In the United States, advertising law is governed by a variety of overlapping federal, state and local laws. There are laws and regulations that prohibit false advertising generally as well as laws and regulations that address specific types of marketing practices. 

The primary consumer protection law in the United States is Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices.” A “deceptive” practice is a material representation, omission or practice that is likely to mislead a consumer acting reasonably in the circumstances. An “unfair” practice is a practice that causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and which is not outweighed by countervailing benefits to consumers or competition.

The primary federal law that gives a right of action to competitors to sue for false advertising is Section 43(a) of the Lanham Act, which generally prohibits false or misleading representations that are likely to cause confusion as to affiliation, connection, association or approval or that misrepresent the characteristics of the advertiser’s or another’s goods or services.

The Federal Trade Commission is the primary federal regulator charged with enforcing federal laws governing advertising practices. There are a number of other federal agencies that are charged with enforcing advertising laws aimed at specific industries or types of advertising practices, such as the Federal Communications Commission, the US Food and Drug Administration, the Consumer Financial Protection Bureau, the US Department of Transportation, and the Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau.

Each of the 50 United States (as well as some of its territories) has an attorney general who is charged with enforcing state laws governing advertising practices. Although it varies by state, there are additional state agencies who have authority to enforce advertising laws as well. 

Some local municipalities – such as county district attorneys in California and the New York City Department of Consumer and Worker Protection – also have the authority to enforce advertising laws.

The remedies that are available to regulators vary, depending on the laws that are being enforced, but can include injunctive relief, restitution and disgorgement, other types of equitable relief (such as corrective advertising), damages and penalties.

Although the First Amendment to the US Constitution provides broad protections for freedom of speech, as a general matter, when marketers engage in advertising or other commercial speech in the United States, they may be held liable for deceptive advertising. Whether a marketer can be held liable for false advertising for specific advertising practices, however, will depend on the specific law that applies. In certain circumstances, other entities and individuals that participate in the creation and dissemination of false advertising (such as, for example, advertising agencies, media companies and company executives) can be held liable as well.

Drawing the line between commercial speech and non-commercial speech is not always straightforward, particularly when the speech comes from a commercial entity and serves multiple purposes. While the US Supreme Court has said that, at its core, commercial speech is “speech proposing a commercial transaction”, it has also acknowledged that the precise bounds of the category of commercial speech are “subject to doubt, perhaps”.  While there are undoubtedly certain types of speech that are non-commercial, most types of communications coming from a company’s marketing department – even communications that aren’t traditional advertising, such as social media posts – are likely going to be considered to be “advertising” that is subject to the specific rules governing advertising. 

For most types of advertising, no government pre-approvals are required before running advertising. In some regulated industries (such as in connection the labelling of alcoholic beverages), certain government pre-approvals are required.

Many television networks, outdoor and transit advertising companies, social media platforms and other media platforms have advertising standards and require advertising be approved before they will allow the advertising to run.

The right of publicity – in other words, the right of a person to control the use of that person’s name, picture, voice or likeness for purposes of advertising or trade – is governed by state law and the rules vary by state. As a general matter, however, advertisers may not use the name, picture, likeness, voice or identity of an individual for any advertising or other commercial purpose without first obtaining the person’s written consent (subject to some limited exceptions). In many states, consent is also required (from the person’s estate) for a period after death as well.

The primary advertising self-regulatory authority in the United States is the National Advertising Division, which is administered by BBB National Programs. BBB National Programs administers a number of other advertising self-regulatory programmes as well, including the Children’s Advertising Review Unit. While the procedures of each of these programmes is different, as a general matter, advertisers can challenge advertising that they believe violates the programme’s standards and then the self-regulatory body will review the matter and issue a decision. If the self-regulatory body finds that the advertising has violated the programme’s standards, it will issue a decision recommending that the advertiser modify or discontinue the advertising (subject to certain rights of appeal). While compliance with their standards is voluntary, if an advertiser fails to comply, the self-regulatory body may refer the matter to a regulatory authority for review.

Various trade associations – such as, for example, the Distilled Spirits Council of the United States, the Beer Institute and the Wine Institute – have the their own advertising standards and dispute resolution programmes as well.

