{"id":225,"date":"2014-09-17T00:42:04","date_gmt":"2014-09-17T00:42:04","guid":{"rendered":"https:\/\/courses.candelalearning.com\/buslegalenv\/?post_type=chapter&#038;p=225"},"modified":"2015-04-15T21:49:38","modified_gmt":"2015-04-15T21:49:38","slug":"27-2-deceptive-acts-and-practices","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/chapter\/27-2-deceptive-acts-and-practices\/","title":{"raw":"Deceptive Acts and Practices","rendered":"Deceptive Acts and Practices"},"content":{"raw":"<div class=\"bcc-box bcc-highlight\">\r\n<h3>Learning Objectives<\/h3>\r\nBy the end of this section, you will be able to:\r\n<ul id=\"mayer_1.0-ch52_s02_l01\" class=\"im_orderedlist\">\r\n\t<li>Name the categories of deceptive acts and practices that the Federal Trade Commission has found, and give examples.<\/li>\r\n<\/ul>\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s01\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Failure to Disclose Pertinent Facts<\/h2>\r\nBusinesses are under no general obligation to disclose everything. Advertisers may put a bright face on their products as long as they do not make a direct material misrepresentation or misstatement. But under certain circumstances, a business may be required to disclose more than it did in order not to be involved in unfair or deceptive acts and practices. For example, failure to state the cost of a service might constitute deception. Thus a federal court has ruled that it is deceptive for a telephone service to fail to disclose that it cost fifteen dollars per call for customers dialing a special 900 number listed in newspaper advertisements offering jobs.<span id=\"mayer_1.0-fn49_001\" class=\"im_footnote\"><em class=\"im_emphasis\">FTC v. Transworld Courier Services, Inc.<\/em>, 59 A&amp;TR Rpt. 174 (N.D. Ga. 1990).<\/span> Likewise, if a fact not disclosed might have a material bearing on a consumer\u2019s decision whether to purchase the product, its omission might be tantamount to deception, as <em class=\"im_emphasis\">J. B. Williams Co. v. FTC<\/em> (see Section 27.5.1 \"False and Misleading Representations\"), suggests.\r\n\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s02\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Descriptions of Products<\/h2>\r\nAlthough certain words are considered mere puffery (<em class=\"im_emphasis\">greatest<\/em>, <em class=\"im_emphasis\">best<\/em>), other words, which have more precise connotations, can cause trouble if they are misused. One example is the word <em class=\"im_emphasis\">new<\/em>. In most cases, the Federal Trade Commission (FTC) has held that if a product is more than six months old, it is not new and may not lawfully be advertised as such.\r\n\r\nThe efficacy of products is perhaps their most often advertised aspect. An ad stating that a product will do more than it can is almost always deceptive if the claim is specific. Common examples that the FTC continues to do battle over are claims that a cream, pill, or other substance will \u201crejuvenate\u201d the body, \u201ccure\u201d baldness, \u201cpermanently remove\u201d wrinkles, or \u201crestore\u201d the vitality of hair.\r\n\r\nThe composition of goods is another common category of deceptive claims. For example, a product advertised as \u201cwool\u201d had better be 100 percent wool; a mixture of wool and synthetic fabrics cannot be advertised as wool. The FTC has lists of dozens of descriptive words with appropriate definitions.\r\n\r\nLabeling of certain products is strictly regulated by specific statutes. Under the Food, Drug, and Cosmetic Act, artificial colors and flavors must be disclosed. Other specific federal statutes include the Wool Products Labeling Act, the Textile Fiber Products Identification Act, the Fur Products Labeling Act, and the Flammable Fabrics Act; these acts are enforced by the FTC. In 1966, Congress enacted the Fair Packaging and Labeling Act. It governs most consumer products and gives the FTC authority to issue regulations for proper labeling of most of them. In particular, the statute is designed to help standardize quantity descriptions (\u201csmall,\u201d \u201cmedium,\u201d and \u201clarge\u201d) and enable shoppers to compare the value of competing goods in the stores.\r\n\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s03\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Misleading Price and Savings Claims<\/h2>\r\n\u201cBuy one, get another for half price.\u201d \u201cSuggested retail price: $25. Our price: $5.95.\u201d \u201cYours for only $95. You save $50.