False Advertising

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As a legal term, false advertising refers to any published claim or advertising material that gives consumers an incorrect understanding or belief about a product or service being offered. False advertising, also referred to as “deceptive advertising,” is illegal according to both state and federal laws, even if the misleading advertising was made by mistake. To explore this concept, consider the following false advertising definition.

Definition of False Advertising

Noun

  1. Advertising statements that are deceptive, misleading, or outright false, about a product or service being offered.

Verb

  1. The act of using deceptive, misleading, or outright false statements about a product or service in an advertisement.

What is False Advertising

Advertising is used to persuade consumers into making purchases or using services that they might overlook or avoid under normal conditions. The law recognizes that consumers have a right to know exactly what they are purchasing, whether in goods or services, as well as what they are paying for the product or service. Unfortunately, some companies began to recognize the value of appearing to offer a discounted price or other incentive to induce consumers to buy, with no intent to provide the stated deal.

The publishing of advertising, whether in print, electronically, online, or TV/Radio advertisement, designed to deceive or mislead consumers, is against the law.

For example:

John’s Auto Sales takes out a full-page ad in the local newspaper for the entire week. The primary feature of the ad is a new pickup truck, usually priced at $27,000, for $18,000. A large color photo of the truck model entices ranchers and townies alike to head into John’s Auto Sales to take advantage of this spectacular deal.

When consumers arrive and mention the newspaper ad, they are told that the company is no longer offering that special, but the sales associate will happily show them other good buys. This is often referred to as a bait-and-switch tactic.

John’s Auto Sales has engaged in false advertising designed to lure customers onto the lot by publishing false or deceitful information. The business does this in the hope that, by luring a larger than usual number of customers to the lot, it will experience increased sales for the week.

False Advertising Laws

The goal of federal and state false advertising laws is to prevent deceptive practices in advertising, rather than punishing violators of the law. For this reason, false advertising claims may be made in civil court, but are not considered a criminal offense. It is common for the court to order a company found to be engaging in deceptive advertising techniques to be ordered to stop the activity, or to correct the misleading information, or disclose any information intentionally left out. In addition, the company may be ordered by the court to pay fines, and possibly damages owed to the plaintiff.

In order for a plaintiff to win a civil lawsuit for false advertising, he must show that the advertising contained false or misleading information, and that the deceptive information influenced his decision to purchase the product or service. A competing business may sue if a company’s false advertising directly caused the plaintiff some type of economic hardship. In many cases, the court will consider whether the false advertisement complained of deceived, or had an impact on, a large audience.

Types of False Advertising

A company can deceive consumers through the use of many types of false advertising. The primary goal of false advertising is to increase the number of customers to the company or business, and thus increase profits. Some types of false advertising are more noticeable to consumers than other advertising schemes. Some of these deceptive practices leave consumers unaware until it is too late. The most common types of false advertising include:

Inconsistent Comparison

Inconsistent comparison takes place when an advertisement compares one item with another only in the areas where it is superior, omitting any features of the other item that are superior to the advertised item. This leads consumers to believe that the advertised item is the best product available. Inconsistent comparison may also describe the practice of listing competitors’ prices, omitting those competitors offering lower prices.

For example:

Alexander’s Toy Shop’s website boldly claims to beat competitors’ prices on the hottest toy of the year. The web advertisement lists a handful of other toy stores which offer the toy at a slightly higher price. This leads consumers to believe they are indeed getting the best price on this particular item when they purchase from Alexander’s Toy Shop. This is not necessarily the case, however, as John has simply left the names of stores offering lower prices on the toy off of its list.

Pricing Based Deception

Pricing based deception occurs when companies or service providers tack on additional fees that are not disclosed to consumers in the advertised price. This has become a common practice among mobile phone providers and credit card companies. Such hidden fees and surcharges also pop up with gym memberships and airline transportation.

These fees, which amount to pricing based deception, are often found in the voluminous amount of fine print, which in some states may be located on an entirely different document or web page. Such false advertising tactics are confusing to consumers, as they are hard to find, and even harder to read and understand.

For example:

Samantha was drawn to a cellular telephone company when she read its web ad for unlimited text, talk, and data for only $49.99 per line per month. As she reads the fine print of the contract the sales associate has asked her to sign, however, Samantha discovers that there will be an additional charge of $9.99 for each line, and a surcharge of $3.99, in addition to taxes. This adds up to a total of $63.97 plus tax, per line. If Samantha had failed to read the fine print before entering into the contract, she would be unpleasantly surprised to be billed at a much higher rate than the $49.99 she expected.

Bait and Switch

Bait and switch advertising takes place when a company advertises a product it does not intend to sell, or service it does not provide. This type of false advertising is done in order to lure customers in, at which time the company attempts to sell them a more expensive item or service.

For example:

An office supply store advertises the gift of a free ink cartridge with the purchase of a specific brand and model printer. The ad states supplies are limited, yet when customers arrive at the store, they are told that model printer is already sold out. Instead of getting the advertised printer with a free ink cartridge, the sales associates attempt to convince the customers to purchase a different, more expensive printer.

