The Risks of Advertising Online

Online advertising plays a vital role in the way businesses conduct their operations today. It’s important to remember, though, that there are risks involved in advertising online. The more you know about what those risks are, the better prepared you will be to not only take action, but also avoid those risks and the potential consequences they represent for your business.

Truth In Advertising FTC Act

The Truth In Advertising FTC Act became law on March 6, 2000. The law essentially requires three facets of advertising:

1)   Advertising must be true and non-deceptive.

2)   Evidence must be used to back up claims made in advertisements.

3)   Businesses cannot make unfair advertisements.

The purpose of the act is to ensure that advertising, whether it’s on the Internet, on television, on the radio, or in newspapers and magazines, is fair and honest. The ultimate goal is to protect consumers and other businesses against false or misleading claims.

The Risks Advertising Represents

Penalties of violating the Truth In Advertising FTC Act by running false or deceptive advertisements may include cease and desist orders, civil penalties, and requirements to run disclaimers and/or corrective advertisements at minimum. More severe penalties may include fines of up to $16,000 per day per ad for repeat offenders or future violations.

Additional risks come in the forms of social media advertising where you don’t completely control the dialog once advertisements and/or information go viral on the World Wide Web and falling for the allure of free advertising methods online that might not be the boon for your business you hoped they would. More importantly, the free or low cost solutions you seek, might not comply as rigorously to FTC requirements as your business must.

Mitigating Risks of Online Advertising

In addition to only offering true and factual information in your advertisements, small businesses should consider additional action to reduce their risks associated with online advertising such as these:

Use disclaimers.  This is especially important to avoid the appearance of providing professional advice in your advertisements. The FTC requires disclaimers to be clear and conspicuous leaving little or no room for misunderstanding the information. Disclaimers alone cannot remedy false or deceptive advertising claims, however. The PDF Disclosures: How to Make Effective Disclosures in Digital Advertising, offers excellent insight on the placement, frequency, and prominence of disclosures on your website and in online advertisements.

Obtain General Liability insurance.  General liability insurance for small businesses provides some degree of protection for your business in the event that a claim is made against your business for false advertising or somehow violating the Truth in Advertising FTC Act.

Obtain Advertising Insurance Injury coverage. As a small business owner who advertises your products and services regularly (or irregularly),  advertising insurance injury coverage is prudent to have for protection.

Avoid unbelievable advertising opportunities.  You know what they say about things that sound too good to be true. They usually are. Choose your own advertising relationships carefully to make sure that your interests, and those of your business, are well represented.

Knowing the risks of advertising online is only half the battle. You must take action now to minimize the risks and their potential impact on your small business.