Demystifying Advertising Law Issues for Startups

By: Vejay Lalla , Kimberly Culp , Justin A. Stacy

Understanding the intricacies of advertising law is a crucial part of getting your venture into the public eye while maintaining legal and ethical standards.

Drawing insights from advertising best practices and recent Federal Trade Commission guidance, Fenwick technology transactions partner Vejay Lalla, litigation counsel Kimberly Culp and litigation associate Justin Stacy recently shared strategies for founders and their counsel to safeguard ventures from potential litigation risks. You can dive into the full recording here—but these are the highlights you need to know now:

  • Make Truthful Claims and Back Them Up. Substantiate all advertising claims you make about your product or service beforehand. Ensure disclosures are clear and noticeable to prevent inadvertently misguiding your customers. Similarly, comparisons to competitors should be substantiated, fair, and respectful without infringing on their rights. Exercise caution with comparative advertising, even though it’s a persuasive technique to showcase your product’s edge over competitors.
  • Use Third-Party Intellectual Property Properly. Using trademarks, copyrighted material, or material that infringes on one’s rights of publicity can lead to lawsuits and hefty penalties. Do your due diligence to confirm you have the rights to all IP your ads use—and that your marketers understand basic IP rights and the strength of fair use defenses.
  • Leverage Endorsements Wisely. Endorsements can be formal testimonials, or they can come from more informal avenues, such as tags on social media. Ensure that any endorsements are accurate and transparent about any affiliations or partnerships. Do not manipulate reviews or ratings, either by suppressing negative ones or fabricating positive ones. Implement endorsement best practices and educate your marketing teams on agreements with influencers, the importance of clear disclosures and the reasons behind these guidelines.
  • Steer Clear of “Dark Patterns.” These deceptive tactics can trick or manipulate users into performing certain actions online they wouldn’t otherwise take, such as signing up for overpriced services or a recurring billing subscription. Ensure your subscription service's consumer-facing check-out and cancellation processes comply with relevant laws by performing thorough reviews and necessary revisions. Provide a transparent experience for customers that promotes trust and fairness by eliminating hidden fees, false urgency statements and misleading prompts.

Keep these issues at the forefront and treat them as a roadmap for building successful, legally robust advertising campaigns. Be transparent, be honest, and most importantly, be fair.