Substantiation: The Foundation of FTC Compliance

Every advertising claim about an e-commerce product — whether on the product listing, the brand website, a social media post, or an email — must be substantiated before the claim is made. The FTC’s standard, articulated in In re Pfizer, Inc., 81 F.T.C. 23 (1972) and reinforced in dozens of subsequent enforcement actions, requires ‘competent and reliable evidence’ sufficient to support the claim at the time it is made. For performance claims, this generally means at least some human-subject testing with the actual product at the dose sold.

E-commerce sellers frequently rely on supplier-provided claims without independent substantiation. This is a mistake. The FTC’s ‘chain of distribution’ theory holds that retailers — not just manufacturers — can be liable for unsubstantiated claims in product listings. If you list a product claiming ‘9 out of 10 dentists recommend’ without documentation of the supporting study, you are at risk of FTC enforcement regardless of where the claim originated.

Green Claims: The FTC’s Green Guides

Environmental and sustainability claims are one of the most actively enforced areas of e-commerce advertising. The FTC’s Guides for the Use of Environmental Marketing Claims (Green Guides), 16 C.F.R. Part 260, set specific requirements for common terms like ‘eco-friendly,’ ‘sustainable,’ ‘biodegradable,’ ‘recycled content,’ ‘compostable,’ and ‘carbon neutral.’

• ‘Eco-friendly’ or ‘green’: General environmental benefit claims are presumptively deceptive under the Green Guides unless qualified with specific, accurate information about the nature and extent of the benefit.
• ‘Biodegradable’: A product can be claimed biodegradable only if it completely breaks down into elements found in nature within one year after customary disposal — which means most plastic products cannot be truthfully called biodegradable.
• ‘Recycled content’: Claims must specify the percentage of recycled content (pre-consumer vs. post-consumer) and be accurate as to what portion of the product (by weight) is recycled.
• ‘Carbon neutral’/’Net zero’: These claims require offsetting all direct and indirect greenhouse gas emissions associated with the product’s full life cycle. The FTC requires disclosure of any assumptions or limitations.

The FTC updated the Green Guides in 2024, taking a harder line on carbon offset claims and extending guidance to newer sustainability marketing terms. E-commerce brands that have relied on environmental claims should audit their marketing materials against the updated guidance.

Price and Sale Advertising: Reference Prices and Strikethrough Pricing

E-commerce sellers commonly use strikethrough pricing to create the impression of a significant discount. This practice is heavily regulated. Under the FTC’s Guides Against Deceptive Pricing, 16 C.F.R. Part 233, a reference price is deceptive if it was not a bona fide price at which the product was actually offered for sale to the public for a reasonable period of time, in reasonable quantities, in the recent past.

Several states have stricter reference pricing laws. California’s False Advertising Law, Bus. & Prof. Code § 17500, has been used in class actions against e-commerce retailers whose ‘sale’ prices were not genuine discounts from a legitimate former price. New York’s General Business Law § 349 similarly prohibits deceptive price advertising. The class-action exposure from deceptive reference pricing can be enormous — every individual product listing with a fabricated strikethrough price potentially constitutes a separate violation.

Amazon’s Advertising Policies and Federal Law

Amazon enforces its own advertising policies through seller central account management — account suspension for policy violations is a routine enforcement tool. Amazon’s policies largely mirror FTC requirements but in some respects go further. For example, Amazon prohibits comparative advertising that denigrates competitors by name unless the comparison is objectively verifiable — a stricter standard than the FTC’s general requirement that comparative claims be truthful and not misleading.

Amazon also requires that any health or safety claim in a listing be substantiated and may require sellers to upload substantiation documents through Seller Central. The intersection of Amazon’s platform policies and federal advertising law creates a two-front compliance challenge: sellers must comply with both or risk account suspension and FTC enforcement.

Developing an E-Commerce Advertising Compliance Program

• A pre-publication review process for all advertising claims, including a substantiation file documenting the evidence supporting each material claim
• Written influencer and affiliate agreements that obligate partners to use only approved claim language and to make required disclosures
• A green claims policy that prohibits the use of environmental benefit claims without legal review and documented substantiation
• A reference pricing policy that requires documentation of the reference price’s legitimacy before any strikethrough pricing is used
• Annual compliance training for marketing personnel
• A process for monitoring platform-generated advertising (automated sponsored ads) to ensure AI-generated ad copy does not contain unsubstantiated claims

Revision Legal’s e-commerce attorneys advise online retailers on advertising compliance, respond to FTC civil investigative demands, and defend class actions arising from advertising claims. Contact us at revisionlegal.com/contact or visit our E-Commerce practice page.

E-commerce businesses must comply with advertising laws and regulations in the same manner as non-e-commerce businesses. The general rule with respect to advertising is that all advertising must be truthful and non-misleading. The rules and regulations apply to all forms of advertising, including types of “advertising” that might not fit the traditional definition. Thus, government regulators consider compensated social media influencers, consumer reviews/ratings, product claims (such as claims that a product is organic), product labeling, and more to be forms of advertising.

E-commerce businesses face some unique challenges with fair advertising compliance. First among these challenges is complying with federal, state, and — potentially — the laws of foreign nations. The internet, of course, “goes” all over the world. This is why e-commerce businesses must assess all three sets of laws. In truth, though, if you are in compliance with federal advertising laws, your e-commerce business is likely to be in compliance with state and foreign laws as well. To be sure, however, it is wise to consult with experienced e-commerce attorneys, like our attorneys here at Revision Legal.

The main federal law is the Federal Trade Commission Act, which is administered by the Federal Trade Commission (“FTC”). Generally, the FTC requires that ecommerce advertising must be truthful and not deceptive or unfair. The FTC has defined “deceptive” as any form of advertising that is likely to

• Mislead consumers and
• Affect consumers’ behavior or decisions about the product or service

Advertising is defined as “unfair” if the advertising causes injury — or is likely to cause injury — that is substantial, not outweighed by other benefits, and not reasonably avoidable. Advertising can be deemed deceptive, unfair, or both by the FTC. Advertising that is deceptive and/or unfair can involve the omission of relevant information. An example provided by the FTC is an advertisement that promotes “$0 Down” for a product but omits reference to the fact that various undisclosed charges will be due at the time of purchase/lease. Such is likely to be deemed deceptive and unfair. A similar omission occurs sometimes with compensated social media influencers who do not prominently disclose that they are compensated.

Further, any claims made in advertising must be “evidence-based.” That is, scientific reports and substantiation are required for any claim. Examples include claims that a product is “organic,” “safe for human use,” “effective,” etc.

Other federal laws may also apply, including the Consumer Financial Protection Act administered by the Consumer Financial Protection Bureau (“CFPB”). The CFPB also regulates misleading, deceptive, and unfair business practices with a focus on financial and credit transactions. If your e-commerce business offers any type of financing or “buy-now-pay-later” plan, then the CFPB will also have the authority to scrutinize your advertising.

The federal CAN-SPAM Act may also apply if your e-commerce business uses email as a form of advertising. Again, truth-in-advertising is the focus. Thus, your emails must use truthful — and not misleading — routing information, subject line messages, and content. Further, the email must clearly and conspicuously disclose that it is an advertisement and provide a physical postal address for consumers to use.

Contact The E-Commerce Business Attorneys at Revision Legal

For more information, contact the experienced e-commerce business lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.