Rule 5 -- Watch Out for the Word "Free"

If you say that goods or services are "free" or "without charge," be sure there are no unstated terms or conditions that qualify the offer. If there are any limits, state them clearly and conspicuously.

Let's assume that you offer a free paintbrush to anyone who buys a can of paint for $8.95 and that you describe the kind of brush. Because you're disclosing the terms and conditions of your offer, you're in good shape so far. But there are pitfalls to avoid.

• If the $8.95 is more than you usually charge for this kind of paint, the brush isn't free and you shouldn't call it free.
• Don't reduce the quality of the paint that the customer must purchase or the quantity of any services (such as free delivery) you normally provide. If you provide a lesser product or service, you're exacting a hidden cost for the brush.
• Disclose any other terms, conditions, or limitations.

What counts is the overall impression created by the ad -- not the technical truthfulness of the individual parts. Taken as a whole, your ad must fairly inform the ordinary consumer.

Rule 6 -- Be Careful When You Describe Sales and Savings

You should be absolutely truthful in all claims about pricing. The most common pitfall is making doctored price comparisons with other merchants or with your own "regular" prices.

Rule 7 -- Observe Limitations on Offers of Credit

Don't advertise that you offer easy credit unless it's true. A business that's not careful in this area can be charged with engaging in an unfair or deceptive practice that violates FTC law. You don't offer easy credit if:

• You don't extend credit to people who don't have a good credit rating.
• You offer credit to people with marginal or poor credit ratings but you require a higher down payment or shorter repayment period than is ordinarily required for credit-worthy people.
• You offer credit to poor credit risks, but once all the fine print is deciphered, the true cost of credit you charge exceeds the average charged by others in your retail market.
• You offer credit to poor risks at favorable terms but employ draconian (although legal) collection practices against buyers who fall behind.

If you advertise specific credit terms, you must provide all relevant details, including the down payment, the terms of repayment, and the annual interest rate.