Full Guide on Advertising Law: Essential Laws and Regulations

Advertising is a multi-billion dollar industry. For context, just one segment of it — digital advertising market — was projected to reach $667.6 billion in 2024 and surpass $730 billion in 2025. With such scale, no wonder that regulators are closely watching ads to protect consumers and ensure fair competition.

Businesses face significant costs to meet advertising regulations, but the cost of failure is actually higher. A 2023 compliance benchmark survey found 93% of fintech firms struggle to meet compliance requirements and over 60% paid at least $250,000 in fines in the past year. On average, companies spent $5.5 million on compliance in 2022, whereas non-compliance costs (fines, legal fees, etc.) averaged $15 million – a strong incentive to invest in advertising law compliance. Enforcement trends also show regulators returning money to consumers; in 2023, FTC actions led to $330 million in refunds to consumers nationwide. These numbers show why advertising law is more relevant than ever for companies' legal and financial well-being. And this guide will give you the basic understanding of the main advertising laws you have to be aware of. 

What is Advertising Law?

Advertising law comprises the laws and regulations that govern how businesses promote their products and services. Its core purpose is to ensure ads are truthful, not misleading, and fair, thereby protecting consumers from deception and enabling fair competition among businesses. In the U.S., this framework is rooted in consumer protection – for example, the FTC's advertising substantiation doctrine (in place since 1984) requires companies to have a reasonable basis for claims before they advertise them. In practice, this means advertisers must back up assertions (e.g. "best rates" or "zero fees") with solid evidence to avoid misleading the public.

Why it matters: Violating advertising laws can carry steep financial consequences and reputational damage for businesses. Regulators can seek civil penalties up to $53,088 per violation for knowing false ads, which adds up quickly for nationwide marketing campaigns. 

Companies caught in deceptive advertising scandals often face multi-million dollar fines or settlements, plus mandated corrective actions. For instance, state attorneys general recently forced a $141 million payout by a tech firm over "free" service ads, and the FTC imposed a record $2 million penalty in 2024 against a manufacturer for false "Made in USA" claims. Beyond government action, businesses may be sued by competitors or consumers, leading to court judgments and legal costs. In short, advertising law violations hit the bottom line – through fines, damages, refund obligations, or lost consumer trust – making compliance essential.

Key Laws and Regulations Governing Advertisements

Federal Trade Commission Act (FTC Act)

The FTC Act (Section 5) is the cornerstone of U.S. advertising law. It prohibits "unfair or deceptive acts or practices" in commerce, which covers false or misleading advertising. The Federal Trade Commission (FTC) enforces this law and has broad powers to stop unlawful ads. The FTC can investigate ad practices and then: issue cease-and-desist orders, seek court injunctions to halt misleading campaigns, demand consumer refunds or disgorgement of profits, and levy civil penalties for violations. Thanks to inflation adjustments, the FTC can fine companies up to $53,088 per violation of an FTC rule or prior order. Recent FTC rules (like the Made in USA labeling rule) explicitly allow such penalties, leading to a string of enforcement actions since 2021 and penalties reaching seven figures. In sum, the FTC Act empowers the chief federal agency policing advertising across most industries.

Lanham Act (Trademark Act) -- False Advertising

The Lanham Act (§43(a)) allows businesses to sue competitors for false or misleading claims in advertising. Unlike the FTC Act, which is enforced by the government, the Lanham Act provides a civil cause of action for companies harmed by a rival's deceptive advertising. This is a key tool for protecting market fairness. In recent years, there's been a notable rise in false advertising litigation under the Lanham Act and similar laws – for example, over 200 consumer class action lawsuits challenging false advertising were filed each year from 2020–2022 (up from just 53 in 2011). Companies found liable under the Lanham Act may have to pay monetary damages (lost profits or harm) and corrective advertising costs, or be subject to injunctions.

 Courts have awarded substantial damages in some cases – e.g. a jury in 2022 found a company's false claims and ordered $21.2 million in actual damages (plus additional punitive damages under state law) for false advertising against a competitor. The risk of Lanham Act lawsuits pushes companies to be diligent with marketing claims, especially in competitive sectors like tech, pharma, and finance where one firm's misrepresentation can directly harm its rivals.

