False advertising applies to any promotions or advertising that misrepresent the nature, quality, characteristics, and/or origin of:
- Commercial activities;
- Goods; and/or
- Services.
A business who knowingly releases an ad that contains misleading, deceptive, and/or untrue statements in order to sell their product can be held liable for any injuries resulting from false advertising.
The Federal Trade Commission (“FTC”) is the government agency responsible for enforcing regulations governing unfair trade practices, which is how false advertising is classified. Depending on the relief that is being sought, an action for false advertising can be filed in either a civil or criminal court, as false advertising is considered to be both a tort and a crime.
Before states began implementing consumer protection and deceptive advertising laws, consumers could only submit complaints to the FTC, who would then notify and/or penalize the business itself. Now, those who have been injured by false advertising can pursue private lawsuits according to the statutes enacted in their state.
An example of this would be if you purchased a protein bar that claimed to have specific nutritional benefits, and no added sugars. If it is discovered that the protein bar has none of the nutritional benefits that the company claims that it has, and it also has added sugars, you may be able to recover damages by taking legal action against the company.
There are many different ways that a business can engage in false advertising practices, such as:
- Adding misleading information, such as that the food contains no sugar when it actually does;
- Making inconsistent or incomplete comparisons to competitors’ products and/or services;
- Using deceptive illustrations, such as a food item or product that appears bigger than it actually is;
- Advertising a specific price, but hiding the fact that there are extra fees;
- Claiming that a company is having a going out of business sale in order to raise prices; and
- Applying bait and switch tactics. This would be advertising one product, substituting with a similar but more
- expensive product, and claiming that the advertised product is sold out.
What Are The Federal Protections Against False Advertising?
To reiterate, the FTC is the federal government agency that is responsible for overseeing and enforcing false advertising regulations. However, the FTC relies on consumers and competitors alike to report unlawful and deceptive advertising. The FTC will then investigate the complaint, and will take one of several actions if it discovers that an ad does in fact violate the law.
The FTC will first notify and attempt to have the business correct its errors on its own. If the business ignores this request, the FTC can issue a cease-and-desist order, as well as file a lawsuit on behalf of injured consumers. During the case, the FTC may ask the court to grant an injunction against the business in order to have them refrain from continuing to employ false advertising practices.
The FTC can also issue fines, and may have the business or their third-party advertiser release new ads that provide correct facts and information. They may also force the business to admit that earlier ads contained false statements. The law that authorizes the FTC to do so is known as the “Federal Trade Commission Act (“FTCA”)”; specifically, Section 5 of the Act.
Another federal law that protects against false advertising practices would be the “Consumer Financial Protection Act (“CFPA”)”. The CFPA created the Consumer Financial Protection Bureau (CFPB), which is the agency that enforces the CFPA. The CFPA authorizes the CFPB to take legal action against financial organizations for unfair, abusive, and/or deceptive practices on behalf of consumers.
One other law that protects consumers against false advertising and deceptive practices would be the “Federal Food, Drug, and Cosmetic Act (“FFDCA”)”, which is enforced by the U.S. Food and Drug Administration (“FDA”). The FFDCA dictates the type of information that must be disclosed in both drug advertisements and on food labels.
What Are The FTC Standards For Online Advertising?
In order to avoid being considered false advertising, an online advertisement must:
- Be truthful;
- Not be misleading; and
- Not be unfair. Online advertising could refer to a website, through email, or other multimedia means.
Additionally, an advertiser must have sufficient evidence in order to back up any claims that are made in the advertisement. In order to avoid making a misleading claim, an advertisement may be required to include a disclosure with the ad. Additionally, all disclosures must be clear and conspicuous. In order to determine whether a disclosure is clear and conspicuous, consider:
- Whether the disclosure is placed in close proximity to its corresponding claim, so as to make an obvious connection between the two;
- The prominence of the disclosure, meaning that if the disclosure is not readily visible, there should be a link or scrolling function that is visible in order to let the viewer know that there is further information;
- Whether other parts of the ad distract attention from the disclosure;
- For multimedia audio messages, there must be adequate volume and cadence of disclosures; and
- Whether language and wording of the disclosure is understandable to the intended audience.
Any disclosure must be displayed on the screen prior to purchase of the product being advertised. Some advertisements that are sent through e-mail can create false impressions that the recipient was “specifically selected” for an offer that is not available to the general public. This is especially true when the offer is being viewed through a more intimate medium, such as a website. If an email invites consumers to telephone the sender in order to purchase goods or services offered, the phone call is subject to Telemarketing Sales Rules, as is the subsequent sale.
What Are Some Other Protections Against False Advertising In General?
To reiterate, nearly every state has a statute that protects consumers against unfair business practices and false advertising. Most states that have enacted such false advertising laws have modeled them after the FTCA, which permit consumers who have been harmed by deceptive ads to sue companies responsible for the advertisement in question. A few states also provide for criminal punishment if fraud is involved.
An example of this would be if the way in which a business falsely advertises a product rises to the level of fraud, and is so harmful that it causes serious financial loss or health problems. The business can be charged with a misdemeanor offense; if convicted, the business can face fines and jail time. A sentence for false advertising jail can last for up to one year, depending on the number of repeated offenses that the business has committed.
The Lanham Act, which is also known as the Trademark Act of 1946, is the primary federal law that governs trademarks and unfair competition. The Act was responsible for creating a national trademark registration system, as well as providing protection against trademark infringement, false advertising, and the use of similar marks. Companies can use the trademark registration system in order to check that a mark that they want to use is not already registered.
In preventing trademark infringement and false advertising through its provisions, the goal of the Lanham Act is to promote fair competition among businesses. It is also intended to protect consumers from false and deceptive business practices.
Do I Need A Lawyer For Help With False Online Advertising Issues?
If you have been defrauded by a false advertisement, you should first contact your state consumer protection agency. If the false advertising had especially serious effects on your business or person, consulting with a lawyer is essential.
A business attorney can evaluate your case and inform you of your rights according to your state’s specific laws. If you have been accused of false advertising, you should speak to a lawyer immediately.