\u201d Claims such as these assault the eye and ear daily. Unless these ads are strictly true, they are violations of Section 5 of the FTC Act. To regulate deceptive price and savings claims, the FTC has issued a series of <em class=\"im_emphasis\">Guides against Deceptive Pricing<\/em> that set forth certain principles by which the commission will judge the merits of price claims. These guides are not themselves law, but they are important clues to how the FTC will act when faced with a price claim case and they may even provide guidance to state courts hearing claims of deceptive pricing ads.\r\n\r\nIn general, the guides deal with five claims, as follows:\r\n<ul id=\"mayer_1.0-ch49_s02_s03_l01\" class=\"im_itemizedlist im_editable im_block\">\r\n\t<li><strong class=\"im_emphasis im_bold\">Comparisons of the sale price to a former price.<\/strong> The former price must have been offered for a substantial period of time in the near past for a seller to be justified in referring to it. A product that once had a price tag of $50, but that never actually sold for more than $40, cannot be hawked at \u201cthe former price of $50.\u201d Under the FTC guides, a reduction of at least 10 percent is necessary to make the claim true.<\/li>\r\n\t<li><strong class=\"im_emphasis im_bold\">Comparable products.<\/strong> \u201cThis same mattress and box spring would cost you $450 at retail.\u201d The advertisement is true only if the seller is in fact offering the same merchandise and if the price quoted is genuine.<\/li>\r\n\t<li><strong class=\"im_emphasis im_bold\">\u201cSuggested\u201d retail price.<\/strong> The same rules apply as those just mentioned. But in the case of a \u201cmanufacturer\u2019s suggested\u201d price, an additional wrinkle can occur: the manufacturer might help the retailer deceive by listing a \u201csuggested\u201d price that is in fact considerably greater than the going price in the retailer\u2019s trading area. Whether it is the manufacturer who is doing his own selling or the retailer who takes advantage of the \u201clist price\u201d ticket on the goods, the resulting claim of a bargain is deceptive if the product does not sell for the list price in any market or in the market of the retailer.<\/li>\r\n\t<li><strong class=\"im_emphasis im_bold\">Bargain based on the purchase of something else.<\/strong> The usual statement in these cases is \u201cBuy one, get one free\u201d (or at some percentage of the usual selling price). Again, the watchwords are <em class=\"im_emphasis\">literal accuracy<\/em>. If the package of batteries normally sells in the advertiser\u2019s store for ninety-nine cents, and two packages are now selling for that price, then the advertisement is unexceptionable. But advertisers are often tempted to raise the original selling price or reduce the size or quantity of the bargain product; doing so is deceptive.<\/li>\r\n\t<li><strong class=\"im_emphasis im_bold\">False claims to explain a \u201csale\u201d price.<\/strong> \u201cGiant clearance sale\u201d or \u201cgoing out of business\u201d or \u201climited offer\u201d are common advertising gimmicks. If true, they are legitimate, but it takes very little to make them deceptive. A \u201climited offer\u201d that goes on forever (or a sale price charged beyond the date on which a sale is said to end) is deceptive. Likewise, false claims that imply the manufacturer is charging the customer a small price are illegitimate. These include claims like \u201cwholesale price,\u201d \u201cmanufacturer\u2019s close-outs,\u201d \u201cirregulars,\u201d or \u201cseconds.\u201d<\/li>\r\n<\/ul>\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s04\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Bait-and-Switch Advertisements<\/h2>\r\nA common sales pitch in retail is the <span class=\"im_margin_term\"><span class=\"im_glossterm\">bait and switch<\/span><\/span>. The retailer \u201cbaits\u201d the prospective customer by dangling an alluring offer, but the offer either disappears or is disparaged once the customer arrives. Suppose someone sees this advertisement: \u201cSteinway Grand Piano\u2014only $1,000.\u201d But when the customer arrives at the store, he finds that the advertised product has \u201csold out.