General provisions on regulation of advertisement activities in the US

The freedom of speech in the United States is regarded as one of fundamental human rights and freedoms. In accordance with the First Amendment to the Constitution of the United States the freedom of speech shall not be restricted (“Congress shall make no law <…> abridging the freedom of speech, or of the press”).

However, the courts ruled that freedom of advertising, which constitutes a part of freedom of speech, can be regulated more strictly than any other form of expression. Thus, state authorities are entitled to control the distribution of false or misleading advertising, advertising of illegal goods or services, and truthful advertising, if public interests are in question.

Advertising in the United States is regulated not only by state authorities, but also and mainly by means of self-regulation.

1. Regulations at the federal level

Federal authorities adopt federal laws and empower regulatory agencies to enforce them, to develop guidelines and policies and to control advertising industry as whole.

The major regulatory body for the advertising market is the Federal trade commission (the FTC). Originally the FTC was created to prevent unfair methods of competition in commerce, however lately its activity turned to the consumers’ protection. Currently the FTC pursues effective law enforcement; represents consumers’ interests; shares its expertise with federal and state legislatures, U.S. and international government agencies; develops recommendations and actively participates in hearings, conferences, and educational programs.

The FTC’s work is performed mainly by its Bureau of Consumer Protection, which protects consumers against unfair, deceptive, or fraudulent practices in the marketplace and helps companies understand and comply with the law.

The Bureau of Consumer Protection is entitled, but not limited, to:

· investigate consumers’ complaints, regarding unfair or deceptive advertising; represent consumers’ interests in federal courts and in administrative proceedings; and enforce corresponding federal court injunctions and administrative orders;

· monitor and stop unfair, deceptive, or fraudulent practices;

· plan, develop and execute national education campaigns to alert consumers of their rights and to help companies comply with the law;

· develop, amend, and enforce consumer protection rules, the FTC policies and recommendations;

· coordinate with federal, international, and self-regulatory agencies.

Federal legislator and the FTC especially focus on the regulation of advertising to children, advertising of particular goods (e.g. alcohol, tobacco, food, drugs and dietary supplements), on-line advertising, eco-marketing (promotion and sale of green and sustainable products and services) and telemarketing.

The FTC (or the court upon the FTC’s motion) may sanction to cease unlawful activities, publish corrective advertising or disclosures, and impose civil penalties, including consumer redress and other monetary remedies. It has to be noted that the FTC concentrates on cases that affect substantial public interests; all individual disputes are resolved in courts, often with the involvement of state or local consumer protection agencies or private groups such as the Better Business Bureau.

Federal communications commission (the FCC) is another authorized body, which regulates advertising by mass-media. The FCC controls TV and radio broadcast advertising by resolving consumer claims about the content and timing of advertisements. The FCC also administers political programming rules and rules about junk fax advertising. The sanctions, which the FCC may impose, include revocation of broadcasting license, imposing a fine or issuing an official warning, and filing a court action seeking for civil or criminal remedies (up to imprisonment). Whereas the FTC investigates cases concerning deceptive or misleading advertising, the FCC deals with obscene, indecent, or profane advertising.

There are some other government agencies which regulate advertising market. For example, Food and drug administration (the FDA) develops Advertising Guidances for drugs and supplements; establishes education programs and resolves consumer claims using its Division of Drug Marketing, Advertising, and Communications. Besides that, Congress has given other government bodies the authority to investigate advertising by airlines, banks, insurance companies, common carriers, and companies that sell securities and commodities.

2. Regulations at the state and local levels

Advertising is regulated not only at the federal level, but also by state, county and city legislators. For instance, state administrative and civil codes, business and professional codes provide grounds for considering advertisements unfair, deceptive, or fraudulent.

State and county laws are based on federal legislation (typically on the Uniform Deceptive Trade Practices Act) and acts by the FTC. Besides, they specify such issues as quality, price, place of origin, or benefits of a product or service, bait-and-switch tactics, disparagement of goods, deceptive or misleading comparative price, etc.

Should the advertising laws be violated, the consumers may file a complaint with the state, county or city Attorney General or with the state, county or city Department of Consumer Affairs (see the complete list of these bodies).

Departments of Consumer Affairs also issue licenses that allow companies and individuals to run their business (in such fields as medicine, transportation, engineering, security and investigation, veterinary, etc.) and develop guidelines for advertising of such businesses. Should the licensee break the recommendations or advertise a service without having a license for it, consumers can file a complaint with the corresponding Department. Monetary fines are the most popular penalty for such an offence.

3. Self-regulatory organizations

Non-governmental organizations are considered the most effective regulators of advertising industry. Better Business Bureau (BBB) is one of the most influential among them.

