What Is False Advertising?
A company engages in false advertising when they make a fabricated, claim about their product, service, or business. Businesses who simply get carried away when advertising their products may exaggerate its benefits and abilities — but might still be subject to false advertising laws.
While this may seem like a harmless mistake, consumer law prohibits companies from false advertising, including making misleading or unproven claims.
Deceptive advertising or labels that are misleading may persuade consumers to spend money or waste time on products or businesses that aren’t beneficial or that don’t deliver what consumers were led to expect. In worst-case scenarios, false claims have the potential to cause harm.
In response to false advertising, consumers have the right to make a legal claim if they were harmed in some way by companies making false or misleading claims about their products or services.
As an entrepreneur, it’s critical to understand false advertising regulations are business laws you need to know to ensure your marketing, promotions and advertising materials aren’t going to get you in legal trouble. Awareness of these regulations is equally important for consumers, who are going to be faced with false claims and need to be able to identify when a company is engaging in fraudulent advertising.
Types of False Advertising
Companies engage in false advertising in different ways. Some false advertising methods are obvious while others are hard to detect as a consumer. Some of the most common types of false advertising include the following:
- Hidden fees: A company may advertise a product for one price but when the consumer attempts to buy it, additional fees for shipping, maintenance, or insurance are added.
- Misleading labels: Companies may use photos of the product that don’t provide a good representation of the product, make claims about its benefits that aren’t true, or provide inaccurate measurements on labels to falsely advertise to consumers.
- Bait-and-switch: With a bait-and-switch tactic, a company advertises a product with specific features at a certain price. When the consumer attempts to buy the product, it’s suddenly unavailable, but a higher-priced item with fewer features is pushed on the shopper.
- Oversized packaging: A large box or package that leads consumers to believe the product itself is also large. However, some companies use large packaging as false advertising for a small, less expensive product.
- Comparative advertising: Companies may also use false advertising to make claims that their product is better than a competitor’s product. Without hard facts, the claims made against competing companies may not be true or justified and could be subject to slander and libel laws as well as false advertising.
False Advertising Examples
Although false advertising is illegal, it’s still a common practice for many companies in a wide range of industries. As a consumer, you may have been exposed to false advertising or heard about it. Some of the most well-known cases of false advertising include the following:
- Activia Yogurt: Activia claimed that its yogurt had special bacteria to aid in digestion and was sold at a higher price due to this claim. However, the bacteria in Activia yogurt is the same as any other yogurt and a class-action lawsuit was filed against the parent company, Dannon, for false advertising.
- Skechers Sneakers: Skechers launched a false advertising campaign with their Shape-Up sneakers, claiming they assisted in weight loss and the strengthening and toning of muscles. They also made other unfounded claims about other sneaker models and their ability to tone muscles. The Federal Trade Commission (FTC) ordered Skechers to stop these campaigns and pay over $40 million in damages.
- Volkswagen Vehicles: Volkswagen falsely advertised many of its vehicles as burning “clean diesel” to appeal to environmentally-conscious consumers and to meet certain government environmental standards. However, their emission measurements were rigged and the FTC filed a lawsuit against Volkswagen.
- Kellogg Rice Krispies Cereal: In an ad campaign, Kellogg’s claimed that Rice Krispies cereal had immune-boosting capabilities, which turned out to be false. The food manufacturing giant was accused of false advertising and ordered to stop the campaign and pay $5 million in damages.
- Airborne Herbal Supplements: Airborne launched a marketing campaign riddled with false advertising that claimed their herbal supplements prevented the flu and common colds. While these supplements were packed with vitamins, the claims were false and Airborne was involved in a class-action lawsuit and ordered to pay $23.3 million.
Is False Advertising Illegal?
False advertising is illegal and the FTC is in charge of regulating and enforcing laws against companies who violate these laws. The FTC’s truth in advertising legislation outlines the guidelines companies must follow to legally advertise products to consumers. The organization assists consumers in pursuing legal action against companies and may pursue legal action itself if it finds probable cause.
The Lanham Act of 1946 also provides additional legislation against false advertising. This law addresses copyright, trademark, and patent infringement and forbids false descriptions of products or services a company offers. In addition to this federal legislation, states may also enact additional laws against false advertising within their jurisdiction.
In most cases, companies are ordered to halt their false advertising campaigns immediately. They may also be required to implement a corrective advertising campaign so the general public is provided with the truth about the product. If consumers are involved in the legal action, companies may need to pay hefty settlements and fines if they’re convicted of false advertising.
How to Report False Advertising
If you encounter false advertising as a consumer, it’s important to report it immediately to the proper authorities. To ensure you accurately report false advertising, follow these steps:
- Ensure you saw false advertising that made an important empty promise or misled the consumer.
- Gather evidence, such as the advertisement you saw or the product packaging.
- Contact the company for a refund for the product you purchased or write a letter expressing your concerns and asking for a refund.
- Keep all communications between yourself and the company, including emails, online chats, or letters.
- Report false advertising to the proper federal agencies, including the FTC and the Better Business Bureau (BBB).
- Contact your state agency, such as the Attorney General’s office or your state’s consumer protection agency, to make a report.
- Provide all the information you have on the false advertising campaign to the federal and state agencies when prompted.
If you were personally affected by false advertising, you may need to seek legal help to pursue a settlement with the company. Whether a large company engaged in false advertising or a multi-level marketing or pyramid scheme company made false promises, you may need to seek compensation for damages. When you’re able to identify false advertising, it’s easier to understand the laws it violates and how to pursue legal action.
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