Do you have millions in pocket change you can afford to throw away? If so, feel free to plaster billboards from coast-to-coast with deceptive, false, and misleading information about your product or service. Actually, you might want to have at least a few hundred million to pony up because the penalties and loss in stock value sometimes add up to that when it comes to deceptive and misleading conduct. We have some misleading and false advertising examples we’ll show you later but, for now, we want to get quickly to critical tips for staying on the right side of U.S. Senator Elizabeth Warren’s Consumer Financial Protection Bureau.
The old bait-and-switcheroo
When it comes to bait-and-switch advertising, regulators examine a merchant’s intent as the discerning factor. To be classified as “bait,” it must be established that the merchant is advertising an attractive price on a service or product that it has no intention of following through with. When a customer responds to the ad, the salesperson steers the conversation towards a more expensive, often unadvertised option. An unscrupulous business may even load sales’ commissions toward the latter, which encourages the salesforce to avoid the actual product being advertised.
Another version of the same scheme is to “inconveniently” run out of the advertised product but have available on hand plenty of a similar but more expensive choice. Either of these schemes could result in a false advertising claim as defined by the U.S. Code of Federal Regulations, and a potential lawsuit. Here’s a tip. Lawsuits are bad for business.
It’s great for the environment
It’s become all the rage in recent years to claim a product is good for the environment. Catch words like “eco-friendly” and “green” are plastered so often on packaging and labels that, at some point, a consumer has to wonder whether it’s all true and if there are any restrictions at all to a company making such claims? Is there a law against false advertising of this sort?
Actually (thankfully), there is. The Federal Trade Commission (FTC) has released what it calls “Green Guides”, publications that define how environmental advertising phrases must be qualified in some way. The bottom line is that a broad claim of general interpretation is no longer allowed. To say something is “good for the environment” is not enough unless there are verifiable ways to back it up. Similarly, a claim of “biodegradable” must be backed up by studies that show how quickly the product and its packaging will return to nature within a specific time period.
The eternal “going out of business” sale
Is there a store in your town that has been going out of business for decades? While most states allow for an annual liquidation sale at the end of the year to move out old stock, there are normally restrictions that regulate how soon the sale can be advertised and how long it may run. It’s easy to see why this area is so ripe for abuse. When a business legitimately plans to close its doors for the last time, consumers expect there will be better than average deals because a merchant would normally rather sell something put it in storage or ship it back to the vendor. Thus, it has been deemed an unfair advertising practice to promote this kind of event unless the business actually intends to close or relocate. There is a gray area that some businesses deploy, where they legally close their business entity with the state, shut the doors for a few days, then reopen under a new tax ID number, maybe even using the same name or a variation of it.
The truth is in the fine print
Another common (and deceptive) method of advertising is to promote one thing in the main headline and text of the ad, but provide details that counteract that offer in the tiny print at the bottom of the ad. As good false advertising lawyers will tell you, the truth, and potential to become embroiled in a lawsuit, is in the fine print. Usually, there is a limit to how fine the fine print can be. For example, the state of New York has decreed that a print ad cannot use a font smaller than 10-point-type.
An audio version of this trickery can be found in radio commercials, where the announcer runs through a list of caveats at the end while speaking inhumanly fast. Actually, it is inhuman. Audio engineers digitally remove the slight dead spaces between words in this “fine print” so that it spills forth in a mostly incoherent swarm of verbiage.
Here’s why you avoid false advertising
The landscape is strewn with the defenses of companies either too ignorant or arrogant to pay attention to their advertising claims. Need an example to be sure we aren’t blowing smoke up your you-know-where?
Let’s take the case of Europcar as an example, they are a company which owns 12 percent of the Australian car rental market. They made several claims regarding insurance that induced customers to believe they were covered against certain common hazards when, in fact, they weren’t. The court eventually decided it was ignorance rather than nefarious intent on the company’s part, though still delivered a $100,000 penalty. That’s not pocket change to some small businesses, so be warned; this could happen to you too.
The bottom line
The end result for advertisers is that it’s not enough to intend to do the right thing. You must be proactive in examining and vetting all your advertisements. In this case, an ounce of prevention is worth the painful pound of cure that will be delivered by the court system in the event it is determined you engaged in deceptive or false advertising. You should also keep in mind that consumers don’t appreciate being lied to. There are plenty of examples of how public censure of a company is not only costly in the fines and damages it may have to pay, but in loss of customers as well. If it’s bad for the bottom line, you might consider not doing it.