Under state law, consumers have a private right of action (either individually or on behalf of a class of consumers) to challenge advertising practices, though the specific standards vary by state. One of the key aspects of a false advertising claim, though, is typically whether the advertising is likely to mislead a reasonable consumer acting reasonably under the circumstances. Consumers can seek monetary damages, injunctive relief and other remedies. 

Advertising is heavily regulated in the United States and there is a great deal of regulatory enforcement, self-regulatory activity and other advertising-related litigation. Advertisers should ensure that they have proper substantiation for both their express and implied advertising claims, or they at great risk of being challenged by a regulators, competitors, consumers and others. Some of the areas of particular focus right now include advertising claims that impact consumers’ health and safety, advertising which could lead consumers to suffer significant financial harm, environmental claims, dark practices, emerging technology (such as artificial intelligence and the metaverse) and the use of endorsers and influencers.

The United States is a large and diverse country where there are widely differing, strongly-held views about issues involving taste, political and other cultural concerns. When advertising in the United States, advertisers should ensure that they work with local experts who are sensitive to these issues.

While there is increased attention on avoiding harmful stereotypes in advertising and on making advertising itself more inclusive, some advertisers have experienced significant backlash from some groups in connection with diversity-related advertising efforts. 

Recently, the National Advertising Division and the Children’s Advertising Review Unit have amended their procedures relating to issues of stereotyping, and this has led to increased self-regulatory enforcement in this area as well.

The laws governing advertising and marketing have remained relatively consistent over time and there has been a remarkable continuity in enforcement priorities as well. That being said, when the government leadership changes at either the federal or state level, regulatory enforcement priorities, and the ways in which they engage in enforcement, do change. 

The current FTC leadership is engaging in an aggressive enforcement programme (seeing bigger damages and tougher remedies) and has been using a wide range of methods (including engaging in rulemaking, issuing notices of penalty offenses and issuing new guidance) to address practices that it is concerned about. One of the main issues that the FTC is particularly concerned about right now is how big tech, emerging technologies and the online ecosystem can harm consumers.

As a general matter, whether an advertising claim is deceptive or misleading is determined from the perspective of the “reasonable consumer”. The FTC defines deception as a material misrepresentation or omission that is likely to mislead a consumer acting reasonably in the circumstances. Some state laws, however, define deception more broadly, considering claims from the perspective of the ignorant, unthinking and credulous consumer.

Advertisers are generally responsible for ensuring that all express and implied claims communicated by their advertising, that are material to consumers’ purchasing decisions, are truthful and substantiated. No substantiation is required for “puffery”. Puffery is an exaggerated and hyperbolic claim, expressing an obvious statement of opinion, that is not subject to proof, and that consumers would not rely on when making a purchasing decision.

Advertisers are generally responsible for ensuring that they have proof for their advertising claims prior to the dissemination of those claims. As a general matter, advertisers must have a “reasonable basis” for their claims. Where advertisers claim to have a specific type of support for their claims (such as “tests prove”), they must have that support.

What constitutes a “reasonable basis” will depend on a variety of factors, including the type of claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim and the amount of substantiation that experts in the field believe is reasonable. In some cases, such as claims involving consumers’ health or safety, the FTC expects advertisers to have “competent and reliable scientific evidence” to support the claims.

When the performance of a product is shown in advertising, advertisers are generally responsible for ensuring that the performance shown is real (without any special effects or other modifications) and that the performance shown reflects the performance that consumers can generally expect to achieve when using the product.

The primary guidance on the use of endorsements and testimonials in advertising is set forth in the FTC’s “Guides for the Use of Endorsements and Testimonials in Advertising” (the “Endorsement Guides”).

While the FTC and others have issued a great deal of guidance on this topic, as a starting point, when using endorsements in advertising, advertisers should keep in mind three key principles. First, the endorsement should reflect the endorser’s honest opinions, findings, beliefs and experiences. Second, endorsers should not make advertising claims that the advertiser could not make itself. In other words, if an endorser makes a claim about the performance of a product, the advertiser must be able to substantiate that this is the generally expected performance of the product. Third, if there is a material connection between the endorser and the advertiser, that is not reasonably expected by the audience, then that connection should be clearly and conspicuously disclosed. 

The FTC also expects advertisers to monitor their endorsers to ensure that their endorsements comply with the law and to take appropriate action when they do not.

