How the FTC and State Laws Prohibit Deceptive Sales

From trunk slammers to “agents” who lure unsuspecting homeowners into signing costly, hard-to-break contracts, deceptive sales are sadly all too common. Fortunately, consumers are starting to stand up against these scams. Last year alone, SDM reported on the industry-wide efforts led by ADT and its reputable competitors to crack down on bad apples in the home security business, with the company winning several judgments against companies like Alder Security and Sunday Riley. And while these successes were encouraging, it is clear that shady business practices are still a problem, with new deceptions popping up on a regular basis.

All states have laws prohibiting unfair and deceptive practices in consumer transactions. While the scope of these laws varies by state, they all seek to protect consumers by prohibiting conduct that would mislead a reasonable consumer, acting reasonably under the circumstances.

The following are examples of deceptive sales practices that the FTC and state laws prohibit:

Advertisements must clearly disclose whether a price is “regular” or “sale” and any conditions that must be met in order to receive the sale price (e.g., purchase a certain number of items to get the sale price). The advertisement must also reveal if an article was previously sold for a higher price and the former price must be stated, without any implication that it was a selling price (for example, by use of such terms as, “Formerly sold at $____,” or “Reduced from $3____”).

Retailers must clearly describe the quality of their goods, services, and prices. Advertisements that suggest or imply that the goods, service or price are of high quality must be backed up by substantiating evidence such as customer reviews and testimonials. Advertisements that suggest or imply that a product has unique features that distinguish it from similar products must be supported by substantiating evidence such as customer testimonials and test results.

SS 233.3 Advertisements of manufacturer’s suggested or suggested retail prices, or of reductions from such prices, must be accompanied by the price at which substantial sales are actually made in the trade area, or a disclaimer that such prices do not necessarily reflect actual selling prices in the trade area. Changing competitive conditions have seriously undermined the dependability of manufacturers’ suggested or retail prices as indicators of exact prices at which articles are generally sold at retail. It is now rare for an advertisement of a reduction from the suggested or retail price to be followed by actual sales at that price.

Door-to-door selling is a valuable marketing tool, but it should be practiced with honesty and integrity. When it isn’t, deception can be serious. The FTC and state agencies encourage consumers to file complaints if they witness any deceptive sales practices. In addition, the ESA has an online resource with tips and information for consumers that can help them avoid deceptive sales practices when engaging in legitimate door-knocking. Lastly, the organization encourages both members and non-members to report any deceptive sales practices that they encounter.