False Advertising
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.
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.
False advertising generally refers to misleading or untrue
marketing claims that companies make about their products.
Companies usually make misrepresentations about their products
to induce customers to pay more or even purchase a product that
they would not have considered otherwise.
Shortly after the proliferation of advertising in the early 1900s,
false advertising was made a crime in 44 states. States followed
with statutes addressing particular types of false advertising that
subject companies to fines and other penalties for violations.
Consumers have also used lawsuits, specifically class action
lawsuits, to hold companies responsible for false advertising.
There are several types of false advertising generally. These
include mislabeling, bait-and-switch, failure to disclose, flawed
research, and product disparagement or trademark infringement.
 Mislabeling
 Mislabeling is a common form of false advertising and
includes situations where companies use false or
misleading information on product packaging or in
related advertising materials such as websites.
 Companies can also make false claims about a
product’s price by claiming that the good is on sale
based on a price that it was never offered for sale at.
Recently, a number of outlet stores have come under
fire for price deception, including Ann Taylor, Michael
Kors, and North Face.
 Companies also engage in false advertising if they
make false or deceptive claims about the quality or
origin of their product. Recently, companies have been
hit with false advertising lawsuits over “Made in
America” claims. While the product may have been
assembled in America, the company sourced the parts
from foreign countries. According to the consumers in
the lawsuits, they felt deceived because they believed
they were purchasing a product solely from the United
States and they often paid more for that product.
 False environmental claims can also be considered false
advertising. These include using terms like
“biodegradable, “recyclable,” and “environmentally
friendly” on product packaging. Certain customers say
that they pay more for products with environmental
claims on the packaging. However, if these terms are
not based on reliable scientific evidence, then they can
be considered false advertising.
 Bait-and-Switch
 If a company uses claims about the price or quality of a
particular product or service with no plans to sell or
provide that service at the price offered, they may be
engaging in “bait-and-switch” false advertising.
 Sometimes advertisers attempt to lure customers in by
offering incredible deals but change the deal after the
customer has already invested a substantial amount of
time and energy into negotiating with the advertiser. In
addition to being frustrating, any bait-and-switch
advertising is illegal under Federal Trade Commission
regulations.
 Failure to Disclose
 A company that does not include material information
about its product or only partially discloses information
can also be considered to be engaging in false
advertising. This information is especially important
when it comes to side effects of prescription and over-
the-counter drugs, but it can also apply to cleaning
products and other items.
 Many products are subject to additional risk disclosures
depending on the type of product sold. Consumers need
to be aware of the dangers of items they purchase and
how to avoid them. Failing to disclose this information
can lead to personal injury or property damage as well.
 Flawed Research
 If a product’s labeling or related advertising makes
claims based on flawed research, it is considered false
advertising. Under federal law, flawed research
includes “representations found to be unsupported by
accepted authority or research or which are contradicted
by prevailing authority or research.”
 Product Disparagement and Trademark
Infringement
 Companies can also get into trouble for false
advertising if they falsely disparage a competitor’s
product as a part of their marketing. Similarly, if a
company uses another company’s trademark to imply
some type of relationship, it can be considered false
advertising.
 Duped By False Advertising Practices?
 These types of false advertising confuse consumers and
generally lead them to spend more on a product then
they would have. False marketing can also induce
consumers to purchase a product that they would not
have otherwise.
 There are a number of remedies for false advertising,
including injunctive relief, corrective advertising, and
paying damages. If you have been duped by false
advertising, you should know that you and other
consumers have rights under consumer protection
laws. Get help today from the experienced attorneys
at Bradley Grombacher.