\u201d The retailer then tries to sell the disappointed customer a higher priced product. Or the salesperson may have the product, but she will disparage it\u2014pointing out that it does not really live up to the advertised expectations\u2014and will exhort the customer to buy the \u201cbetter,\u201d more expensive model. These and related tactics are all violations of Section 5 of the FTC Act. In its <em class=\"im_emphasis\">Guides Against Bait Advertising<\/em>, the FTC lists several such unfair practices, including the following: (1) refusing to demonstrate the advertised product, (2) disparaging the product (e.g., by exhibiting a visibly inferior grade of product next to higher-priced merchandise), (3) failing to stock enough of the advertised product to meet anticipated demand (although the advertiser may say \u201csupplies limited,\u201d if that is the case), (4) stating that delivery of the advertised product will take an inordinate amount of time, (5) demonstrating a defective product, and (6) deliberately discouraging the would-be buyer from purchasing the advertised product.\r\n\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s05\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Free Offers<\/h2>\r\nCareless advertisers will discover that <em class=\"im_emphasis\">free<\/em>, perhaps the most powerful word in advertising, comes at a cost. As just noted, a product is not free if it is conditional on buying another product and the price of the \u201cfree\u201d product is included in the purchased product (\u201cBuy one tube and get another tube free\u201d). Just how far the commission is prepared to take this rule is clear from <em class=\"im_emphasis\">F.T.C. v. Mary Carter Paint Co<\/em>.<span id=\"mayer_1.0-fn49_002\" class=\"im_footnote\"><em class=\"im_emphasis\">F.T.C. v. Mary Carter Paint Co.<\/em>, 382 U.S. 46 (1965).<\/span> In that case, the company offered, from the time it began business, to sell on a two-for-one basis: \u201cevery second can FREE, gallon or quart.\u201d The problem was that it had never priced and sold single cans of paint, so the FTC assumed that the price of the second can was included in the first, even though Mary Carter claimed it had established single-can prices that were comparable to those for paint of comparable quality sold by competing manufacturers. The Supreme Court sustained the commission\u2019s finding of deception.\r\n\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s06\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Product Comparisons and Disparagements<\/h2>\r\n<span class=\"im_margin_term\"><span class=\"im_glossterm\">Product disparagement<\/span><\/span>\u2014saying defamatory things about a competitor\u2019s product\u2014is a common-law tort, actionable under state law. It is also actionable under Section 5 of the FTC Act. The FTC brands as disparagement the making of specific untrue statements about a competitor\u2019s product. The agency labels an indirect form of disparagement \u201ccomparative misrepresentation\u201d\u2014making false claims of superiority of one\u2019s own product. Again, the common-law puffing rule would permit the manufacturer of an over-the-counter pain reliever to make the general statement \u201cOur pill is the best.\u201d But the claim that a pill \u201cworks three times as fast as the leading competitor\u2019s\u201d violates Section 5 if untrue.\r\n\r\nTruth has always been a defense to claims of product disparagement, but even that common-law rule has been eroded in recent years with the application of the <em class=\"im_emphasis\">significance<\/em> doctrine. A statement may be technically true but insignificant and made in such a way as to be misleading. For example, <em class=\"im_emphasis\">P. Lorillard Co. v. Federal Trade Commission<\/em> (Section 27.5.2 \"Product Comparisons\") concerned a comparative study published in <em class=\"im_emphasis\">Reader\u2019s Digest<\/em> of tar and nicotine in cigarettes. The article suggested that the differences were inconsequential to health, but the company making the cigarette with the smallest amount of tar and nicotine touted the fact anyway.\r\n\r\nDuring the 1970s, to help enforce its rules against comparative misrepresentations, the FTC began to insist that advertisers fully document any quantitative claims that their products were superior to others. This meant that the advertiser should have proof of accuracy not only if the commission comes calling; the advertiser should collect the information beforehand. If it does not, the claim will be held presumptively deceptive.\r\n\r\nThe FTC Act and state laws against misleading advertising are not the only statutes aimed at product comparisons. One important more recent federal law is the Trademark Law Revision Act of 1988, amending the original Lanham Act that protects trademarks as intellectual property (see Chapter 30 \"Intellectual Property\"). For many years, the federal courts had ruled that a provision in the Lanham Act prohibiting false statements in advertisements was limited to an advertiser\u2019s false statements about its own goods or services only. The 1988 amendments overturned that line of court cases, broadening the rule to cover false statements about someone else\u2019s goods or services as well. The amendments also prohibit false or misleading claims about another company\u2019s commercial activities, such as the nature of its warranties. The revised Lanham Act now permits a company injured by a competitor\u2019s false advertising to sue directly in federal court.