Product Misrepresentation

MISREPRESENTATION of product features is what happens when a manufacturer, seller, or

dealer of a product makes false or untrue statements regarding a product’s capabilities or
characteristics. Features are often the main selling point of some products. Thus, if a seller makes
misrepresentations regarding important features, this could cause a person to decide that they
otherwise might not have made.

This also occurs when product advertising, packaging, labels, or other product information
available to consumers misrepresents material facts concerning the quality or use of the product.

Misrepresentation may be classified into two types: direct misrepresentation and indirect
misrepresentation.

Direct Misrepresentation is characterized by actively misrepresenting about the product or

customers. This includes:

Deceptive Packaging.
 is the practice of placing the product in containers of exaggerated sizes and misleading
shapes to give a false impression of its actual contents.
Misbranding or Mislabeling.
 Misbranding is the practice of making false statements on the label of a product or
making its container similar to a well-known product for the purpose of deceiving the
customer as to the quality and/or quantity of a product being sold.

False or Misleading Advertising.

 Advertising serves a useful purpose if it conveys the right information. It is the principal
means by which people are informed about the availability, nature and uses of old and
new products. If advertising does not provide a useful service anymore to the customers,
it can become the agent of misrepresentation.
Adulteration.
 Adulteration is the unethical practice of debasing a pure or genuine commodity by
imitating or counterfeiting it, by adding something to increase its bulk or volume, or by
substituting an inferior product for a superior one for the purpose of profit or gain.
Weight understatement or Short weighing.
 In short weighing, the mechanism of the weighing scale is tampered with or something is
unobtrusively attached to it so that the scale registers more than the actual weight.
Measurement understatement or Short measurement.
 In short measurement, the measuring stick or standard is shorter than the real length or
smaller in volume than the standard.
Quantity understatement or Short numbering.
  In this unethical practice, the seller gives the customer less than the number asked for or
paid for. Short numbering is often practiced in selling situations where the product being
sold is in such a shape or is packed in a manner that would make counting the product
difficult or inconvenient.

Indirect Misrepresentation is characterized by omitting adverse or unfavorable information

about the product or service. Among the most common practices involving indirect
misrepresentations are caveat emptor, deliberate withholding of information and business
ignorance.   

Caveat emptor
 is a practice very common among salesmen. Translated, caveat emptor means "let the
buyer beware". Under this concept, the seller is not obligated to reveal any defect in the
product or service he is selling. It is the responsibility of the customer to determine for
himself the defects of the product.
 Under the principle of caveat emptor, the buyer could not recover damages from the
seller for defects on the property that rendered the property unfit for ordinary purposes.
The only exception was if the seller actively concealed latent defects or otherwise made
material misrepresentations amounting to fraud.
 The caveat emptor rules do not apply to the financial services industry. Unlike real estate
transactions, financial service providers need to provide relevant information to investors
about products or services.

Caveat Emptor Exceptions

 Sale by knowing buyer’s purpose
If the seller is aware of the purpose and intention of the buyer behind a potential
purchase. In this case, if the seller sells anything other than what is required, the
doctrine cannot save them.
 Sale by descriptions
If the description provided for the product does not match its actual functions, the
principle does not apply.
 Sale of branded products
Quality issues are unlikely if the buyer purchases an item from a brand or seller
known for the standard quality. In case it happens, it is yet again an exception.
 Sale by fraud
If the seller obtains the buyer’s consent for any fraud deal, the contract law
principle cannot save them.
 Sale by Sample
If a product is sold to the buyer based on a satisfactory sample. But if the product
delivered does not match the quality, the notion will not be applicable.
Deliberate Withholding of Information.
 the deliberate withholding of significant information in a business transaction is also
unethical. No business transaction is fair where one of the parties does not exactly know
what he is giving away or receiving in return.
Passive deception.
 Direct misrepresentation gives business a bad name while indirect misrepresentation or
passive deception is not as obvious, it nonetheless contributes to the impression that
businessmen are liars and are out to make a fast buck. Business ignorance is passive
deception because the businessman is unable to provide the customer with the complete
information that the latter needs to make a fair decision.
Over-Persuasion
 Persuasion is the process of appealing to the emotions of a prospective customer and
urging him to buy an item of merchandise he needs. Persuasion used for the sole benefit
of selling a product without considering the interest of the buyer is not ethical.

