False Advertising

The term “false advertising” means advertising a product or service in a misleading way, to make the purchaser believe that the product or service they are buying performs better than it actually does.

Publicly disseminating an ad that the advertiser knows contains a false, misleading, or deceptive offer of a product or service with the intent to promote the sale of said goods or services to the public, is a crime. Depending on the severity of the infraction of false advertising laws, an advertiser may be able to rectify the situation itself, without incurring other repercussions, or face stiff fines and possible jail time if convicted of fraud.

Under Section 43(a) of the Lanham Act, a claim can be made against a litigant for false or deluding advertising.

False Advertising

In determining whether any advertising is misleading, one should consider not just claims made by statement, word, design, device, sound or any combination thereof. Also, it should be taken into account the degree to which the advertising fails as deceptive, misleading, or false.

Advertising a work opportunity might be construed as misleading in failing to reveal exactly when a job is available, whether the pay is a salaried position or on a commission basis, and whether or not a prospective employee will be required to pay out-of-pocket costs up front, perhaps for a uniform, as a condition of being accepted for a position.

An employer may not be liable under false advertising laws if an individual has not suffered actual financial losses due to the misleading advertising of an employment opportunity, or if the employer has, before any financial losses are accrued, disclosed in writing an exact description of the kind, character, terms, and conditions of a particular job.               

For claims of false advertising, a plaintiff must show documents of the defendants that proves the false or misleading statements about his product or services. Also, a plaintiff must show that the deception is likely to influence purchasing decisions. A plaintiff does not have to prove actual injury to make a claim against an advertiser.

The Federal Trade Commission

The Federal Trade Commission, or FTC, is the primary federal department that works to rectify instances of false advertising. Government bodies at state and local levels also go after companies that breach laws on advertising. This responsibility usually falls to a state attorney general, a consumer protection agency, or the local district attorney. Customers and competing businesses also may be able to continue straight against the advertiser.

The FTC depends primarily on customers and business competitors to report false advertising. If the FTC believes that an ad breaks the law, they will work with the violator, using informal measures, to help them bring their advertising into compliance. If that does not work, they can invoke a “cease-and-desist” order, or file a civil lawsuit for those who were affected by the false advertising.

The FTC may also seek an injunction, which will halt the ad in question, while they investigate. The FTC also can require that a company found to be guilty of advertising infringement to run corrected ads, admitting that an ad from before had false information.

The FTC has taken action against many businesses who were charged with using false advertising. A large number of those actions have been tested in court. The courts have supported the FTC by upholding even their most stringent policies.

State Laws Against False Advertising

There are also laws in most states, primarily deceptive practices or consumer fraud statutes, which regulate advertising. By using such laws, states or local agencies can pursue injunctions against false advertisers.  This gives them time to take legal action or work with the violators to offer relief to affected customers. Some laws provide for criminal penalties, such as fines or jail time, but such penalties are rare in the case of false advertising, unless actual fraud can be proved.

Using state consumer protection laws, customers often can sue deceptive advertisers. Such cases usually are based on either unfair competition or commercial disparagement. A business competitor who is affected by fraudulent advertising, or faced with impending harm because of such advertising, usually has the right to seek an injunction and sometimes can be awarded financial restitution.

However, damage to a competitor can be hard to prove. For example, a person who purchases a service or product in reliance on a deceptive or false ad may sue in small claims court in hopes to get a refund. They may also connect with other people to sue for a large amount in a different court.

Keeping the following rules in mind when creating advertisements will help to keep those ads away from the pitfalls of false advertising claims.

Rule 1 - Accuracy

Be certain that all ads are accurate. Double check to be sure that no ad can be construed as deceiving or misleading by the public. Include pictures only of the actual product or service that you are advertising. Do not use representations from a different year or model that might suggest a customer is getting a better deal than you are actually offering.

Tell the truth about what can be expected from your product. Don't state something can cure an ailment, for example, when all it does is alleviate symptoms temporarily. Do not state a carpet cleaner is a professional at removing all types of stains when in reality there are stains it can’t remove.

Fireproof or waterproof means just that -- not fire or water resistant under certain circumstances. The term polar, when attached to cold-weather gear, suggests that it can keep people warm in dangerously cold temperatures, not that it's just adequate when the temperature drops to almost freezing.

Rule 2 - Fairly Treat Competitors

Do not disparage the services, goods, or reputation of other people with misleading or false information. When comparing your services and goods with other businesses, check twice to make sure that all of your information is accurate.

Rule 3 - Have Enough Quantities Available

When you are advertising something for sale, make sure there is enough product on hand to meet the demand that is reasonable to expect. If you think the demand may exceed your supply, state in your ad that only a certain number of the product is available, and when it’s gone, it’s gone.

Some states, such as California, have laws that can require a business to stock enough of an advertised to meet a reasonable expected demand, unless the ad states that there’s limited stock. Other states may require that a rain check be issued when the supply of goods runs out. Be acquainted with the requirements in place in your state.

Rule 4 – Be Careful When Using the Word "Free"

If you promote services or goods as "free," make sure that no hidden conditions or terms that qualify the offer exist. State any limits clearly and conspicuously.

Maybe you are offering a free “gift” to anyone who buys a specific kind of rug in your store. If you disclosing the terms and conditions of your offer, you're doing well. But there are problems you may encounter:

  • If the rug costs is more than you usually charge, the gift isn't actually free.
  • Don't reduce the inventory of the rug that people must buy to receive the gift, as in a “bait and switch” tactic. If the specific rug advertised isn’t available, and you take the opportunity to sell the customer a more expensive rug, which doesn’t qualify them to receive the free gift, then you have lured the consumer in to your store under false pretenses.
  • You should disclose up front that there is a limited quantity of that particular rug available, as well as any other terms that may exclude a customer from receiving the free gift.

Rule 5 - Be Careful When You Describe Sales and Savings

You should be completely honest in all of your claims about pricing. A very common pitfall is creating altered price comparisons with other businesses.

Unlawfulness

Advertising that is intended to induce, directly or indirectly, the purchase of food, drugs, devices, services, or cosmetics, using techniques that constitute false advertising, is unlawful to distribute,.

Unfair or Deceptive Act or Practice           

The distribution of any false advertisement is considered a deceptive act. This is somewhat similar to patent infringement.                

Temporary Restraining Orders; Preliminary Injunctions 

After weighing the information presented against an advertiser and determining that the information that was disseminated was in fact false advertising, a court could grant, in the interest of the public, a temporary restraining order or a preliminary injunction, preventing the advertiser from continuing the use of said false advertising.      

If a complaint is not filed within 20 days, or a time period specified by the court, the temporary restraining order or preliminary injunction will be dissolved and will have no further effect of the advertiser. 

Imposition of Penalties

If using the product or services that are falsely advertised could cause injuries or health problems, the advertiser would then be guilty of a misdemeanor. If the advertiser is convicted, they face a fine of not more than $5,000, or a jail term of not more than six months, or by both.

If this is a second conviction for a false advertiser, the punitive actions increase to a fine of not more than $10,000, or a jail term of not more than one year, or by both.                

Exception of Advertising Medium or Agency

No publisher, broadcaster, or advertising agency used to distribute deceptive or misleading advertising shall be liable or subject to the penalties related to crimes of false advertising, unless he has refused to furnish the FTC with the name and address of the entity who had him distribute said false advertising.  

If you need help with defending a false advertising claim, or with filing one, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top five percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and have an average of 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.