Misleading Illustrations

Illustrations in advertisements which are intended to lead consumers to believe the product depicted is what they will receive commonly appear more enticing than reality. Pictures on food packaging often include ingredients or items that are not included in the package. Adding a “serving suggestion” disclaimer on the package may help the company avoid legal issues. Misleading illustrations also come in the form of making food items look larger than they really are.

False coloring is another form of false advertising through misleading illustrations. Photo manipulation software is often used to enhance the coloring of fruits and vegetables to make them look riper and more appealing to consumers in print and web ads. This method of misleading consumers is also found in the stores when produce is packaged in colored packages that hide the true color of the items.

Price Reduction Deception

Price deception occurs when a company uses advertisements to give false or incorrect information in relation to the price of a product. This often occurs when a company advertises a product claiming it is on sale or has been marked down when, in fact, the advertised item was never sold at a higher price.

For example:

May’s Market advertises a 2-liter bottle of Purple Pop for $1.00. The ad claims that the $1.00 price is a 50% discount off the soda’s regular price, but in reality, regular price of the pop is $1.00. This brings customers in to purchase the advertised pop, at which time it is likely the customers will purchase at least a few other items.

Quality or Origin Deceptions

When advertising a product, it is illegal for a company to make claims about the quality or origin of the product if the claims cannot be substantiated. It is also illegal for a company to withhold information about known defects.

For example:

Bob’s Bait Shop advertises its newest line of fishing poles. In the bait shop’s weekly advertisement, the fishing pole is described as the best on the market, and the ad features a “Made in the USA” graphic, which is known to attract many buyers. In fact, the fishing poles are manufactured in China, making the bait shop’s advertisement false.

Keeping Advertisements Lawful

Keeping advertisements lawful is an important part of good business practices, and may help businesses gain loyal customers. While there are no universal guidelines for effectively promoting goods or services in a legal manner, companies can make an effort toward keeping advertisements lawful by following a few steps. Consulting a checklist of honest advertising when creating advertisements helps most companies stay within the bounds of the law. In order to comply with false advertising laws, a company should:

  • Be very accurate in its description and illustration of the product or service offered
  • Be upfront and truthful about pricing
  • Treat all competitors fairly
  • Be cautious when using the word “free”
  • Keep an adequate supply of the advertised products on hand

Division of Advertising Practices

The Federal Trade Commission (the “FTC”) is an agency of the federal government charged with protecting consumers from unfair business practices. The Division of Advertising Practices, a division of the FTC, is in turn tasked specifically with protecting consumers from unfair or deceptive advertising practices. The Division of Advertising Practices (the “DAP”) enforces false advertising laws and brings legal actions against companies engaging in fraudulent advertising and marketing practices.

The DAP coordinates its efforts with both U.S. and international law enforcement agencies. This becomes especially important in matters involving health and safety products and services. In addition, the Division of Advertising Practices coordinates with the FTC and other agencies to monitor advertisements marketing children’s products, alcohol, and tobacco.

Examples of False Advertising

Increasing sales by the use of creative and inventive advertising techniques has become big business in the U.S. While some large corporations maintain a staff of advertising professionals, other companies turn to advertising agencies to handle their marketing campaigns. Being able to offer something eye-catching and alluring for just about any product or service imaginable results in job security for many advertising professionals. Following are two examples of false advertising of popular national brands.

Advertised Health Benefits of Activia Yogurt

In 2010, Dannon advertised their Activia brand yogurt, claiming it had clinically and scientifically proven health benefits. The company even hired a popular celebrity to promote the product’s supposedly “clinically proven” health benefits. During this ad campaign, Dannon charged more for its Activia yogurt line that what comparable brands cost.

Eventually customers stopped believing in the advertised health benefits, and a class action lawsuit was filed against Dannon. The company settled with the consumers who filed the claim, agreeing to pay up to $45 million dollars in damages. Dannon was also ordered to limit health claims to those that are factual.

Snap, Crackle and Pop’s Immunity Boosting Super Powers

In 2010, Kellogg’s engaged in an aggressive advertising campaign claiming that their popular Rice Krispies cereal had the ability to boost children’s immunity, as it contained “25 percent Daily Value of Antioxidants and Nutrients – Vitamins A, B, C and E.” The Federal Trade Commission found the company’s claims to be questionable, and ordered Kellogg’s to stop making false claims of improved immunity.

This action by the FTC came just one year after Kellogg’s was investigated for making false claims that its Frosted Mini Wheats had the ability to increase children’s attentiveness. After the FTC examined the clinical studies touted by Kellogg’s, which purportedly showed a 20% enhancement of attentiveness, it found that the studies showed only 1 in 9 children actually received this benefit from the cereal. Kellogg’s was ordered to stop this deceptive advertising campaign.

Related Legal Terms and Issues

  • Civil Lawsuit – A lawsuit brought about in court when one person claims to have suffered a loss due to the actions of another person.
  • Deceptive – Tending or having power to deceive.
  • Federal Trade Commission – An independent federal agency tasked with protecting consumers and ensuring a strong, competitive market by enforcing antitrust and consumer protection laws.
  • Litigation – The process of taking legal action; the process of suing someone, or trying them for a criminal act.
  • Plaintiff – A person who brings a legal action against another person or entity, such as in a civil lawsuit, or criminal proceedings.