Internet Advertising

Clients refer to our law firm to obtain information about internet advertising rules and regulations. These days companies use email, telephone, or online advertisements for promoting themselves in the market. They create a website and online application to expand their outreach towards customers who may be in the same or different region. They can use banner advertisements on another entity’s website, pop-up advertisement, metatags, mass email messages, mass text messages, linking arrangements or co-branding procedures. Therefore, it is imperative to be familiar with the relevant laws, including, but not limited to, the Lanham Act, Federal Trade Commission Act, and California Business & Professions Code.

The Lanham Act – also known as the “Trademark Act of 1946” – regulates and enforces liability for violating trademarks, service marks, trade names and trade dress. So, if there is a claim for false advertising, an individual may bring a legal action under this federal statute since there is a private right of action. The courts have dealt with cases where a competitor’s keywords were used to link to online advertisements when there is a likelihood of confusion. In SMC Promotions, Inc. v. SMC Promotions (C.D. Cal. 2004) 355 F. Supp. 2d 1127, the Ninth Circuit created a three-part test to determine whether there was a violation.

The Federal Trade Commission Act – which is codified under 15 U.S.C. §§ 41-58 – grants authority to the Federal Trade Commission to oversee most kinds of internet advertising. For example, it does not have authority over transactions with foreign countries or financial institutions. The FTC Act is designed to enforce the law if there is evidence of any kind of “unfair or deceptive acts or practices” that affects commerce. It generally prohibits false or misleading advertising, marketing, or promotions that have some kind of correlation to commerce. The courts have dealt with cases where a party has used false or misleading “click bait” advertising to send prospective clients to an affiliated website for profit. Therefore, internet advertisers should be able to substantiate their claims even if they are not the manufacturers or distributors of the product. For example, they must include clear and conspicuous disclosures that can be easily found on their websites. A violation of this federal statute may create civil liability and impose monetary sanctions against the wrongdoers.

In California, there are specific laws that regulate internet advertising. For example, Business and Professions Code §§ 17500 addresses false or misleading advertising and prohibits the dissemination of untrue or misleading statements in connection with the sale of products or services. This statute provides legal and equitable remedies for the victims including monetary damages and injunctions. The Consumers Legal Remedies Act (“CLRA”) which is codified under Civil Code §§ 1750, et seq. regulates internet advertisements and promotions. It prohibits any kind of misrepresentation of the source, sponsorship, approval, certification, or quality of the products or services. However, it is important to note that it does not cover the sale of software since it is not a tangible product or service. Business and Professions Code §§ 17538 addresses the issues related to telephone, internet, mail order, and catalog sales. It has strict guidelines for the content of internet advertisements. It prohibits the seller from accepting payment unless there are certain disclosures such as their legal name and street address and their return and refund policies. Moreover, there are laws against the sale of alcohol, firearms, ammunition, spray paint, tobacco, fireworks, drug paraphernalia, or obscene material to minors. In 2019, California passed a law under Business and Professions Code Section 17940 that regulates the use of robots – also referred to as “bots” – to communicate with a person with the intent to mislead him or her about its artificial identity in order to intentionally deceive that person and incentivize a purchase of products or services. The statute defines a “bot” as an automated online account where all or substantially all of the actions or posts of that account are not the result of a person.

There are state and federal laws that prohibit the transmission of unsolicited commercial emails towards third parties. This kind of practice is generally known as “spam” and has created a significant problem for users and Internet Service Providers. Spam is considered commercial speech and is granted a lower level of protection by the First Amendment. Therefore, ISPs are able to legally block spam especially because they are not government agencies and not subject to the First and Fourteenth Amendments. In addition, the CAN-SPAM Act was promulgated under 15 U.S.C. Sections 7701-7713 and 18 U.S.C. Section 1037 to prohibit the dissemination of spam and there are specific state laws which follow the same guidelines.

Finally, the FTC has the power to regulate behavioral advertising which is used by companies to track a person’s online activities to send customized advertising. The FTC has issued guidelines that require internet advertisers to provide clear and conspicuous notice about behavioral advertising and provide an opt-out option to consumers. So, in this way, the consumers will have notice about the collection of their information by the third parties.