Truth-in-advertising codes

Definition Industry standards designed to guide advertisers

Truth-in-advertising codes provide guides for voluntary regulation within the advertising industry that serve the public interest and help raise public trust in advertising.

As the United States prospered during its early years, businesses promoted themselves through advertising. Exaggeration of product merits were commonplace, and untruths were rampant and unchecked. Although not all advertising claims were false or misleading, the early caveat, “Let the buyer beware,” seemed an accepted standard for most advertising claims. Over time, however, dubious advertising claims increasingly harmed businesses that practiced truthful advertising.

Laws against fraud and deception stopped some false-advertising practices, but it was often impossible to prove the truth or untruth of many advertising claims or to prove consumers had suffered damages, even in cases when advertising claims were fraudulent or deceptive. In 1872, the U.S. Congress authorized the U.S. postmaster general to forbid the use of the mail system to “persons operating fraudulent schemes.” This was the first attempt to use federal law to regulate misleading advertising. However, the postmaster’s authority did not extend to many advertising practices that varied in degree from exaggeration to outright deception.

The emerging advertising industry sought a remedy through public education and advocacy of voluntary advertising changes. In 1904, various organizations were consolidated to form the National Federation of Advertising Clubs of America (late renamed the Associated Advertising Clubs of America). Through this organization, highly successful “vigilance committees” policed members’ advertisements. In 1911, the organization adopted what it called “Ten Commandments of Advertising.” This was the first formalized code of advertising in the United States. The first commandment was: “Thou shalt have no other gods in advertising but Truth.” During that same year, Printers’ Ink, the leading magazine of the advertising industry, published a “Model Statute” for advertising based on existing statutes in several states, and encouraged all states to adopt the statute as law.

Through the National Vigilance Committee’s educational efforts, truth-in-advertising codes, based on the Model Statute, were adopted in 1914. The committee’s name changed, and it eventually became the National Better Business Bureau. Bureau members drove the truth-in-advertising movement regionally and then nationally. By 1922, twenty-three states had enacted the Model Statute into law, and the bureau’s practice of counseling and educating advertisers was well established.

From the 1920’s to 1960, truth-in-advertising remained a significant issue. Modifications to acceptable standards of advertising, including special rules for new media such as radio and television, were implemented. Under joint sponsorship by the bureaus and the Advertising Federation of America, the advertising industry adopted the “Advertising Code of American Business” in 1964. By 1970, the bureaus were consolidated with other organizations into the Council of Better Business Bureaus, which has continued operating in to the twenty-first century. Its educational and counseling efforts now include internet advertising, and the organization publishes a code that includes basic advertising principles, which are as follows:

• The primary responsibility for truthful and non-deceptive advertising rests with the advertiser. Advertisers should be prepared to substantiate any claims or offers made before publication or broadcast and, upon request, present such substantiation promptly to the advertising medium or the Better Business Bureau.
• Advertisements which are untrue, misleading, deceptive, fraudulent, falsely disparaging of competitors, or insincere offers to sell, shall not be used.
• An advertisement as a whole may be misleading although every sentence separately considered is literally true.
• Misrepresentation may result not only from direct statements but by omitting or obscuring a material fact.

The Better Business Bureau has periodically updated its code to reflect additional rules instituted by the Federal Trade Commission, such as those regarding environmental benefits, health outcomes, or country-of-origin claims. It also addresses native advertising—that is, sponsor-provided content made to imitate noncommercial editorial content in a given medium—which became particularly prevalent in the internet age in social media and games.

The US Supreme Court has also weighed in on matters of truth in advertising from time to time. Misleading commercial speech was deemed an unprotected category of speech in Central Hudson Gas & Electric v. Public Service Commission (1980). The Lexmark International v. Static Control Components (2014) decision established a test for standing in Lanham Act antifraud lawsuits that limits prospective plaintiffs to parties with commercial interest that have sustained economic or reputational harm. In POM Wonderful, LLC v. The Coca-Cola Company (2014), the court found a company could sue its rival for potential Lanham Act violations, even if the allegedly misleading product labeling in question complied with Food and Drug Administration requirements. The court noted the distinct purposes for which the Lanham and Food, Drug and Cosmetics Acts had been created—business competition versus public safety—and found that compliance with the latter did not grant immunity from suits under the former.

Bibliography

Frankel, Alison. "Can Market Competitors Police False Ads Better Than Class Actions?" Reuters, 13 June 2014, blogs.reuters.com/alison-frankel/2014/06/13/can-market-competitors-police-false-ads-better-than-class-actions. Accessed 30 Nov. 2018.

"History: 1910-1920." AdAge Encyclopedia, Crain Communications, 15 Sept. 2003, adage.com/article/adage-encyclopedia/history-1910-1920/99072/. Accessed 30 Nov. 2018.

Lears, Jackson. Fables of Abundance: A Cultural History of Advertising in America. New York: Basic Books, 1994.

"Native Advertising Added to BBB Code of Advertising; Deceptive Native Ads Now Violate the Code." Better Business Bureau, 25 Oct. 2016, www.bbb.org/native-advertising-added-to-bbb-code-of-advertising. Accessed 30 Nov. 2018.

Tungate, Mark. Adland: A Global History of Advertising. Philadelphia: Kogan Page, 2007.