EXAMPLES OF PRODUCT MISREPRESENTATION

 The memory, capacity, and performance speed of computers, phones, and other such
electronic products;
 False information associated with vehicle speed, gas mileage, airbags, and other
automobile features;
 False information regarding product feature defects, such as allowing the defective to go
to market while aware of its various defects;
 The age and condition of used products;
 The quality of materials that were used in the product’s construction; and
 False information associated with the number of items or units contained in a singular
product package.

ESSENTIALS AND LEGAL RULES (Elements)

1. The misrepresentation must be of material facts.
 A mere expression of one’s opinion is not a statement of facts.
2. The misrepresentation must be false, but the person making it honestly believes it to be
true.
 The statement of facts which amounts to misrepresentation must be a false
statement. But the person making it should believe it to be true.
3. The misrepresentations must induce the other party to enter a contract.
 The person making false representation must have the intention to induce the
other party. Moreover, the second party must enter a contract believing the
representation to be true.
4. The misrepresentation must have been addressed by one party to the party misled.
 
The false statement which amounts to misrepresentation must have been
addressed by the person making it to the party who is misled by it. If it is not
addressed to the party who is misled, then it is not misrepresentation and the
contract is not voidable at his option.
5. Change of circumstances, may amount to misrepresentation.
 Sometimes, a representation of fact is made, and the circumstances change before
the conclusion of the contract. In such cases, the change of circumstances which
affect the facts already represented must be brought to the knowledge of the other
party.
 If the change is not brought to the knowledge of the other party, then the contract
can be set aside on the ground of misrepresentation.

SAMPLE CASE
Burritos: Chipotle and Its “Non-GMO” Pledge

Beginning April 2015, Chipotle began representing the majority of its products as “Non-GMO.”

A significant amount of market research available to the restaurant industry confirmed that
contemporary customers desired foods that were “natural,” and that some (but not all) consumers
preferred foods that were not genetically modified (“non-GMO”). The attraction to the restaurant
industry of pledging to sell “natural” and “non-GMO” foods is obvious.

However, the question of what “non-GMO” actually means, and what the effect of a non-GMO
pledge is to consumers, became the subject of a lawsuit filed by consumers under the Florida
unfair practices act.

In the matter of Reilly v. Chipotle Mexican Grill, the plaintiffs claimed that:
Chipotle unfairly advertises and markets that its food products are made with non-GMO
ingredients, even though it knows that its meat and dairy products come from animals that
consume GMO feed. Meat and dairy products that come from animals that consume GMO feed
are in fact GMO products, and not GMO-free as advertised and marketed by Chipotle.

According to the plaintiff, “Chipotle claims to use ingredients that are GMO-free in order to
capture health and environmentally conscious consumers who will pay premium prices for food
products that are healthier and/or more environmentally-friendly.”

The plaintiff also claimed that she and the class members paid a premium price for their Chipotle
food products, relying on Chipotle’s claim that the food products did not contain Gums. Plaintiff
and the Class have been damaged by Chipotle’s deceptive and unfair conduct in that they
purchased a misbranded and worthless product or paid prices they otherwise would not have paid
had Chipotle not misrepresented the ingredients in the food products.
Chipotle, in its answer, responded that the “non-GMO” pledge had been fulfilled, partially by
noting on its website and in some materials that its beef and dairy ingredients come from animals
that are fed GMO-enhanced feed. Chipotle also contested whether the consumers were damaged:
  “Plaintiff cannot establish that the reasonable consumer would believe that meat and
dairy ingredients sourced from animals that have consumed GMO feed are, or contain,
GMOs,” the restaurant chain said. “Accordingly, plaintiff cannot demonstrate that
Chipotle has violated the [Florida Deceptive and Unfair Trade Practices Act] by making
representations allegedly inconsistent with that belief.”
Moreover, Reilly “cannot establish that any allegedly deceptive practice caused her harm or led
to Chipotle’s being unjustly enriched.

LEGAL REMEDIES/PENALTIES OF PRODUCT MISREPRESENTATATION

 Legal damages for losses experienced by a consumer; such as medical bills or missed
work;
 Refund or exchange of a product, along with any additional costs.
 Product recalls or discontinuation of the product, especially when multiple parties have
been injured by the same issue; and/or
 Injunction to have the ad removed entirely, or replaced; and
 Civil fines.