As a general matter, in order for a disclosure in advertising to be effective, it should be “clear and conspicuous”. This means that the disclosure should be easily seen, read and understood by consumers. More recently, the FTC has further articulated the “clear and conspicuous” standard by saying that disclosures should be “difficult to miss” and, when disclosures are made online, they should be “unavoidable”.

Issues related to stereotyping and diversity in advertising are not generally regulated (except to the extent that other laws are violated, such as laws prohibiting discrimination in employment or housing). Television network and other media platforms include restrictions on the use of negative stereotypes, and negative stereotyping is generally prohibited by US self-regulatory standards as well. For example, the National Advertising Division standards address “national advertising that is misleading or accurate due to its encouragement of harmful social stereotyping, prejudice or discrimination”.

In addition to general laws prohibiting false advertising, standards for making environmental claims are set forth in the FTC’s “Guides for the Use of Environmental Marketing Claims” (the “Green Guides”) as well as various state laws governing specific environmental marketing practices. The Green Guides provide detailed guidance on the making of many different environmental marketing claims, including claims such as “recyclable”, “biodegradable”, “compostable” and made from “renewable materials”.  The Green Guides also caution against making unqualified general environmental benefit claims (such as “earth friendly”), since they may communicated a variety of claims that cannot be substantiated.

The FTC recently issued a report, “Bringing Dark Patterns to Light”, which warns advertisers against engaging in online design practices that that trick or manipulate consumers into making choices they would not otherwise have made or that would cause them harm. In the report, the FTC identified four key types of dark practices:

• design elements that that induce false beliefs (for example, making false claims or using deceptive formats);
• design elements that hide or delay disclosure of material information (for example, by hiding key information in terms and conditions or engaging in drip pricing);
• design elements that lead to unauthorised charges (for example, by charging consumer after a free trial period without the consumer’s authorisation or by making it difficult for a consumer to cancel a subscription); and
• design elements that obscure or subvert privacy choices (for example, by not allowing consumers to definitively reject data collection or use).

The primary guidance related to advertising to children is contained in the “Self-Regulatory Guidelines for Children’s Advertising” issued by the Children’s Advertising Review Unit, which is a division of BBB National Programs. 

The CARU guidelines apply to national advertising (in any medium) that is primarily directed to children under the age of 13. The key underlying principle of the guidelines is that advertisers have special responsibilities to children. The guidelines address a variety of issues, including, for example, advertising claims, product demonstrations, disclaimers, the use of endorsers and influencers, the blurring of advertising and entertainment content, unsafe and inappropriate advertising, and other issues.

The general rule is that consumers have the right to know when they are being advertised to. 

Several years ago, the FTC issued an “Enforcement Policy Statement on Deceptively Formatted Advertisements”, which provides detailed guidance about the use of branded content. The FTC and other regulators have also brought enforcement actions when marketers have misled consumers about the source of content or about whether the content they are viewing is advertising. 

The FCC also has sponsor identification requirements for broadcast advertising and certain other media subject to FCC jurisdiction.

There are many other types of advertising claims that are that are subject to specific federal or state law requirements, and marketers are advised to consult counsel in the United States before launching advertising campaigns here. 

One area of particular concern to the Federal Trade Commission is when marketers claim that their products are made in the United States. The FTC’s “Enforcement Policy Statement on US Origin Claims” says that, in order for a marketer to make an advertising claim that a product is made in the United States, the marketer must be able to substantiate that the product is “all or virtually all” made in the United States. This standard was also recently codified in the FTC’s Made in USA Labelling Rule.

As a general matter, comparative advertising is permitted in the United States. Advertisers should exercise caution, however, when engaging in comparative advertising, to specifically identify the products being compared, to ensure that claims are truthful and not misleading, and to clearly and conspicuously disclose any material limitations on the comparisons. Like other advertising claims, advertisers are also generally responsible for ensuring that the claims are truthful for the entire time that are used.

Advertisers are generally permitted to use the name of a competitor, a competitor’s trade mark and a competitor’s packaging in truthful comparative advertising, as needed, subject to some limitations.

Under both federal and state law, advertisers can generally challenge false and misleading claims made by competitors, and can seek damages, injunctive relief and other remedies. For example, under Section 43(a)(1)(B) of the Lanham Act, an advertiser can sue a competitor for false advertising where the competitor “misrepresents the nature, characteristics, qualities or geographic origin of his or her or another person’s goods, services or commercial activities”.

