Legal Aspects of Marketing
The success of any given business relies heavily on how effectively that business can bring its products or services to market. This marketing objective is both regulated and assisted by the law. The government has an interest in protecting its citizens from unfair dealing on the part of dishonest or overzealous marketers. However, the government also has an interest in promoting innovation and invention for the benefit of society. To achieve these goals, the law seeks to regulate the acceptable methods of marketing and allow inventors to profit from the fruits of their labor. Two ways the federal government accomplishes those goals are with the Federal Trade Commission and the intellectual property law. These two bodies of law join together with other areas of law, like contracts and torts, to form the fabric that governs the marketplace.
Keywords Copyrights; Federal Trade Commission; Intellectual Property; Marketing; Patents; Trademarks; Truth in Advertising
Law: Legal Aspects of Marketing
Marketing is an essential function of most all businesses; as the saying goes, nothing happens until something is sold. As with any other profession, knowledge of legal rights and responsibilities that affect a given area is fundamental to success, and the lack of that that understanding can be dangerous. Marketing a product or service typically involves exposure of a message to a large number of people in an attempt to persuade their behavior in a particular manner. That wide and public exposure increases the chances that injury may occur to a member of the target audience. Aside from deliberate wrongful acts, a marketer may inadvertently violate the law with potentially severe consequences. A marketer may embroil their company in an expensive lawsuit, do significant damage to their professional reputation, and damage their company's profits and market position. There is also the possibility that such problems end in a prison sentence. Accordingly, marketers would be wise to keep informed of the legal implications of marketing activities. In the current digital age, it is especially important for marketers to be aware of legal developments because the field of marketing changes quickly in response to consumer needs and new technology. While ignorance of the law may cause many difficulties, knowledge and use of certain laws can provide a significant advantage to the marketer of products in the form of intellectual property rights.
The law that can affect any given attempt to market any given product would be a large undertaking. In truth, comprehensive coverage of any area of law is generally reserved for the writers of multi-volume legal treatises. Those treatises are not read cover to cover but are used as research materials to resolve a particular legal problem as they arise. Moreover, many legal problems include issues from several categories of law. Such is the case with marketing. Marketing a product may raise potential issues in the law of contracts, torts (e.g. defamation, products liability), intellectual property rights, advertising and labeling, broadcasting, licensing and merchandising, promotions and incentives, lobbying and online marketing rules. Understanding that the law often imposes many requirements from several areas and issued by different governmental organizations is critical. Here we will take a closer look at two areas of the law that are generally applicable to nearly all marketers; federal regulation through the Federal Trade Commission (FTC) and federal intellectual property law.
When designing and implementing a marketing campaign, marketers and advertising agencies must take into account federal law. The United States government through the FTC, a federal agency formed to administer the Federal Trade Commission Act, seeks to protect all consumers from deceptive and unfair trade practices. Generally, the FTC requires marketers to tell the truth, not mislead consumers, and substantiate the claims made about their products. As interpreted by the FTC, a practice is deceptive if it is likely to mislead consumers and affect a consumer's decision about the product or service. That is, the consumer would have chosen differently in the absence of the deception. Deceptions that affect consumer decisions are called material; the FTC is concerned with material acts.
In addition to a material representation or act, the FTC imposes marketer liability based on the behavior of a reasonable consumer. The word "reasonable" is a critically adjective in the law and imposes an important qualification of the noun it modifies. There is a vast different between "consumers" and "reasonable consumers." "Consumers" means all consumers and would impose liability on marketers for potential deceptions that arise from the understandings or misunderstandings of any consumer. "Reasonable consumers" means that a marketer is only liable for potential deceptions interpreted by a specific subset of consumers. That subset of reasonable is defined by certain specific factors relevant to a chosen marketing practice. Examples of factors that may define the reasonable consumer in a target audience are age, education, profession and experience. For example, if a company seeks to sell a sophisticated MRI machine to doctors, the marketing practices would be judged by how a typical doctor in that field of practice would interpret the information. An advertisement does not become false or misleading simply because it could unreasonably misunderstood by a member of the general public; an advertiser is not liable for all possible interpretations by all consumers.
While the reasonable consumer qualification limits the potential liability of consumers, the FTC interpretation of deception broadens the range of impermissible acts. When the FTC considers whether a marketing practice is deceptive, the critical issue is whether a practice or act is likely to mislead, rather than whether it actually causes deception. The FTC presumes that certain types of claims are material or likely to influence consumer behavior. Express claims and omitted information are presumed material. Express claims are material because the willingness of business to promote its products with those claims reflects a belief that the public is interested in that advertising. Omitted information is material if the advertiser knew or should have known that a reasonable consumer would need the omitted information to evaluate their product or service.
To determine whether a practice is fair, the FTC generally looks to whether the practice injures consumers, whether the practice violates public policy and whether the practice is unethical or unscrupulous. The most important factor is the issue of injury. The FTC is concerned with substantial injury not outweighed by benefits, caused by benefits of the practice. A substantial injury typically involves monetary harm, as when a seller coerces consumers into buying unwanted goods or services or when consumers are sold defective goods and are unable assert the defect as a defense against payment.
The FTC does not protect consumers against injuries they could have reasonably avoided themselves. Again, notice the use of the word reasonable. In this context, the word means that consumers need not take all possible steps to avoid the injury. It means that a consumer must take the similar precaution that the average consumer would take when presented with the same claim or marketing practice.
The FTC's Division of Marketing Practices implements these general prohibitions against unfairness and deception in marketing practices by enforcing specific rules that address a wide variety of initiatives. For example, initiatives seek to: shut down internet and telephone scams; end deceptive and misleading telemarketing and direct mail marketing; stop fraudulent business opportunity scams; govern labels on merchandise; prohibit deceptive...
(The entire section is 3515 words.)