E-commerce businesses must comply with federal and State-level advertising laws and regulations. This is true of any business.

But e-commerce businesses face special challenges because there is a whole array of potential methods of innocently, accidentally, or intentionally violating advertising laws. These include the potential to engage in false and deceptive advertising practices, such as the following:

• Manipulating product reviews and other types of user-created content
• Manipulating claimed forms of engagement like followers, “likes,” and similar
• Use of “dark patterns” to attempt manipulation of consumer behavior
• Disguising endorsements as “real” by failing to disclose paid consideration
• Use fake endorsements, influencers, websites, reviews, etc.
• Not displaying labeling information such as ingredients and “Made in ______” notices
• Collecting consumer personal data without notice or consent — this might be limited to payment-processing information, but might be much more intrusive

Just as a matter of practicality, non-e-commerce businesses — those with brick and mortar stores — cannot engage in some of these types of false and deceptive advertising.

When considering compliance with advertising laws and regulations, there are a couple of basic principles from which the specific rules/regulations flow. These are:

• Be truthful and accurate in what is said and presented
• Do not use manipulative or deceptive practices

Thus, if your e-commerce business makes a claim about the product in the advertising/marketing, that claim should be accurate and substantiated with evidence/studies where applicable. A couple of examples include a claim that a product is “organic” or is “safe for use.” Other claims should also be accurate, such as claims about where the product came from, how quickly the product will ship, the nature of the return policy, fees, and other charges added to the price, etc.

Disclosure is the other major touchstone of fair and non-deceptive advertising. Fair advertising laws assume, in part, that consumers can make up their own minds about things. Thus, the emphasis on full disclosure is embedded in the laws and regulations related to advertising/marketing. Generally, the disclosures must be clear and must be prominent. If your e-commerce business emphasizes proper disclosure, that “takes care of” a large percentage of the potential legal issues that arise with respect to advertising and marketing. Specific examples include:

• Disclose all compensation and relationships with those who are endorsing your product or business
• Label sponsored content
• If your business engages in affiliate marketing, make sure your affiliate is fully disclosing the relationship and the compensation
• If data is being collected, disclose what is being collected, the reasons why, etc. — more specifically, an e-commerce business must comply with applicable consumer data privacy statutes, which specify what must be disclosed and more

Compliance with advertising laws and regulations may seem unimportant. However, there can be severe consequences. From the government sector, there can be administrative and even criminal enforcement investigations and actions. From the private sector, false and manipulative advertising can lead to consumer lawsuits. These can be very expensive to handle, even if your business is able to defeat the claims.

The FTC’s Updated Endorsement Guides: What E-Commerce Businesses Must Know

The FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, 16 C.F.R. Part 255, were substantially revised in 2023 and directly affect virtually every e-commerce business that uses reviews, influencers, or affiliate marketing. Key updates relevant to e-commerce include:

• AI-generated reviews and endorsements must be disclosed as such when they could be mistaken for genuine consumer opinions
• Insider reviews — reviews by employees, company officers, or anyone with a financial interest in the business — must be clearly disclosed as such or not published as consumer reviews
• Review suppression — cherry-picking positive reviews while systematically preventing negative reviews from being displayed — is now explicitly a deceptive practice
• Fake social media indicators — purchasing fake followers, likes, or engagement metrics — violate the Guides when those metrics are used to create the false impression of consumer approval
• Influencer material connections must be disclosed clearly and conspicuously at the start of the endorsement, not buried in hashtags

Dark Patterns: A Growing Enforcement Priority

The FTC has made “dark patterns” — user interface design techniques that trick consumers into making purchases, subscriptions, or data disclosures they did not intend — a significant enforcement priority. In 2022, the FTC published a report identifying dozens of dark pattern categories and warning that their use violates Section 5 of the FTC Act. E-commerce businesses should audit their websites and checkout flows for:

• Confirm-shaming: Using emotionally manipulative language on “decline” buttons (e.g., “No thanks, I prefer to lose money”)
• Hidden subscription traps: Enrolling consumers in recurring subscriptions through free trial offers without conspicuous disclosure of the recurring charge
• Drip pricing: Advertising a price and only revealing mandatory fees and charges late in the checkout process
• Difficult cancellation flows: Making subscription cancellations unreasonably complicated — the Negative Option Rule finalized in 2024 specifically mandates simple cancellation mechanisms
• Fake urgency and scarcity: Using false countdown timers or falsely claiming limited stock
• Pre-checked boxes: Pre-selecting add-on products or recurring subscriptions

Consumer Review Compliance Under the FTC’s 2024 Rule

In August 2024, the FTC finalized its rule banning fake reviews and testimonials. 16 C.F.R. Part 465. The rule explicitly prohibits:

• Creating, buying, or disseminating fake consumer reviews
• Providing compensation for positive (but not negative) reviews
• Paying for insider reviews without clear disclosure
• Using unfounded legal threats or unjustified contract terms to suppress negative reviews
• Purchasing fake social media indicators
• Procuring company-controlled reviews that are presented as independent consumer opinions

Civil penalties for violations of this rule can reach $51,744 per violation (adjusted annually for inflation). The rule also creates liability for businesses that provide the “means and instrumentalities” for others to engage in these practices — meaning a SaaS platform that facilitates fake review generation could itself be liable.

California-Specific E-Commerce Advertising Obligations

California’s Automatic Renewal Law (“ARL”), Cal. Bus. & Prof. Code §§ 17600-17606, imposes specific disclosure and consent requirements on any business that offers automatic renewal or continuous service subscriptions to California consumers. These requirements include:

• Clear and conspicuous disclosure of the automatic renewal offer terms before the subscription is accepted
• Positive affirmative consent from the consumer to the automatic renewal terms
• An acknowledgment email containing the terms and cancellation instructions
• A simple, straightforward mechanism to cancel the subscription

The ARL does not apply only to California businesses — it applies to any business that offers these subscriptions to California consumers. Given California’s population and purchasing power, virtually every significant U.S. e-commerce business is subject to ARL compliance obligations.

CAN-SPAM, TCPA, and Email/Text Marketing Compliance

E-commerce businesses that use email marketing must comply with the CAN-SPAM Act, 15 U.S.C. §§ 7701-7713, which requires honest header information, a clear “advertisement” label in the subject line for commercial emails, a physical address, and a functioning opt-out mechanism honored within 10 business days. Businesses that use SMS or text message marketing must comply with the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227, which requires prior express written consent for automated marketing texts and provides a private right of action with statutory damages of $500 to $1,500 per text message. TCPA class action litigation against e-commerce businesses is extremely active and represents one of the highest-probability consumer litigation risks in the industry.

Contact Revision Legal

If you have questions about e-commerce and advertising law, the experienced attorneys at Revision Legal can help. We represent businesses, entrepreneurs, and individuals across the country. Contact us through the form on this page, visit our e-commerce and advertising law practice page, or call us at (855) 473-8474.