BBB accredits businesses, meaning that the organization meets accreditation standards, including a commitment to make a good faith effort to resolve any consumer complaints. BBB standards comprise BBB Code of business practices, BBB Standards for Trust and Code of advertising. In addition, BBB is an alternative dispute resolution service that resolves consumer complaints along with organizations’ disputes. The cases are settled by the means of conciliation, mediation or arbitration. Local BBBs resolve several hundred thousand cases a year

Together with 4A’s (formerly – American Association of Advertising Agencies), the American Advertising Federation and the Association of National Advertisers, BBB unites in an alliance – the National Advertising Review Council (NARC). Its mission is to foster truth and accuracy in national advertising through voluntary self-regulation.

The self-regulatory system developed by NARC is a flexible alternative to the federal and state regulations, which allows to settle disputes among competing advertisers and increases public trust in the credibility of advertising. NARC sets the policies for BBB’s National Advertising Division, BBB’s Children's Advertising Review Unit, National Advertising Review Board (an appeal instance for the first two bodies) and the Electronic Retailing Self-Regulation Program. All these organizations are responsible for monitoring and reviewing national advertising for truthfulness and accuracy and receiving or initiating, evaluating, investigating, and holding negotiations with an advertiser, and resolving complaints or questions involving the truth or accuracy of national advertising. These programs are proven to be more effective, quick, low-cost and private mean to settle a dispute than regular litigation.

BBB U.S. and BBB Canada are united in the Council of BBB, which is considered to be the nation's recognized leader in developing and administering self-regulation programs for the business community. It does that in conjunction with NARC, the Association of National Advertisers, the American Association of Advertising Agencies, the American Advertising Federation, the Direct Marketing Association, the Electronic Retailing Association and the Interactive Advertising Bureau.

4А's is the national trade association, which represents the advertising agency business in the United States. Its members place approximately 80 percent of the total advertising volume nationwide. 4A’s states that one of its main missions is the monitoring of advertising practices and encouragement of the highest creative and business standards for business community. 4A's members are bound by its constitution and by-laws, its mission statement, Standards of practice and Creative code. The organization collaborates with federal, state and local governments to achieve social and civic goals, to resist unwise or unfair legislation and regulation, and to be the principal source of information and advice about advertising.

The American Advertising Federation (AAF) is the oldest national advertising trade association, representing 40,000 advertisers, agencies, media companies, local advertising communities and colleges. AAF protects and promotes advertising at all levels of government through grassroots activities. The organization monitors advertising-related legislation at local, state and federal levels and conducts meetings between its members and influential lawmakers. Besides, AAF publishes summaries of the most crucial and controversial issues and addresses them to the U.S. Senate, state governments, and the FTC.

The Association of National Advertisers (ANA) is the leading advertising industry’s trade association, which safeguards and advances the interests of client-side marketing corporations. ANA oversees industry practices, manages industry affairs and protects advertisers' legislative rights. ANA plays an extremely active role in the legislative, regulatory, and legal spheres to protect the interests of the marketing community. At the end of each year, it prepares a Compendium which describes its efforts on the broad range of issues (see, i.e. 2010 Compendium of Legislative, Regulatory and Legal Issues).

4A’s, AAF and ANA are the founders and active members of the Advertising Coalition, the Alliance for American Advertising, the Freedom to Advertise Coalition, and the State Advertising Coalition. These coalitions bring together a diverse set of groups who share an interest in protecting advertisers’ rights. They provide a united front in lobbying Congress and government agencies on advertising community issues.

The Interactive Advertising Bureau (IAB) is comprised of more than 500 leading media and technology companies who are responsible for selling 86% of online advertising in the United States. IAB educates marketers, agencies, media companies and the wider business community, evaluates and recommends standards and practices, fields critical research on interactive advertising, and protects and promotes its members’ interests. IAB works out such document as: Ad Standards & Creative Guidelines, Data Taskforce, Games Advertising Overview, Interactive Television Overview, etc. Moreover, IAB lobbies Congress and federal administrative agencies, helps craft meaningful legislative proposals and engage the FTC and other agencies to influence future enforcement proceedings, potential rulemakings, and public workshops.

In response to the FTC’s call for more robust and effective self-regulation of online behavioral advertising practices, the largest media and marketing trade associations (IAB, 4A’s, AAF, ANA, the Direct Marketing Association) united in the Digital Advertising Alliance to create the Self-Regulatory Program for Online Behavioral Advertising. In July 2010 the Program launched the Assurance Platform, Evidon InForm, which gives consumers enhanced control over the collection and use of personal data regarding their web viewing habits.

Audit Bureau of Circulations (ABC) was established by advertisers, advertising agencies and publishers as an industry watchdog to end deceptive practices. ABC constantly provides and publishes independent, third-party circulation audits of print circulation, readership and website activity. ABC's reports and services are essential for buyers and sellers of print advertising to make informed business decisions. Leading advertisers and agencies use ABC reports and analyses as the basis of media buying decisions. Publishers use ABC-audited data to manage circulation and develop competitive marketing strategies.

Such organizations as the Direct marketing association and the Electronic Retailing Association also set requirements for their members, which include the call for truthful advertising, and protect their interests before federal, state and local governments.

Denis Vaskov for AdConsul