Why The BBB Works To Improve Advertising

For more than 80 years, the Houston Better Business Bureau has been actively helping the community by giving information about companies, resolving business/consumer complaints, and alerting the public to con games, charity promoters, and false or misleading advertising. In fact, "Truth in Advertising" is the primary reason why the Better Business Bureau was formed in 1922.

When advertising works as it should, consumers purchase products and services, and companies profit. However, false advertising goes hand-in-hand with rip-offs of consumers and hurts companies who advertise fairly and honestly.

The Better Business Bureau wants to help business strengthen consumer trust in advertising. And the BBB wants to help advertisers prevent problems with regulatory agencies, such as the District Attorney, Attorney General, and the Federal Trade Commission.

To help advertisers get and keep customer confidence, and to help avoid legal problems, the BBB developed these basic guidelines. They are all clear-cut, simply-stated, and practical. Most importantly, they work.

Use of these guidelines is not a guarantee a company will be successful. But they will promote accuracy, fairness, and consumer trust.

These basic advertising guidelines have been prepared by the Better Business Bureau to provide guidance for advertisers, advertising agencies, and the advertising media.

Basic Rule Of Thumb

Advertisements which are untrue, misleading, deceptive, fraudulent, falsely disparaging of competitors, or insincere offers to sell, shall not be used. All advertising claims and/or implications of advertising claims should be based in truth. The advertising as a whole must not create a misleading impression, even if every statement is literally true.

The burden of proof of advertised statements and claims rests with the advertiser. An advertiser should be prepared to substantiate any claim made in an advertisement upon request by the Better Business Bureau or a regulatory agency.

Advertising Standards Topics

1. Comparisons and Savings Claims

All price comparisons and savings claims should be based in truth and offer a genuine savings to the consumer.

A. Comparisons using an advertiser's own selling price

When an advertiser's own immediate selling price is used as the basis of a savings claim, the advertiser should be certain that the price is the actual price at which he or she has been currently offering the item for sale on a regular basis. The former selling price shall not be inflated to imply a greater savings to the public than is actually true.

B. Comparisons using a competitor's price for the same item

When using a competitor's current selling price as a basis for a comparison or savings claim, the advertiser should be certain that the price on which he or she bases his or her savings is the current price being offered elsewhere. The advertiser should also check the competitor's price on a weekly basis to verify that the price is still valid. Also, the advertiser shall verify that the merchandise being compared is identical; otherwise he or she should note the difference.

If the comparison price is being used in point-of-purchase signs or shelf tags, the advertiser should state the name and location of the store used in the comparison and the date of the comparison.

C. Comparisons using a competitor's price for similar item

Comparisons of merchandise that is not identical shall not be used unless the items are similar in all respects, are of like grade and quality, and are the same quantity.

D. Comparisons using a list, retail, or suggested price

If an advertiser uses a list price, retail price, or manufacturerís suggested price as a basis of a savings claim, the fact that the comparison price is a list price and not an actual selling price must be stated. Terms such as "was", "regularly", or "sold elsewhere" shall not be used.

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2. Use of "Free" in Advertising

The word "free" may be used in advertising when the advertiser is offering an unconditional gift. If the gift is conditional on a purchase, the advertiser must disclose the condition clearly and conspicuously with the "free" offer and the normal price of the merchandise or service to be purchased must not be increased. Also, the "free" offer should be temporary.

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3. Wholesale, Wholesaler, Wholesale Prices

The use of the word "wholesale" is prohibited unless the company is, in fact, a wholesaler as defined in the Texas Business Commerce Code 17.11. A wholesaler is defined as a person who sells for the purpose of resale and not directly the general public. Also, this statute states that a person may not misrepresent the nature of his business by using the word wholesale or other word(s) of similar meaning.

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4. Factory-To-You Prices

Unless all merchandise is actually manufactured by the advertiser in plants owned and operated (or directly and absolutely controlled) by the advertiser, statements such as "factory to you," "direct to you," and "direct from maker/manufacturer," shall not be used.

