "light" foods. Usually this term meant low in calories, sugars, salt, carbs, or even light in color. Using the term light without legally defining what it means leads to a lot of confusion for consumers.

Hidden Fees and Surcharges: It is typlical for service providers to tack on additional fees and surcharges that are not included in the advertised price. An example of this could be when I went to buy a new phone last week. The phone I had decided to purchase was advertisied for $99 with a new 2-year agreement. I decided it was a good deal so moved along with the purchase. A few days later when I went to pay my bill, I was not only charged the $99 for the new phone, but also a $36 activation fee, and an additional $20 fee because it was a smart phone. These charges were not listed on the actual ad for the phone but apparently is listed in the phone company's new handbook.

“Going Out Of Business” Sales: Liquidators are hired to sell merchandise from stores that are closing down. The legal issue comes into play when the liquidators actually raise the prices on items that were previously marked-down on clearnace by the origional owner of the product. In reality, then, one could actually just go to the origional store in thier final days of operations and get items cheaper than if they were to buy from a liquidator.

References:

The Legal Issues of Advertising Online:
http://www.entrepreneur.com/article/160062


Click Fraud:
http://www.businessweek.com/magazine/content/06_40/b4003001.htm


False Advertising:
http://legal-dictionary.thefreedictionary.com/False+Advertising