Deceptive sales occur when a company falsely represents a product or service or engages in an act that misleads consumers. These practices are a threat to customers as well as the industry.
Deception may take many forms, but it generally refers to an act or practice that is likely to mislead a consumer acting reasonably under the circumstances. The FTC and the states have developed a set of definitions that can be used to determine whether an act or practice is deceptive.
(1) The Fairness Clause: Unfairness to consumers can be found when an act or practice causes or is likely to cause substantial injury, which is not reasonably avoidable by the consumer and is not outweighed by countervailing benefits to the consumer or competition. For example, if a company makes a claim that a particular product is “highly recommended” for a particular purpose when it is not, it is unfair.
(2) The Consumer Protection Clause: In addition to enforcing the Fairness Clause, the FTC and state agencies can also enforce the Consumer Protection Clause when an act or practice is deceptive. This is done by taking a close look at the representation, omission or practice. The agency will consider how the statement, omission or practice affects the consumer’s decision and conduct.
(3) The Advertising Clause: In determining whether an advertisement is misleading, the agency will consider the entire advertisement and the context in which it is made. This includes all statements, representations or omissions that are used in the advertisement. It will also consider how the advertiser uses these statements, representations or omissions in its entirety and how it uses them in the overall course of dealing with the consumer.
(b) If a manufacturer’s or distributor’s suggested retail price is being represented as a reduction from the price at which substantial sales of the article are being made in the advertiser’s trade area, it should be very carefully considered by him in making his advertisement. For example, if a number of the principal retail outlets in the area are regularly selling Brand X fountain pens for $10, it is not dishonest for a retailer to represent in his advertising that he was selling them for $7.50, even though the latter is a higher price than the former.
4. The Advertiser’s Defendant: If an advertiser has reason to believe that his competitor is using a false or misleading representation of the list price, he should immediately bring the matter to the attention of the Commission and the other agencies. This is the only way to ensure that the commission can quickly stop this misleading practice.
5. The Agencies: In determining whether an advertisement is deceptive, the Agencies will evaluate it in light of the FTC’s interpretation of the Consumer Protection Act and the policies that guide them in their investigations of and enforcement of unfair or deceptive practices. For example, the agency will look to see if the practice is used in the context of all other advertisements and transactions that are related to the subject of the alleged deceptive act or practice.