What Is Advertising and Marketing Law? Key Legal Risks Businesses Miss

The FTC investigates and brings administrative complaints against advertisers for unfair or deceptive practices. The agency may issue cease-and-desist orders, impose civil penalties (now up to $43,792 per violation as of 2024, adjusted annually), order corrective advertising, and seek consumer redress. The FTC's substantiation doctrine requires advertisers to maintain and produce evidence supporting performance claims before the agency or in court. Failure to comply with an FTC order can result in additional civil penalties and contempt liability.

New York General Business Law Section 349 prohibits deceptive practices in consumer transactions. The state attorney general and county consumer protection offices investigate complaints, issue subpoenas, and pursue injunctive relief and civil penalties. Private consumers may also bring lawsuits under Section 349 or common law fraud. In practice, delays in documenting consumer injury (receipts, photographs, correspondence) or notice timing can complicate what remedies a court may address at summary judgment or trial, particularly in higher-volume consumer courts in New York County or Kings County.

Competitors or consumers may sue for deceptive advertising under the Lanham Act (federal trademark and false advertising claims), state consumer protection statutes, common law fraud, unjust enrichment, or tortious interference. Plaintiffs must prove materiality (the misrepresentation affected the purchasing decision), reliance, and damages. The substantiation burden typically falls on the advertiser; if the defendant cannot produce evidence supporting a claim, that failure may support summary judgment for the plaintiff or support a jury inference of deception.

Statements like America's favorite brand or finest craftsmanship are typically puffery because no reasonable consumer would treat them as verifiable facts. By contrast, a claim that a product contains no artificial preservatives when it does is a factual misrepresentation. The Restatement of Torts and case law recognize that some product categories (beauty, taste, durability) naturally invite subjective language, whereas health, safety, and performance claims are more readily treated as factual and subject to substantiation demands.

Advertisers may compare their product favorably to competitors, provided the comparison is truthful and substantiated. A claim that our product outperforms Brand X in durability testing requires the advertiser to possess competent evidence of that testing. Comparative advertising disputes often hinge on whether the underlying test was methodologically sound, whether the comparison was material to consumer choice, and whether the advertiser disclosed material limitations of the test (e.g., sample size, conditions, time frame).

In federal and New York state court litigation, the advertiser's internal files regarding substantiation, testing, and claim approval become central discovery targets. Courts treat the absence of pre-publication substantiation as probative of deception or negligence. In practice, advertisers who cannot produce contemporaneous test reports, expert opinions, or internal approvals face significant summary judgment risk. The discovery process also requires production of all versions of the advertisement, internal communications about claim drafting, and competitive intelligence that may have informed the advertisement's positioning.

FTC administrative proceedings follow formal adjudication rules. The agency issues a complaint alleging unfair or deceptive practice; the respondent (advertiser) may request a hearing before an administrative law judge. The burden of proof rests on the FTC to establish the violation by a preponderance of evidence. The respondent may challenge the FTC's jurisdiction, the sufficiency of substantiation standards applied by the agency, and the materiality of the alleged misrepresentation. Appeals from the ALJ proceed to the full FTC Commission, which may affirm, modify, or reverse. The Commission's order becomes final unless reviewed by a federal appellate court.