The primary basis for challenging ambush marketing in the United States is based on Section 43(a)(1)(A) of the Lanham Act, which provides a right of action where an advertiser engages in marketing that “is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, sponsorship or approval of his or her goods, services or commercial activities by another person”. There are additional federal and state laws which may be implicated as well.

For the most part, the general rules that govern advertising in the United States also govern advertising in online and social media. There have been some laws have been enacted to govern specific online advertising practices as well (for example, email marketing, which is discussed in 6.1 Email Marketing). The FTC has also issued guidance on advertising online and on social media, including, for example, specific guidance on the use of disclosures online and guidance in the FTC’s Endorsement Guides on the use of influencers and consumer reviews online.

The Communications Decency Act (“CDA”) provides certain protections for third party material that is placed online.  The CDA provides that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider”. Whether a CDA defence is available in the advertising context will often turn on whether the advertiser was in part responsible for the creation or development of the content that is posted. The CDA does not provide immunity, however, from certain types of laws, including criminal laws and intellectual property laws. In addition, the Digital Millennium Copyright Act provides immunity for monetary damages for copyright infringement in certain situations, including for content that is posted at the direction of users, provided that certain criteria are met.

As a general matter, the same rules that apply to advertising disclosures generally also apply to advertising online and in social media. 

The FTC has also issued specific guidance on the use of disclosures online, “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,” but this guidance has not been updated for more than a decade. Last year, the FTC announced that it planned to update this guidance. The FTC has also issued specific guidance on the use of disclosures in specific contexts (such as, for example, in connection with the use of influencers).

While the general rule for disclosures is that they should be “clear and conspicuous”, the FTC has more recently indicated that, for online disclosures to be effective, they should be “unavoidable”.

There are no general prohibitions under federal law on the use of social media platforms in the United States, though federal law may limit certain uses by federal employees. Some state laws have been enacted that limit some social media use as well, but there are legal challenges to these laws ongoing. Most social media platforms also do not permit use of their platforms by children under the age of 13.

When engaging in native advertising, marketers are generally expected to clearly and conspicuously identify the content as advertising. The FTC’s “Enforcement Policy Statement on Deceptively Formatted Advertisements” provides detailed guidance about the use of native advertising. 

The FTC’s Endorsement Guides provide detailed guidance on the use of influencers. As a general matter, advertisers should ensure that influencers’ statements reflect their honest opinions, findings, beliefs and experiences, that influencers’ claims about product performance reflect the generally expected performance of the product, and that influencers clearly and conspicuously disclose material connections that they have to the brand that are not reasonably expected by the audience.

In appropriate circumstances, advertisers can be held liable for content posted by their influencers. Therefore, it is prudent for advertisers to have proper procedures in place to help ensure that influencer posts are legally compliant.

In the FTC’s Endorsement Guides, the FTC states that advertisers may be liable for deceptive endorsements by influencers. The FTC also advises advertisers to provide guidance to their endorsers on the need to ensure that their statements are not misleading and to disclose unexpected material connections and to take action sufficient to remedy non-compliance and prevent future non-compliance. The FTC explained, “While not a safe harbor, good faith and effective guidance, monitoring and remedial action should reduce the incidence of deceptive claims and reduce an advertiser’s odds of facing a Commission enforcement action”.

The FTC’s Endorsement Guides provide guidance on the solicitation, hosting and use of consumer reviews. As a general matter, advertisers should solicit reviews in a manner that is intended to obtain consumers’ unbiased opinions. When hosting reviews that have been incentivised, advertisers should ensure that such incentives are properly disclosed. When hosting reviews, advertisers should not organise (or curate) the reviews in a manner that misrepresents consumers’ views.

One particular area of focus by the FTC has been on the proper hosting of consumer reviews on an advertiser’s website. The Endorsement Guides provide that, “In procuring, suppressing, boosting, organizing, publishing, upvoting, downvoting, reporting or editing consumer reviews of their products, advertisers should not take actions that have the effect of distorting or otherwise misrepresenting what consumers think of their products, regardless of whether the reviews are considered endorsements under the Guide”. 

When advertisers select individual reviews for use in advertising materials (as opposed to providing a section of a website for the hosting of reviews generally), advertisers should generally treat the review as they would treat any other endorsement being used in advertising.

