Many consumer complaints filed with the Better Business Bureau revolve around deceptive sales practices. These practices range from the failure to disclose pertinent facts in advertisements to misleading price and savings claims. Consumers also may be misled by comparative misrepresentation – making a misleading comparison between a product and the product of another company. Other deceptive sales practices include bait selling – the attempt to lure buyers with one product and then switch them to another product, and careless use of the word free.
The Federal Trade Commission (FTC) regulates unfair and deceptive acts or practices under Section 5 of the FTC Act, and has established a series of guides that provide important clues about how it will judge these kinds of claims. Some of these guidelines are:
Failing to Disclose Privileged Facts
Advertisements that fail to disclose important information that consumers must have in order to make an informed purchase are deceptive. This includes failing to disclose any limitations on the use or performance of a product, any known safety risks, and the existence of any government-imposed restrictions on the manufacture, sale or use of a product. It also includes failing to disclose any material differences between a product and its competitor, or failing to disclose that a product is subject to warranty terms imposed by a manufacturer.
Misleading Price and Savings Claims
Generally, consumers believe that a list price or suggested retail price reflects the prices at which an article is normally sold in the principal markets where the seller conducts business. A reduction from such a price therefore seems like a bargain to most consumers. But, to qualify as a deceptive claim under the FTC’s pricing guides, the former price must actually have been in effect for a substantial period of time, and it must reflect the prices at which a substantial number of sales were made. For example, if a single can of paint regularly sells for ninety-nine cents in the advertiser’s market area, and he offers to reduce that price by 50%, he must have sold substantial numbers of single cans at that price.
Whether it is a throat spray if Lady Gaga recommends it, a pair of jeans if Justin Bieber wears them, or a face cream if Paris Hilton blesses it, millions of products are promoted every day with some form of celebrity endorsement. These endorsements can be very effective in luring buyers, but they must be carefully considered for their truthfulness.
In addition, a product promotion that requires the purchaser to buy some other article in order to obtain the advertised product is deceptive unless the requirements are disclosed clearly and conspicuously in the advertisement. This also includes offering a rebate on a product when the consumer purchased it from another dealer, or failing to have available for immediate delivery a sufficient quantity of an advertised product to meet reasonable anticipated demands. The FTC’s pricing guides warn that such promotions can violate Section 5 of the FTC Act.