From the trunk slammers of the 1970s to the door-to-door alarm salespeople who hawk hard-to-break contracts, deceptive sales practices are not only common but also very dangerous. If a product or service doesn’t live up to advertised expectations, the consumer may suffer injury and financial loss. To protect consumers, the Federal Trade Commission regulates deceptive sales under Section 5 of the Act.
The agency defines deception in terms of false or misleading representations that are made to influence a person’s buying decision. Deceptive claims include statements that misrepresent a product’s performance, quality or value; misrepresent the extent to which a price reduction is a genuine bargain; misrepresent the terms of an offer; and claims made through written, printed or oral communications.
Advertisers must be scrupulous in the use of pictorial representations, which can create a variety of false inferences. For example, a picture of an expensive car can lead people to believe that the dealer is selling such cars at low prices when, in fact, they are only offering less-expensive models. White-coated “doctors,” seals of the British monarchy, and plush offices can all connote that a company is legitimate and reputable, even though the business does not actually have those credentials.
A major problem in retail is the bait and switch, a practice where a retailer lures prospective customers with an alluring offer, then either fails to deliver or disparages the product once the customer arrives. A classic case involves a piano retailer that advertises a Steinway grand for $1,000, then either claims that the model has been sold or offers a higher-priced product to the disappointed customer.
Other common deceptive sales practices include advertising that a product is being sold at prices below those charged in the area, when the prices actually charged are very high and incomparable with those generally paid by local buyers of the same article. It is important for advertisers to carefully establish that the prices they advertise do not appreciably exceed those charged by a substantial number of retailers, as reflected in the sales made to local consumers.
Similarly, an advertisement that compares a sale price with a former price must be made in good faith; that is, the former price must have been offered for a substantial period of time. If the former price is fictitious, such an advertisement can be deceptive.
Many members of the public assume that a manufacturer’s list or suggested retail price represents the price at which most articles are sold. Thus, if an advertiser uses this figure in an advertisement and it does not correspond to the price at which a substantial number of sales of that article are being made, the advertisement is likely to mislead consumers. The FTC’s Guides against Deceptive Pricing contain additional detailed provisions regulating these kinds of price and savings claims. The guides provide examples of how to comply with the law and describe the types of advertisements that are likely to violate it.