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7 Advertising Laws Every Business Owner Should Know

7 mins read

Freedom of speech gives marketers a fair amount of leeway in the United States, but that doesn’t mean it’s a free for all. Legislation from the Federal Trade Commission (FTC) keeps an eye on things like testimonials, use of private data, contesting and advertising for children still regulate the industry. If you’re marketing to other countries like Canada or the European Union, you may face even more restrictive advertising laws.

“But I went to school to be a creative, not a lawyer!” I hear you cry. I get it – I’m no lawyer myself. But after creating law-abiding campaigns in multiple countries, I’ve become pretty familiar with these seven common (and critical!) advertising laws. Whether you’re a small business owner or an agency exec, these rules should always be on your radar.

1. Getting paid for an endorsement? Make it clear.

This one has been making big headlines in the advertising world (seriously, I counted 20 related stories in my feed just last week). Influencer marketing is becoming increasingly popular, and the FTC has some pretty strict guidelines on disclosing paid endorsements.

Basically, it’s legal to tell your 10,000 Instagram followers you love your new jacket…but it’s NOT legal to leave out the #sponsored if you received that jacket in exchange for some social media props. Oh, and make sure your disclosure is super visible – an #sp hidden in a sea of hashtags may not cut it for the FTC. The disclaimer has to be reasonably seen and understood by followers.

2. Affiliate marketers must reveal that they will benefit from people buying a product through their links.

One of the main ways bloggers make money online is through affiliate marketing. Basically, when they discuss products on their website, they incite readers to click on a custom link and buy the recommended product. If readers complete a purchase, the “affiliate” gets a cut of the sale. Easy, right?

Here’s the catch: Just like influencer marketing, affiliate marketing requires disclosure under FTC regulations. If you’re getting a cut of the sale, your readers or viewers need to be in on the deal so they can factor that fact into their purchasing decision.

Some affiliates offer a short and sweet disclaimer at the top of blog posts with a link to a longer page of legal details, like this:

Others post a longer explanation, even encouraging audience members to buy through the links to support the blog. As long as it follows FTC rules, disclosure style is really up to the content creator!

Affiliate links on social media also require clear disclosure. Here’s an example:

If you have any questions about this legislation, the FTC recently updated their frequently asked questions about endorsements to detail specific instructions for online affiliates.

3) We all want more reviews, but incentivizing them can end in a big fine.

If you’re thinking about giving your customers a free product or coupon in return for a review, think again. Not only does that violate FTC rules, but common review sites like Google will penalize you for offering freebies in return for five stars.

4) Employees must reveal their relationship with the company if leaving a review.

Okay, you get the point – payment and perks can influence an endorsement and require disclosure. But what about a reviewer’s relationship to the company?

Disclosure is necessary here as well, at least in an employee-employer relationship. If you ask workers spam your business page with reviews that don’t mention the fact they work there, you could face serious consequences. Consider Bell Canada, which was slapped with a $1.25 million dollar fine for encouraging employees to leave positive reviews on their new application.

The responsibility works both ways – you as a business owner or advertiser must also reveal if testimonials you’re presenting come from someone on your payroll. Violations aren’t cheap here, either. One company had to pay $250,000 for presenting affiliate reviews as customer testimonials.

5) Email Marketing must follow local anti-spam advertising laws.

Laws governing email marketing exist all over the world. You have the CAN-SPAM Act in the United States, CASL in Canada, the Spam Act in Australia…I could go on, but you get the picture. There are over 40 pieces of anti-spam legislation on the books in various countries, so chances are you’ll have to consider national advertising laws in any future email campaigns.

The good news is that most email marketing platforms comply with these laws. This means they automatically give recipients the ability to unsubscribe and disclose of the sender’s identity. Here’s an example from one of our emails below:

Bottom line: Study up on the rules governing the people locations relevant to your campaign before pressing “send.”

6) Want kids to “sign up” for an account? They’ll need parents to sign off.

The FTC doesn’t mess around when it comes to advertising to children. One of the advertising laws of particular consequence to digital marketers has to do with creating accounts. If you create a cool app aimed at kids under 13 and want them to create an account, they’ll have to get parental permission.

This is part of the Children’s Online Privacy Protection Rule (COPPA), which also restricts the collection of children’s contact information online and gives parents the ability to restrict and access the information collected about their children’s activities. If you plan on advertising to children online, you’ll want to check out the full COPPA breakdown here.

7) Want to run a social media contest? Make sure you have all the fine print in hand first.

Contesting involves games of chance, which can be a legally murky subject in some countries. To make matters even dicier, social media marketers also have to contend with platform-specific contesting regulations (you can find Facebook’s here).

Using the right language (contest, sweepstakes, and lottery are all very different under U.S. law) and providing the appropriate fine print is vital when creating an online contest. You’ll need to include readily available terms and conditions, which may make it difficult to run a contest on a platform that restricts content (like Twitter) or links (like Instagram). Facebook contests like the one shown below are much more popular for this reason.

Contests are a unique challenge due to the legal variations from state to state – contest registration is required in some, while completely others ban prizes that come from purchasing a product. Inc. wrote a killer piece with some of the basics here.

Remember, not all rules are “advertising laws.”

Even if something is technically legal in the country you’re targeting, other regulations can still get in your way. For example, social media platforms have strong rules in place for their advertisers. Industry groups also often create “codes of conduct” that the businesses in their sector must follow to retain membership – the alcohol industry is a good example of this in action. Other consumer watchdogs like the Better Business Bureau help promote common-sense rules by offering membership and endorsement to those who fall in line.

That’s why in advertising, it’s best to not only do what’s legal but to do what’s right. That means telling the truth about your product, being respectful of people’s private data and avoiding “spammy” behaviour online. Not only will this keep you out of trouble with authoritative bodies, it will also attract genuinely qualified customers willing to stick around for the long term. That’s a result that consumers and businesses can both get behind!



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