Determining Deceptive Sales Practices

Deceptive sales practices are a serious problem in the alarm industry, as many consumers rely on their security providers for peace of mind. The practices undercut the trust that consumers have in their alarm systems, and erode the reputation of the industry as a whole.

ADT is a leading company on the forefront of combating these tactics, and has won numerous court cases against other alarm companies for their deceptive sales practices. It has also worked closely with the Better Business Bureau, and recently won a $10 million settlement against Vivint for deceptive sales techniques as well.

In addition to the common tactics used by deceptive sales people, such as posing as an existing customer and fraudulently claiming that a consumer’s alarm system is going out of business, there are also other techniques that can be misleading. These include offering a free upgrade, asking a consumer to sign an agreement without explaining that the agreement will be void, and using bait-and-switch tactics.

The key to determining whether an act or practice is deceptive or unfair is to evaluate it from the perspective of a reasonable consumer. Often, the most important factor is the meaning that the act or practice conveys to the average person, rather than how it may be interpreted by the majority of consumers in the relevant class.

It is essential to remember that an act or practice is unfair if it causes or is likely to cause substantial injury, which is not reasonably avoidable and not outweighed by countervailing benefits to consumers or competition. This can be demonstrated by a variety of factors, including the nature and severity of the harm caused by the act or practice, the potential for injury to others, and the likelihood that the harm would have been avoided in other circumstances.

When considering an act or practice as unfair, the agencies will examine it in the context of its overall advertising, transaction, or course of dealing. In deciding whether an act or practice is unfair, the agencies will consider whether the entire advertisement, transaction, or course of dealing was designed to mislead the public and whether it is more likely than not that a reasonable person would be misled.

SS 233.3

In advertising the list price or suggested retail price of an article, the agency may find that the offer of a reduction from this list price is deceptive if it does not correspond to a price at which a substantial number of articles are sold in the advertiser’s trade area. This is especially true where the list price was set artificially, or was established for the purpose of enabling the offer of a large reduction to be made.

Similarly, an offer of a reduction from a previous price may not be deceptive where the previous price was in fact bona fide and where no sales were made at that earlier price. The former price should be one that was openly and actively offered for sale, for a substantial period of time in the advertiser’s trade area, honestly and in good faith.