While advertisers should, as a general matter, not be liable for advertising claims that appear in reviews that consumers post on an advertiser’s website, there may be certain situations where an advertiser could have liability. 

The Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003 (the “CAN-SPAM Act”), enforced by the FTC, establishes requirements for commercial email messages, provides email recipients with opt-out rights and spells out penalties for violations. Under the Act, key email marketing requirements include the following:

• The message may not include false or misleading header information.
• The message may not include a deceptive subject line.
• The message must be clearly identifiable as marketing, whether by labelling it as such or as made clear from the content itself.
• The message must include the sender’s physical postal address.
• The message must clearly and conspicuously notify how they can opt out of receiving future commercial emails from the sender. 
• Any opt-out mechanism offered must be able to process opt-out requests for at least 30 days after the message is sent and all opt-out requests must be processed within 10 business days of receipt. This requires email marketers (and their vendors) to scrub their recipient lists against their do-not-email lists before each deployment. 

Each separate email in violation of the law is subject to penalties of up to USD50,120. Emails that make misleading claims about products or services may also be subject to laws outlawing deceptive advertising, including Section 5 of the FTC Act.

The Telephone Consumer Protection Act (“TCPA”), enforced by the Federal Communications Commission (“FCC”), and the Telemarketing Sales Rule (“TSR”), enforced by the FTC, regulate telemarketing calls and text messages, as do a patchwork of state telemarketing and do-not-call laws.

Broadly speaking, the TCPA restricts callers from making robocalls and robotexts unless they have received the appropriate prior express consent of the recipient, subject to several exemptions, and requires telemarketers to provide an automated, interactive “opt-out” mechanism. The Act also contains provisions requiring identification by the caller and prohibits calls to emergency lines or lines serving hospitals, among other provisions. Earlier this year, the FCC issued a Notice of Proposed Rulemaking intended to strengthen consumers’ ability to revoke consent to receive robocalls and robotexts, in addition to strengthening callers’ and texters’ obligations to honour such requests in a timely manner. The FCC previously revised its TCPA rules to establish the national Do-Not-Call Registry, which prohibits companies from contacting listed customers. 

The TSR requires telemarketers to make specific disclosures of material information, prohibits misrepresentations, sets limits on the times telemarketers may call consumers, prohibits calls to a consumer who has asked not to be called again, and sets payment restrictions for the sale of certain goods and services.

The TCPA allows individuals to sue for damages ranging from USD500 to USD1,500 per telephone call or text message sent in violation of the statute. Violations of the TSR are subject to civil penalties of up to USD43,792 per violation. In addition, violators may be subject to nationwide injunctions that prohibit certain conduct, and may be required to pay redress to injured consumers.

Text messages are typically considered to be synonymous with “calls” under both the TCPA and TSR. Marketers must therefore have the proper level of consent to send a text to a recipient’s mobile phone if they are using regulated technology or contacting a number on the national Do-Not-Call Registry and must comply with the same opt-out requirements.

Several state privacy laws have recently been passed to address, in part, consumers’ concerns with marketers’ collection and use of third-party data to serve them targeted advertising. These state laws allow consumers to be informed about marketers’ data collection practices, to delete and correct their data, and to block advertising that relies on internet cookies and related technologies. For instance, several state statutes, including in California, Colorado, Connecticut, Utah and Virginia, provide an explicit right to opt out of the processing of one’s personal data for the purposes of targeted advertising, sale or profiling. In the coming years, more states’ comprehensive privacy laws are set to go into effect. While there are nuances to the specific requirements of these laws, they all provide consumers with some version of the right to opt out of the sale or sharing of their personal information for purposes of targeted advertising.

The FTC also continues to examine online behavioural advertising. In a 2009 staff report, which seeks to balance the potential benefits of behavioural advertising against the privacy concerns it raises, the FTC provides guidance, including the following:

• Companies are expected to provide clear and prominent notice regarding behavioural advertising, as well as an easily accessible way for consumers to choose whether to have their information collected for such purpose.
• Companies should provide reasonable security for any data they collect for behavioural advertising and should retain data only as long as it is needed to fulfill a legitimate business or law enforcement need.
• Due to heightened privacy concerns around sensitive data (eg, financial information, health information, Social Security numbers), companies should obtain affirmative express consent before collecting such data for behavioural advertising.

