Deceptive Sales Practices in the Alarm Industry
LOS ANGELES–The security industry is one of the most-complained-about industries for deceptive sales practices. Skilled scam artists manipulate consumers into changing their alarm companies by falsely claiming their current security system is unsafe or that their existing monitoring company will soon go out of business, and then offering them a “free upgrade.” The FTC has long-held that deceptive trade practices can violate the law. The agency’s broad definition of deceptive practices covers such actions as making misleading price and savings claims; bait-and-switch tactics; and careless use of the word “free.”
Misleading price and savings claims, for example, often involve a seller implying that his product is cheaper than it really is. To avoid such misrepresentations, the FTC has set forth certain requirements in its Guides for Manufacturers and Retailers. For example, an advertised reduction in a product’s price must be clearly and conspicuously disclosed; the lower price must be the actual selling price of the article for the entire time it is offered for sale; and it cannot be based upon a former price that has not actually been used in selling the product (for instance, by saying “Formerly sold at $50”), unless substantial sales were made at that price.
Other types of misleading representations often involve making comparative statements that are likely to mislead consumers. To be deceptive, the comparison must disclose both the existence and nature of the similarity, and the fact that the comparative product may be more expensive or less expensive than the seller’s own. In addition, the seller must be able to substantiate the comparison. This requires a substantial amount of evidence, such as independent consumer surveys and product testing data.
Pictorial representations also can create deceptive inferences. For example, a picture of a Steinway grand piano in an advertisement can be deceptive if it shows the piano without its lid, or if it is sitting in a room that is not a normal store environment. Other false inferences can be created through pictures such as white-coated “doctors,” seals of the British monarchy, or plush offices.
When a statement, omission, or practice is deceptive, the FTC looks at it in the totality of the circumstances. In other words, a representation must convey two or more meanings to reasonable consumers, one of which is misleading, and the consumer’s interpretation must be unreasonable under the circumstances.
The FTC and state attorneys general have taken a number of actions to stop deceptive sales. These actions have included lawsuits against sellers, the establishment of joint educational programs, and consumer warnings. The agencies’ activities have underscored the importance of the deep trust consumers place in their home security companies, and the need for consumers to be informed. Fortunately, the vast majority of dealers and service providers are honest and ethical, but the actions of a few can cause serious harm to the industry. FTC staff attorney Daniel Conner, who oversees the enforcement of the deceptive marketing laws, is available to answer questions about deceptive sales practices.
