Offering sales and discounts is a great way to bring in extra business and promote loyalty from your customers. But, have you thought about some of the legal issues that might arise if you put on a sale or provide coupons or vouchers to your customers?
What about if you want to send your customers a newsletter in the mail with a coupon that they can cut out, or an email newsletter alerting them to a bargain opportunity?
There are a number of laws around the world that you must always make sure you comply with whenever you are contacting your customers, particularly advertising laws, privacy laws, and anti-spam laws. These topics will be covered in three articles; this article is Part I, which will cover advertising your products. Part II will cover privacy laws, and Part III will cover anti-spam legislation and marketing.
First, let’s look at all types of advertising and sale offers to your customers, and the advertising laws that you need to comply with.
Advertising your products
Some common ways of advertising discounts are:
- Advertising sales in store
- Offering coupons to customers or distributing coupons in your local area
- Emailing and posting newsletters or sales flyers
- Radio and TV advertising
- Internet advertising
I will be focusing on advertising in-store, coupons, newsletters, and sales flyers.
Advertising in store is one of the most common ways of alerting your customers to a sale, by displaying large signs reading something like “20% off all merino tees!” or “Buy one get one free!”
Here’s an example of the types of signs I mean:
Offering coupons is also common, and they may be printed on the back of receipts (at your store or at a partner store), sent to customers, or printed and left on tables in public areas near your store. Here’s an image of what receipt coupons typically look like:
Finally, emailing and posting newsletters or sales flyers is becoming an increasingly common advertising method, particularly if you run both an offline and online business.
Emailing and posting will be covered in Part III of this article.
What kind of laws apply here?
No matter which method of advertising you are using, one of the most important things to keep in mind is that you are not misleading any of your customers, or inadvertently using false advertising tactics. An obvious example is that you can’t release a coupon that says “30% off anything in store” that actually only applies to specific items.
A commonly used sales tactic is to mark prices up, and then mark them down again to original price and say that the items are “on sale.” Class action lawsuits are currently pending against Kohl’s and J.C. Penney, accused of deceiving customers by selling products at regular prices but calling it a “sale.”
The Federal Trade Commission’s Guides Against Deceptive Pricing notes this type of pricing as “deceptive.” The guide states:
“Where the former price is genuine, the bargain being advertised is a true one. If, on the other hand, the former price being advertised is not bona fide but fictitious—for example, where an artificial, inflated price was established for the purpose of enabling the subsequent offer of a large reduction—the ‘bargain’ being advertised is a false one; the purchaser is not receiving the unusual value he expects.”
Comparative advertising is a another common way to advertise products, such as “We have the best towels on the market!”
However, despite this practice being widespread, there are some legal pitfalls you need to be careful of, and you need to make sure not to deceive your customers with this type of advertising.
The two main types of comparative advertising that are generally viewed by the law as deceptive are incomplete comparison and inconsistent comparison.
Incomplete comparison is when the advertiser uses the term “better” or “best,” without listing the ways in which their product is being compared with others (such as quality, price, resilience). For example, an advertisement that claims “Our medicine is better at curing colds” could mean “better” than not taking any medicine at all, rather than better than competitors as many consumers may assume.
Inconsistent comparison is where a product is compared with many others, but only compared in the categories where that product wins. For example, “Our Nut Bar X is more convenient than Nut Bar A, cheaper than Nut Bar B, and healthier than Nut Bar C!”
But, what the consumer doesn’t know is that Nut Bar A is the least convenient of all the brands (so of course Nut Bar X is more convenient), or that Nut Bar B is the most expensive (so of course Nut Bar X is cheaper), and Nut Bar C is the least healthy. But overall, the best choice for the consumer may be the more expensive but very healthy and convenient Nut Bar B, while Nut Bar X is just “average” in all qualities. The advertisement makes it seem like Nut Bar X is the best, when it is actually just better than the worst Nut Bar in each category.
This is what I mean by comparative advertising:
While this advertisement was able to be published in the U.S., it could be considered potentially deceptive under legislation in other countries. This is because it only compares Verizon to AT&T in one category (3G coverage), and does not compare the two providers in all categories, such as price, 3G coverage, available plans, customer service, or ratings. AT&T may be the better option for a consumer when looking at the whole picture, not just coverage.
So what can I do to comply?
These deceptive advertising practices are known as false advertising, and are illegal in most countries. If you don’t check the wording of your advertisements carefully, it may leave you open to fines from regulatory bodies (such as the FTC in the U.S. or the Advertising Standards Authority and the Institute of Sales Promotion in the U.K.) or class actions from consumers.
Make sure that your advertisements always display a fair and accurate price, don’t use deceptive sales tactics, and ensure that you check over the wording of all comparative advertisements carefully. Ensure that someone outside of your marketing team looks at your advertisements (for an independent point of view), or if you are working alone, ask a friend or business partner to cast their eye over things for potentially misleading terms.
With the above tips on advertising, you should be able to ensure that you comply with all laws when you are sharing your deals and products with your customers.
Always make sure that you don’t unintentionally mislead your customers in any way or use deceptive advertising practices, and always have an independent person check over your proposed adverts just in case.
Now that you’re aware of some of the main advertising pitfalls to look out for, the next installments in this series will look at some of the legal issues that arise when you send coupons, advertisements, or sale notifications to customers by mail or email.
How do you avoid accidentally misleading customers with your advertising? Do you always make sure you have someone look over your advertisements?