Enacted in 1998, the Children’s Online Privacy Protection Act (“COPPA”) empowers the FTC to issue and enforce regulations concerning children’s online privacy in the US. The primary goal of COPPA is to place parents in control over what information is collected from their young children online, and it applies to both:

• operators of commercial websites and online services (including mobile apps) directed to children under 13 that collect, use or disclose personal information from children, or on whose behalf such information is collected or maintained; as well as
• operators of general audience websites or online services with actual knowledge that they are collecting, using or disclosing personal information from children under 13.

According to the FTC, covered entities’ responsibilities include the following:

• Posting a clear and comprehensive privacy policy describing their practices for personal information collected online from children.
• Providing direct notice to parents and obtaining verifiable parental consent, with limited exceptions, before collecting personal information online from children.
• Giving parents the option of consenting to the operator’s collection and internal use of a child’s information, but prohibiting the operator from disclosing that information to third parties (unless disclosure is integral to the site or service, in which case, this must be made clear to parents).
• Providing parents access to their child’s personal information to review and/or have deleted.
• Maintaining the confidentiality, security and integrity of information they collect from children, including by taking reasonable steps to release such information only to parties capable of maintaining its confidentiality and security.

• Retaining personal information collected online from a child for only as long as is necessary to fulfill the purpose for which it was collected.
• Not conditioning a child’s participation in an online activity on the child providing more information than is reasonably necessary to participate in that activity.

A court can order civil penalties of up to USD50,120 per violation of COPPA, which amount may turn on several factors, including the egregiousness of the violation, any previous violations, the number of children involved, the amount and type of personal information collected, and the size of the company.

In September 2022, California enacted the Age-Appropriate Design Code Act (“AADC”), which takes effect on 1 July  2024. The California AADC is a landmark privacy bill modelled after the United Kingdom’s Age-Appropriate Design Code Act that imposes certain requirements as it relates to children’s data privacy. It applies broadly to businesses that provide online products and services which are “likely to be accessed” by a child. Along with a host of other requirements, covered businesses must complete Data Protection Impact Assessments (“DPIAs”) before providing any new online products or services to the public where such product or service is likely to be accessed by a child, document any risks of “material detriment to children” that may be identified in the DPIA, and create a plan to eliminate or mitigate such risk to children before the online product or service is actually accessed by a child. Under the AADC, businesses must also implement a “privacy by design” approach by configuring all default privacy settings to “offer a high level of privacy” to children users. 

Businesses are also prohibited from collecting, selling, sharing or retaining a child’s personal information where such data practices are not necessary for the online service or product. The prohibition on selling and sharing personal information may restrict the use of children’s personal information for purposes of targeted advertising.

Washington has enacted the Washington “My Health, My Data” Act, which will go into effect on 31 March 2024. The Act will impose significant restrictions on the use of “consumer health data” by all entities (including non-profits) that do business in or directed at the state. Among other requirements, the Act requires that any regulated entities maintain consumer health data privacy policies, obtain consent from consumers before collecting consumer health data and obtain written authorisation from consumers before selling or offering to sell consumer health data, including in the context of targeted advertising. Given the difficulties of scaling the authorisation requirements to consumers of online businesses and the presence of a private right of action for violations of the law, the Act is likely to, in effect, completely or near-completely end the use of consumer health data for purposes of targeted advertising.

A patchwork of federal and state laws governs sweepstakes and contests in the US. Below are some key general requirements.

• As an initial matter, sweepstakes and contests must comply with general advertising principles and state unfair and deceptive practices laws. Accordingly, all promotional offers must be conducted in a non-deceptive, non-misleading manner and the drawing of winners must be fair and unbiased. 
• As lotteries (except for those sponsored by state governments) are illegal in the US, promotions must not contain all three of the following elements:  prize, chance and consideration. 
• In the US it is generally impermissible to require participants to make a purchase in order to compete for prizes in a game in which chance (not skill) is the predominant factor. Therefore, for such chance-based promotions, a non-purchase alternative method of entry is required.
• Most states require that each sweepstakes or contest be governed by a comprehensive set of official rules that generally serve as the contract between the sponsor and the entrant. While the details may vary depending on the nature of the promotion, most states generally require such rules to include: eligibility requirements, clear entry instructions, the start and end dates (and times, if applicable) of the entry period, a complete description of the prizes and their approximate retail value, how and when the winners may be determined, an odds statement and the corporate name and physical address of the sponsor.
• Most social media platforms have their own set of terms and conditions that govern sweepstakes and contests offered through the platform.