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5. Lowest Price Claims

Claim that an advertiser's prices are the lowest requires systematic, timely, and on-going monitoring of all competitors and all products covered by the claim. Due to rapid price fluctuation and the difficulty in knowing all competitorís selling prices at all times, lowest price claims shall not be used. Instead, terms such as "low" or "lower" should be used.

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6. Lotteries, Contests, Games of Chance

Lotteries and games of chance are prohibited in Texas except for the state-run lottery and licensed bingo parlors.

If an advertiser is considering a game or contest he should know that there are three elements that will define the contest as a lottery: consideration, chance and prize. If all three of these are part of the contest, then the advertiser is running a lottery, which is in violation of the Texas Lottery Act.

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7. Going-Out-of-Business Sales

The state of Texas regulates going-out-of-business sales. Any company going out of business must register with the County Clerk's office. Call the BBB or the County Clerk for a pamphlet on the Going-out-of-business Act.

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8. Distress Claims

Advertisers shall not use fictitious distress claims such as "creditors demand action" or "must liquidate everything or else". Also, advertising claims should not imply that a company is going out of business (see above), moving, or has lost its lease unless the claim is true and can be substantiated.

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9. Price Guarantees and Meet-or-Beat Claims

If an advertiser claims to meet or beat a competitor's price or guarantees to refund the difference of a competitor's price, the ad must disclose the following:

What the advertiser will do when an item is found selling at a lower price ( i.e., sell item at the lower price, refund the difference, etc.). What the customer must do to receive the lower price or the promise made in the guarantee (i.e., bring in the ad, a receipt, etc.). Any exclusions or limitations to the offer.

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10. Disparagement

All advertising should be positive and based upon the performance and capabilities of the advertiser's own products or services. An advertiser should not deceptively or falsely disparage a competitor's products or services.

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11. Illustrations & Layout

Illustrations should represent the product exactly. If a price is used, the picture shall be of the exact model for sale at the advertised price. If the illustration is inexact, clearly mention that the product being described is "similar to the illustration."

All disclosures shall be clear and conspicuous and important facts shall not be hidden in the layout.

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12. Credit

The following guidelines are based on the FTC;s Truth-In-Lending Act. There are two kinds of credit, closed-end and open-end, and each has required disclosures when certain triggering terms are used in advertising.

A. Closed-end

Typically, closed-end credit transactions involve credit that is extended for a specific time period and the amount financed, finance charge, and schedule of payments is agreed upon by the lender and the customer. Closed-end credit includes sales credit and loans. If an advertisement for closed-end credit contains any of the following triggering terms, three specific disclosures must also be included in the advertisement.

• The amount of down payment
• The amount of any payment
• The number of payments
• The period of repayment
• The amount of any finance charge

If any of the triggering terms is used in an advertisement, the following three disclosures must be included:

• The amount or percentage of the down payment
• The terms of the repayment
• The annual percentage rate

B. Open-end

Examples of open-end credit are bank and gas company credit cards and stores' revolving charge accounts. In open-end credit, the creditor reasonably expects the customer to make repeated transactions.

The triggering terms for open-ended credit are:

• Statement of when the finance charge begins to accrue, including any "free ride" period, if any
• Statement of either the periodic rate used to compute the finance charge or the annual percentage rate
• The method of determining the balance on which a finance charge may be imposed
• The method of determining the finance charge, including a description of how any finance charge other than the periodic rate will be determined
• The amount of any charge (other than the finance charge) that may be imposed as part of the plan
• The fact that the creditor will acquire a security interest

The required disclosures are:

• Any minimum, fixed, transaction, activity, or similar charges that could be imposed.
• Any periodic rate that may be applied, expressed as an "annual percentage rate". If the plan provides for a variable periodic rate, that fact must be stated.
• Any membership or participation fee.

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The Better Business Bureau does not endorse, recommend, or disapprove any product, service or organization.