Any company in California that is hoping to advertise its services will be hoping to attract new customers, but there are going to be important legal considerations to many advertisements because several forms of marketing can involve some potentially dangerous actions. Certain kinds of false statements in advertising have the potential to lead to potential jail time.
There can also be certain legal issues relating to products marketed to children as well as possible trademark and right of publicity issues. In general, there is one federal and multiple state laws people are going to need to be familiar with.
Federal Trade Commission Act of 1914
The Federal Trade Commission Act established the Federal Trade Commission (FTC) and outlawed unfair methods of competition and unfair acts or practices affecting commerce. The Federal Trade Commission Act empowered the FTC to:
- prevent unfair methods of competition, and unfair or deceptive acts or practices in or affecting commerce
- seek monetary redress and other relief for conduct injurious to consumers
- prescribe trade regulation rules defining with specificity acts or practices that are unfair or deceptive, and establishing requirements designed to prevent such acts or practices
- conduct investigations relating to the organization, business, practices, and management of entities engaged in commerce
- make reports and legislative recommendations to Congress
The FTC can prosecute any inquiry necessary to its duties in any part of the United States, and is authorized to gather and compile information concerning, and to investigate from time to time the organization, business, conduct, practices, and management of any person, partnership, or corporation engaged in or whose business affects commerce, but FTC policies can allow identification of investigations where it determines the public interest warrants it or a merging party or target has disclosed the existence of an investigation. Following an investigation, the FTC can initiate an enforcement action using either an administrative or judicial process when it has reason to believe that the law is being or has been violated, and the FTC enforces both consumer protection and antitrust laws.
California Unfair Competition Law
California’s unfair competition law (UCL) under California Business and Professions Code § 17200 prohibits unlawful, unfair, or fraudulent business practices and false, deceptive, or misleading advertising. Lawsuits can be brought by consumers or businesses affected by such unfair actions, and unfair competition is defined as any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising and any act prohibited by Chapter 1 of Part 3 of Division 7 of the Business and Professions Code.
A business practice violates the unlawful, unfair or fraudulent prong if it is forbidden by law or is against public policy, so almost any violation of the law could serve as the basis for an unfair competition claim if, as a result of the unfair competition, it harms consumers or gives a business an unfair advantage over competitors. To meet the standing requirement to bring a UCL claim in California, a member or members of the public must actually have lost money or property as the result of false advertising or unlawful conduct.
California Consumers Legal Remedies Act
The California Consumers Legal Remedies Act (CLRA) established under California Civil Code § 1750 declares unlawful several methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer. It protects consumers from false advertising, fraud, and other unfair business practices, and allows people to bring individual or class action lawsuits to recover damages and to stop unlawful practices.
California Civil Code § 1770(a) outlines 28 different unfair methods of competition and unfair or deceptive acts or practices. Under California Civil Code § 1780(a), consumers injured by deceptive or unfair practices can be entitled to recover actual damages, orders enjoining methods, acts, or practices, restitution of property, punitive damages, and any other relief a court deems proper, and senior citizens or disabled consumers could be eligible for additional awards of up to $5,000 if they suffer substantial physical, emotional, or economic damages as the result of conduct.
California Business and Professions Code § 17500
Under California Business and Professions Code § 17500, false or misleading statements in advertising can be a criminal offense punishable by jail time. The law applies to print, digital, and any other advertising media methods.
A victim of false advertising can sue a company for damages if they can prove that the business lied about a material fact, the person purchased a product based on the lie, and the person suffered financial harm as a result of the transaction.
Contact Our Mountain View Startup & Small Business Attorney
There are a wide assortment of legal concerns that companies need to navigate when operating in California. Kalia Law P.C. can help you ensure that you are doing everything by the book.
Our firm helps companies understand applicable state tax laws and operate without fear. You can call (650) 701-7617 or contact our Mountain View startup & small business attorney online to take advantage of a free consultation.