Games of skill are generally those in which the outcome is determined by a participant’s ability or aptitude instead of by chance. If chance dominates the promotion, it is not one of skill, even if some skill is required to participate. Most states follow the “dominant element” test to determine whether a promotion is skill-based, evaluating the following factors:

• participants must have a distinct possibility of exercising skill and must have sufficient data upon which to calculate an informed judgment to the extent required by the promotion;
• the general class of participants must possess the skill;
• the participants’ skills or efforts must sufficiently govern the result; and
• the standard of skill must be known to the participants, and this standard must govern the result.

A few states require that certain sweepstakes be registered before they can be implemented in the state. For example: 

If the aggregate value of all prizes to be awarded exceeds USD5,000, New York and Florida both require that the sponsor register the sweepstakes. The sponsor must also file a surety bond with each state that equals the aggregate value of all prizes in the sweepstakes. 

Rhode Island also requires registration of sweepstakes offered at in-state retail establishments and sets a lower registration threshold. Sweepstakes must be registered with the state if the aggregate value of all prizes to be awarded exceeds USD500.

The FTC’s Guides Against Deceptive Pricing address various kinds of pricing representations, including representations by marketers that their current price is a discount from their former price (a “sale” or “discount”), comparisons to others’ prices and to manufacturers’ suggested retail prices, and representations about special prices based on the purchase of other products (eg, gifts with purchase, buy-one-get-one offers). 

The FTC also provides guidance on “free” offers in its Guide Concerning Use of the Word “Free” and Similar Representations, which states that all such offers of “free” merchandise or services “must be made with extreme care so as to avoid any possibility that consumers will be misled or deceived”.  The Guide provides rules about the frequency of any such offers and the circumstances in which they can and cannot be made, as well as guidance concerning required disclosures, introductory offers and negotiated sales.

Many states also have specific laws and regulations on pricing, free claims and other promotional practices.

Under federal law, the Restore Online Shoppers’ Confidence Act (“ROSCA”) governs automatic renewal programmes.  ROSCA sets forth certain baseline requirements, including that marketers obtain unambiguous consent for the “negative option” feature of their sales. Earlier this year, the FTC announced a proposed rulemaking to address negative option. As the FTC noted in the introduction to the proposed rule, “Problematic negative option practices have remained a persistent source of consumer harm for decades, saddling shoppers with recurring payments for products and services they never intended to purchase or did not want to continue buying”. Through this rulemaking, the FTC seeks to address what it considers a “patchwork of laws and regulations [that do] not provide industry and consumers with a consistent legal framework across media and offers”. The proposed rule would also establish a common set of requirements applicable to all types of negative option marketing, and would allow the FTC to seek civil penalties and consumer redress in many contexts where such remedies are currently unavailable. 

At the state level, there is an ever-increasing list of state statutes regulating automatic renewal and continuous service programmes. While these state laws do not dramatically change the regulatory landscape, many introduce stringent new requirements. 

Auto-renew programmes have been the subject of recent regulatory enforcement at the federal, state and local level, in addition to self-regulatory actions at NAD and class actions.

The FTC Act’s prohibition on unfair and deceptive conduct should apply equally to the use of artificial intelligence (“AI”) in advertising. One of the FTC’s key concerns is marketers’ use of AI tools in ways that steer consumers unfairly or deceptively into harmful decisions in areas such as finances, health, education, housing and employment. In fact, advertisers’ misleading use of tools such as celebrity deepfakes, doppelgängers, fake dating profiles, phony followers, and chatbots have already resulted in FTC enforcement actions. In June 2022, the FTC issued a report to Congress outlining significant concerns that AI tools can be inaccurate, biased and discriminatory by design, and that they can incentivise relying on invasive forms of commercial surveillance. Together, the FTC’s enforcement actions and guidance emphasise that the use of AI tools should be transparent, explainable, fair and empirically sound, while fostering accountability.

The use of AI tools raises significant intellectual property concerns as well. Not only are there questions about whether there can be copyright ownership of the material that AI tools create, the tools themselves may infringe – or create output that infringes – third party rights.

