Download Advertising “Free” Offers and Promotions – Tips To

Retail Team
To: Our Clients and Friends
August 10, 2010
Advertising “Free” Offers and Promotions – Tips To
Avoid Liability
Recent Challenges to Advertising Giveaways and “Free” Offers
The National Advertising Division of the Council of Better Business Bureaus, the premier arbitration
forum for advertising disputes, released two decisions this summer condemning advertisers’ “free”
promotions. The cases brought against Staples and OfficeMax involved separate advertisements that
used the term “like Free” to describe benefits that a consumer would receive using the companies’
loyalty programs. Although both cases are on appeal to the National Advertising Review Board (the
“NARB”), they are a reminder to retailers that free promotions can bring legal challenges and possible
liability under state and federal consumer protection statutes. Indeed, the Federal Trade Commission
has brought over fifteen cases in recent years challenging advertisements that incorporate a free
giveaway.
Rules of Thumb When Making Free Offers
Although consumer protection laws differ depending on the states in which a company operates, the
type of products that are being promoted, and the type of offer that is being made, the following are
some useful guidelines when making a free offer whether it relates to quantity (e.g., “buy one get one
free,”), complimentary products (e.g., “buy x and get y free”), or services (e.g., “buy x and get
shipping for free”).
•
Do not increase the cost of the product you are trying to sell. A free offer can be challenged as
deceptive if a company increases the price of the item that it is selling in order to recover any part
of the cost of the item it is giving away. Consider pricing the product that you are selling at, or
below, the lowest price at which it was sold in the 30 days before the free promotion begins.
•
Make the terms* and conditions† clear. Free offers are often challenged if a condition or restriction
is buried in a footnote, in fine print, or as a website link. Consider placing any restrictions on the
offer immediately next to the word “free.” In addition, be aware that too many restrictions may
be interpreted as inherently deceptive.
This Client Alert is published for the clients and friends of Bryan Cave LLP. Information contained herein is not to be considered as legal advice.
This Client Alert may be construed as an advertisement or solicitation. © 2010 Bryan Cave LLP. All Rights Reserved.
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•
Limit the duration of the offer. Free offers that go on for too long are often considered de facto
combination or bundled offerings for which the term “free” is deceptive. As a result, some states
prohibit permanently selling products with free giveaways. Consider limiting the number of free
offers made each year, the total time that a product is advertised with any free offer, and the
units of a product that are made in conjunction with a free offer.
What You Can Do To Be Compliant With Advertising Laws
Before making a “free” promotion, a retailer needs to know the advertising laws that apply in each
state in which it intends to run the promotion. For national retailers, or retailers who operate on the
internet, consider the following guidelines.
•
Adopt written advertising guidelines that govern any “free” advertisement. Include a policy
establishing how often a free promotion can be offered, and what type of documentation is needed
to support the offer. Require marketers and ad copyrighters to obtain legal department approval
of any advertisement that contains a “free” offer.
•
Maintain an archive of free offers that have already been vetted for legal compliance.
•
Conduct periodic training for marketing, advertising and copyrighting staff on how to create free
offers or promotions that comply with state and federal laws.
If you have any questions or would like additional information on this topic, please do not hesitate to
contact David Zetoony at 202-508-6030 or [email protected]. You can also contact any
member of our Retail Group to discuss further.
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