What is Substantiation and why is it important to businesses?

By Aaron Reese

The BBB does this thing called “Ad-review.” If we spot a potentially misleading advertisement, we ask the advertiser to prove what they claim. We’ve found that most businesses are not familiar with the nuances of advertising law and frequently don’t even know they’ve done anything wrong before we contact them. They’re just trying to bring attention to their business.

FTCThe BBB challenges ads because we want to make sure businesses don’t accidentally get themselves in trouble. The FTC or Attorney General’s office may not have time to deal with every misleading advertising claim, but customers who feel misled because of an ad have the time and the will.

Luckily, the easiest way to avoid most potential problems is also the easiest. Businesses should have prior substantiation for any claim they put in an ad. If businesses need more motivation to have prior substantiation, they should also know it’s the law.

FTC policy states that there is an “underlying legal requirement of advertising substantiationadvertisers and ad agencies must have a reasonable basis for advertising claims before they are disseminated.”

Put simply, it means if you can’t prove it, you can’t say it.

There’s some legalese to decode here, and that’s what we’ll focus on. Businesses need to know what this means for their day-to-day operation. What is a “reasonable basis” and what is required of businesses when they disseminate (publish) ads?

We contact businesses all the time and ask for substantiation of claims. We often find that businesses are surprised when we tell them they need proof of their claims. Not only that, we tell them they should have had it before the advertisement was published. We’ve contacted businesses that assumed what they said is true, but they never bothered to check. Confidence in a statement is not proof of that statement. They need evidence.

Businesses sometimes latch onto the word “reasonable” and believe they can say anything they want as long as they believe they’re being reasonable. As we’ve seen with settlement after settlement (So many settlements) with the FTC, that is definitely not the case. When the FTC uses the word “reasonable,” they’re referring to a reasonable expectation of the average customer.

Claims require the appropriate amount of evidence according to what the typical consumer expects.

For the past 30+ years, the FTC, BBB, state attorneys general and other consumer protection agencies have doggedly honed in on the appropriate amount of evidence for different types of claims. That’s what businesses need to know. To make it easier to understand, I’ve broken claims into five tiers according to the level of substantiation required.

Tier 1: Puffery

PufferyBusinesses will be relieved to hear that some claims require zero evidence. They’re called “puffery” claims. They are so obviously opinionated and subjective that providing evidence would be silly. For instance, a pizza place claiming that it has “the best pizza in the world” is stating an opinion. Opinions don’t require evidence. Usually, if a business says it’s the “best” at something, they’re in the clear (unless they say “best prices,” which we’ll get to later)

Tier 2: Easily verified claims

Some claims are easy to back up, like claiming “low everyday prices.” A comparison between a few competitors’ prices would easily prove that a business’s prices are on the lower end of the price-point spectrum among competitors. Unless the BBB hears rumors of a business price-gouging while it claims “low prices,” we usually don’t bother challenging low price claims. However, in 2016, we did challenge a business that claimed it was selling jewelry at steep discounts, but we couldn’t find a single example of the same jewelry being sold anywhere at a more expensive price.

Tier 3: Proficiency Claims

Open any newspaper and it will contain numerous ads claiming that their products are X% better than something. A few years back, a bunch of window companies claimed that consumers could save specific amounts of money and mentioned that their windows were more energy efficient. The FTC slapped down those claims that couldn’t be proven.

Energy savings claims, efficiency claims, or superiority claims of this nature can be advertised legally. Businesses just need to have all their evidence ready to hand over if someone asks. If a business conducts an experiment on their product and wants to advertise the result, they need to mention what the test was and who performed it. That’s why a toothpaste commercial might say something like, “According to organization X, our product fights bacteria 25% better than other name brand toothpastes.” Did you ever wonder why they’re worded like that? It’s because those are the rules As long as the business is up front about the stats, they’re probably ok.

Tier 4: Ultimate Claims

Businesses can claim they are best at something and it’s frequently just puffery, but the instant they claim they are #1 in a particular category (“largest selection,” “fastest service,”  “#1 in customer service,”) these claims suddenly become objective statements of fact. Opinion disappears. We can compare those things and come up with a definitive answer, one way or the other, and a business must prove their objective claims with appropriate evidence.

Claiming that a business is #1 in a particular category requires substantiation, but as long as the business has the appropriate data to back up the claim, it shouldn’t be a problem. For instance, a few years ago, we challenged an ad that claimed a business was the #1 retailer for Sealy Mattresses in Kansas City. The business responded with sales sheets and a letter from Sealy proving that they not only sold more Sealy mattresses in the area, but they sold more Sealy mattresses than anyone in the Midwest.

If a business claims to be “voted #1” they should provide evidence of who voted and in what publication the vote appeared. If a business claims to have the “largest storeroom,” they better know the dimensions of their competitors’ stores. Anything short of definitive knowledge in this category and a business could be in trouble.

Tier 5: Impossible to Substantiate.

This tier contains things that a business should never say. Ever.

“Lowest price” claims are the worst culprit. A business simply can’t keep track of fluctuating prices for all their competitors, sales, specials, coupons and online deals. Claiming to have the lowest prices is technically an objective and provable claim. This kind of claim requires substantiation. The problem is that no business is capable of substantiating such a claim. Best case scenario, they’re guessing. Worst case scenario, they don’t care if it’s true or not.

The same goes for “largest selection.” Unless a business has an accurate and up-to-date list of their competitors’ inventories, they can’t prove they have the largest selection.

You may be wondering why all of this is so important to the BBB, the FTC, or state consumer protection agencies. Well, that’s because claims that aren’t substantiated have a negative effect on public confidence in advertising. In the BBB’s training materials, we have a section that explains it as such:

“When a dozen products are simultaneously advertised under identical claims of superiority, often in the same advertising medium, the public, having no means of determining whose claim is correct, has no choice but to disbelieve all of them.”

If you own a business and aren’t sure if your advertising can be substantiated, give the BBB a call. We can review it and tell you if it adheres to the BBB Code of Advertising. We do it all the time!

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