Fraudulent Advertising: What Nobody Tells You

Your company is liable for what others do on your behalf.

When your small business hires an advertising agency, you might very well be paying for a third-party marketer too—even if nobody told you.

That’s because many advertising agencies will subcontract with third-party firms to handle Internet advertising, landing pages and the digital side of promoting your company. These marketers can help you obtain a huge number of client leads very quickly. They can position your business in front of literally millions of consumers.

In most cases, your advertising agency will have signed a contract with the third-party marketer, but you and the third-party are not responsible to each other because a contractual relationship most likely doesn’t exist.

This means you lack direct oversight regarding what this marketer does with your brand. Your ad agency will not be held responsible for marketing violations—you will be at fault and subject to penalties.

Demystifying Third-Party Marketers

Always ask this simple question when negotiating a contract with an advertising agency: “Do you have relationships with third-party marketers, and are you able to control their activities?”

To illustrate the importance, consider if these third parties are advertising your company information on websites you find morally reprehensible, or have the wrong information about your brand, location or image. What if they make false claims about your product(s) or services?

What is your company’s recourse? You have no contract with the third-party and often cannot contact them to stop the behavior. Many agencies are often unaware of third-party marketer strategies and simply notifying them isn’t enough. If you find a fraudulent ad, your agency may be able to rectify the situation, but the harm is already done.

While you may have no control—or in some cases any knowledge—of the advertised inaccuracies, that will not be enough to protect your business from federal regulations.

The Federal Trade Commission (FTC) is busy monitoring all online advertising for violations of truth-in-advertising laws. Depending on your business, a corresponding government agency will also oversee ads related to your industry. If the FTC finds false or misleading ads, the agency may subject your company to devastating fines, freeze company and personal assets, and obtain injunctions.

Understand the Details

Make it your responsibility to know exactly how your advertising agency will market your company, and whether a third-party marketer will be part of the work. Read the fine print. Ask questions. Understand how the company is being advertised and know where your sales leads are originating.

Request reports that confirm marketing initiatives are operating properly and monitor the affiliate network. Knowing these details can help you prevent misrepresentation of your products or services. Remember, delegating to an outside entity doesn’t relieve you of responsibility.