The FTC has recently issued some guidance specific to the use of AI-related claims in advertising, including:

• Do not overpromise what an algorithm or AI-based tool can deliver, including by claiming that it can do something beyond the current capability of any AI or automated technology. 
• Do not make baseless claims that a product is AI-enabled. 
• Consider the reasonably foreseeable risks arising from the use of AI tools (including ways in which tools can be misused or cause other harm), and take all reasonable precautions, before the AI product hits the market.

The FTC issued a report to Congress on the use of social media bots in online advertising, noting that the FTC Act’s prohibition on unfair and deceptive acts and practices can apply to these practices and outlining the Commission’s enforcement work and authority in this area, including cases involving automated programs on social media that mimic the activity of real people (eg, fake followers, likes and subscribers). The FTC also recently launched an investigation into popular chatbot ChatGPT to examine whether the AI tool has harmed consumers by generating incorrect information about them.

In October 2022, the White House Office of Science and Technology Policy published “The Blueprint for an AI Bill of Rights: Making Automated Systems Work for the American People”, stating that the American public must be notified, through clear, brief and understandable notice, whether a bot is being used.  According to the guidance: “Designers, developers, and deployers of automated systems should provide generally accessible plain language documentation including clear descriptions of the overall system functioning and the role automation plays, notice that such systems are in use, the individual or organisation responsible for the system and explanations of outcomes that are clear, timely and accessible.”

States are also responding to this rapidly-changing landscape. For instance, a 2019 California law makes it unlawful for any person to use a bot to communicate or interact with another person in California online, with the intent to mislead the other person about its artificial identity, for the purpose of knowingly deceiving the person about the content of the communication in order to incentivise a purchase or sale in a commercial transaction or to influence a vote in an election.

General advertising principles should also generally apply to the marketing and sale of cryptocurrency and non-fungible tokens (“NFTs”). Among other things, marketers must be careful to avoid misleading claims about NFTs, as the value of such digital assets is subject to extreme volatility and may be adversely impacted by, among other things, a decline in public interest, a change in law, regulation or policy, and technical issues. 

The FTC is also particularly concerned that, when consumers buy these digital products, they may not understand what they are buying, and it is not always clear what they actually own or control. Therefore, FTC guidance suggests that, when offering digital products, companies should ensure that customers understand the material terms and conditions, including whether they are purchasing an item or simply obtaining a license to use it.

Section 17(b) – the so-called “anti-touting provision” – of the Federal Securities Act of 1933 also makes it unlawful for any person to publish, give publicity to or circulate any advertisement, among other communications, describing a security for a consideration received or to be received, without fully disclosing the receipt and amount of consideration. If a digital asset is considered a security, those rules may apply as well.

The US Securities and Exchange Commission continues to follow through on repeated warnings that it will aggressively enforce Section 17(b) of the Securities Act against influencers, including mainstream celebrities, who fail to disclose the nature, scope and amount of compensation received in exchange for their sponsored posts promoting these products.

General advertising principles should apply to advertising within the metaverse. Some current, key issues of attention include the blurring of advertising and other content, the use of virtual influencers, how to properly disclose material connections and other qualifying information, privacy and data collection, and the impact of the metaverse on children.

Although the FTC is primarily responsible for the enforcement of consumer protection laws in the United States, there are a number of other federal agencies that enforce consumer protection laws directed to specific industries, including, for example, food and drugs, alcohol and tobacco, banking and securities, and transportation. State laws may impact the marketing of regulated products, such as cannabis, as well.

While the FTC has expressed the general view that consumers have the right to know when they are being advertised to, the FTC has also indicated that product placement (at least in adult-directed advertising), often does not require disclosure. The FTC has explained that, “merely showing products or brands in third-party entertainment content, as distinguished from sponsored content or disguised commercials”, does not require a disclosure that the advertiser paid for the placement. Disclosures may be needed to prevent consumer confusion when objective product claims or endorsements are being made.

The FCC’s sponsorship identification rules, however, require disclosure of product placement in broadcasting and certain other media that is subject to FCC jurisdiction.

Advertising is highly regulated in the United States and this outline only touches on some of the key areas that are regulated. Marketers are advised to consult with local counsel before engaging in any advertising in the United States.