State Consumer Protection and Advertising Laws

In addition to federal law, every state has its own unfair and deceptive acts and practices (UDAP) statutes (often called "little FTC Acts" or consumer fraud acts) that outlaw false advertising. State attorneys general can enforce these laws, and many states allow consumers (and sometimes competitors) to sue as well. State laws can impose significant penalties or remedies. For example, New York's General Business Law allows civil penalties up to $5,000 per violation of false advertising provisions, and enables the NY Attorney General to seek injunctions and restitution for consumers. States often band together or partner with federal agencies for large cases – TurboTax $141 million settlement was led by a coalition of 50 states.

Some states have advertising laws targeting specific issues: California, for instance, passed a 2023 law requiring that all mandatory fees be included in advertised prices to combat hidden "junk fees" in ticketing and travel ads. And Texas has rules against misleading use of bank names by fintechs, Florida penalizes false fundraising solicitations, etc. The key point is that businesses must know 50 different sets of ad laws in addition to federal law – often matching with FTC standards but sometimes going further. Non-compliance can trigger state-level fines or injunctions on top of federal enforcement.

Sector-Specific Advertising Regulations

Compliance-heavy sectors like fintech, banking, and investment advisers are seeing increased advertising law enforcement. In just one quarter of 2023, federal and state regulators finalized 17 enforcement actions against consumer finance companies' marketing practices, totaling $59.6 million in fines (with a single deceptive-ad case drawing a $19 million penalty).  So if you are in that industry you probably have to be extremely careful. 

All in all, various industry-specific statutes and regulators also oversee advertising in particular domains, complementing general consumer protection law. For example:

• Financial services: The Truth in Lending Act (TILA) and its Regulation Z mandate certain disclosures (APR, terms) in consumer credit advertising; the Consumer Financial Protection Bureau (CFPB) enforces these for banks and lenders. The CFPB and FTC together report dozens of annual enforcement actions under TILA/Reg. Z and related laws in recent years (covering mortgage, auto, and credit card ad practices). Similarly, the SEC polices securities advertising – notably the Investment Advisers Act advertising rule, which the SEC updated in 2021 to modernize marketing by investment advisers. In 2023 the SEC charged nine advisory firms for violating the new Marketing Rule (e.g. improper use of hypothetical performance in ads), resulting in $850,000 in combined fines.
• Healthcare and FDA-regulated products: The Food and Drug Administration (FDA) oversees prescription drug advertising (ensuring risk disclosures, etc.), while the FTC handles most non-prescription drug, supplement, and food ads for truthfulness. There are also special truth-in-advertising rules for medical devices, and penalties for false health claims can be severe (including FTC seeking redress or FDA injunctions).
• Communications and media: The Federal Communications Commission (FCC) enforces rules for broadcast advertising (like sponsorship identification and restrictions on obscenity or tobacco ads). The FCC also requires phone and internet providers to advertise prices transparently (no hidden fees) under its Truth-in-Billing rules.
• Others: The Alcohol and Tobacco Tax and Trade Bureau (TTB) sets rules for alcohol advertising (prohibiting false health claims, etc.). The Department of Transportation (DOT) regulates airline fare advertisements (full fare including taxes must be shown). Additionally, self-regulatory bodies like the National Advertising Division (NAD) review ads and provide guidance, helping enforce standards through industry cooperation.

These laws form a comprehensive regulatory net for advertising. Companies must ensure ads comply with ALL applicable rules – from general FTC Act standards to specific requirements of their sector and state – to avoid legal pitfalls.

How Does the Federal Trade Commission Regulate Advertising?

The FTC is the primary federal agency enforcing advertising laws in the U.S. Through its Bureau of Consumer Protection, the FTC monitors ads in all mediums (online, print, TV, social media) and takes action against unfair or deceptive advertising practices under Section 5 of the FTC Act. The FTC's approach to regulation includes policy guidance, investigations, and enforcement actions:

Guidelines and Education

The FTC issues guides and policy statements to help businesses comply. For example, it publishes "Truth-in-Advertising" guides, endorsement guides, and policy statements on specific topics (e.g. the FTC has detailed guidelines on testimonials and influencer marketing, native advertising, environmental marketing claims, etc.). These outline what the FTC considers deceptive. In 2023, the FTC updated its Endorsement Guides to address social media influencers and fake reviews, clarifying that posts by influencers must clearly disclose material connections to brands. The agency also sent out Notices of Penalty Offenses to 770+ companies in late 2021 warning that certain endorsement and review practices are illegal and could lead to fines. This proactive outreach puts the industry on notice about advertising rules.

Investigations and Enforcement

The FTC actively investigates ads and brings enforcement cases against advertisers that violate the law. It can start with warning letters or inquiries, but often results in formal complaints and settlements or litigation. Recent statistics show robust enforcement: in 2023, the FTC filed or resolved a series of high-profile advertising cases across industries. For instance, the FTC sued Amazon in 2023 alleging the company deceptively enrolled consumers into Amazon Prime through manipulative "dark pattern" design and made it hard to cancel. The agency also charged multiple financial tech companies – in late 2024 it took action against Dave, a fintech app, for misleading marketing (promising "up to $500 instant cash" when most users got far less and had to pay undisclosed fees). And in 2023 the FTC cracked down on another cash advance app, Brigit, for false "instant cash" claims and junk fees, ultimately securing $17 million in refunds for 1.8 million consumers. These cases illustrate the FTC's willingness to target deceptive advertising practices in cutting-edge sectors like e-banking and subscription services.

Enforcement Tools and Penalties

The FTC primarily seeks cessation of unlawful ads and consumer redress, but it can also demand other remedies. In many cases, companies settle by signing a consent order that prohibits specific misrepresentations in the future, mandates compliance monitoring, and sometimes requires consumer refunds. The FTC can and does litigate in federal court or through administrative proceedings to obtain injunctions and equitable monetary relief (refunds/disgorgement) for consumers. Although the FTC's ability to get money via Section 13(b) was narrowed by a 2021 Supreme Court decision, the agency increasingly relies on rule violations and the Penalty Offense Authority to seek civil penalties. When a company violates certain trade regulations or knowingly engages in conduct that the FTC has flagged as illegal, the FTC can ask courts for civil penalties – now up to $53,088 per violation (as of 2025).

This adds real teeth: for example, the FTC's new Made in USA Rule enabled it to impose the largest-ever "Made in USA" fine ($2 million) in 2024 on Kubota Tractor for false origin claims. The FTC also coordinates with the Department of Justice to enforce penalties. In addition to fines, advertisers may be required to run corrective advertising or disclosures (a famous example being tobacco companies forced to issue corrective statements about health risks).

Recent Focus Areas

The FTC's recent enforcement trend shows focus on "dark patterns" (deceptive user interface tricks), hidden fees, health and safety claims, and emerging tech. In mid-2023, it announced the largest-ever telemarketing "junk fees" sweep with over 100 actions (with state partners) targeting bogus fees and fake prize scams. The FTC has also emphasized that AI is not a loophole for deception: in September 2024 it launched "Operation AI Comply", announcing 5 law enforcement actions against schemes falsely touting AI products or using AI to facilitate deception (such as an AI tool that generated fake reviews). Likewise, the agency has pursued cases involving social media, such as brands that misled consumers with influencer ads or fake followers. The FTC's message is that traditional truth-in-advertising principles apply fully to online and high-tech marketing – there is no "AI exemption" and no leniency for deceptive online advertising, influencer promotions, or review manipulation.

Final Thoughts 

Today regulators are actively enforcing advertising laws, and the potential penalties can be substantial. But compliance doesn't have to be a manual, time-consuming process that slows down your marketing efforts.

The volume of laws you have to keep up with and complexity of marketing materials that modern organizations produce makes manual compliance review practically impossible. Most marketing teams are already stretched thin, and compliance teams can't possibly check every social media post, email campaign, landing page, and product description.

That's where we come in. At Luthor, we've built an AI-based solution that automatically reviews marketing assets for compliance issues. Our technology helps you:

• Identify potential compliance issues before they become expensive problems
• Scale your compliance efforts across all marketing channels
• Reduce the time and resources needed for marketing approvals
• Maintain consistent compliance standards across your organization

Since regulatory scrutiny of marketing messages isn't going away and if anything, it's intensifying as new technologies and channels emerge. But with Luthor, you can reduce risk, effort, and time spent on marketing compliance while still getting your messages to market quickly.

Want to see how Luthor can help your organization tackle marketing compliance at scale? Request a demo today.

‍