\r\n\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s07\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Endorsements<\/h2>\r\nHow wonderful to have a superstar (or maybe yesterday\u2019s superstar) appear on television drooling over your product. Presumably, millions of people would buy a throat spray if Lady Gaga swore by it, or a pair of jeans if Justin Bieber wore them, or a face cream if Paris Hilton blessed it. In more subtle ways, numerous products are touted every day with one form of testimonial or another: \u201cThree out of four doctors recommend\u2026\u201d or \u201cDrivers across the country use.\u2026\u201d In this area, there are endless opportunities for deception.\r\n\r\nIt is not a deception for a well-known personality to endorse a product without disclosing that she is being paid to do so. But the person giving the testimonial must in fact use the product; if she does not, the endorsement is deceptive. Suppose an astronaut just returned to Earth is talked into endorsing suspenders (\u201cThey keep your pants from floating away\u201d) that he was seen to be wearing on televised shots of the orbital mission. If he has customarily worn them, he may properly endorse them. But if he stops wearing them for another brand or because he has decided to go back to wearing belts, reruns of the TV commercials must be pulled from the air.\r\n<div id=\"mayer_1.0-ch49_s02_s07_f01\" class=\"im_figure im_large im_editable im_block\">\r\n\r\n<span class=\"im_title-prefix\">Figure 27.2<\/span>\r\n\r\n<a href=\"https:\/\/textimgs.s3.amazonaws.com\/buslegalenv\/section_30\/d8ba2c93d642b69d56f49bd45db4f653.jpg\" target=\"_blank\"><img src=\"https:\/\/textimgs.s3.amazonaws.com\/buslegalenv\/images\/sm_d8ba2c93d642b69d56f49bd45db4f653.jpg#fixme\" alt=\"\" \/><\/a>\r\n\r\nConsent Decree: Pat Boone and Cooga Mooga, Inc.\r\n\r\n<\/div>\r\nThat a particular consumer is in fact ecstatic about a product does not save a false statement: it is deceptive to present this glowing testimonial to the public if there are no facts to back up the customer\u2019s claim. The assertion \u201cI was cured by apricot pits\u201d to market a cancer remedy would not pass FTC muster. Nor may an endorser give a testimonial involving subjects known only to experts if the endorser is not himself that kind of expert, as shown in the consent decree negotiated by the FTC with singer Pat Boone (Figure 27.2).\r\n\r\n<\/div>\r\n<div id=\"mayer_1.0-ch49_s02_s08\" class=\"im_section\">\r\n<h2 class=\"im_title im_editable im_block\">Pictorial and Television Advertising<\/h2>\r\nPictorial representations create special problems because the picture can belie the caption or the announcer\u2019s words. A picture showing an expensive car may be deceptive if the dealer does not stock those cars or if the only readily available cars are different models. The ways of deceiving by creating false inferences through pictures are limited only by imagination. White-coated \u201cdoctors,\u201d seals of the British monarchy, and plush offices can connote various things about a product, even if the advertisement never says that the man in the white coat is a doctor, that the product is related to the British crown, or that the company has its operations in the building depicted.\r\n\r\nTelevision demonstrations may also suggest nonexistent properties or qualities in a product. In one case, the commission ordered the manufacturer of a liquid cleaner to cease showing it in use near hot stoves and candles, implying falsely that it was nonflammable. A commercial showing a knife cutting through nails is deceptive if the nails were precut and different knives were used for the before and after shots.\r\n<div id=\"mayer_1.0-ch49_s02_s08_n01\" class=\"im_key_takeaways im_editable im_block textbox\">\r\n<h3 class=\"im_title\">Key Takeaway<\/h3>\r\nA variety of fairly common acts and practices have been held by the FTC to be deceptive (and illegal). These include the failure to disclose pertinent facts, misleading price and savings claims, bait and switch advertisements, careless use of the word \u201cfree,\u201d and comparative misrepresentation\u2014making misleading comparisons between your product and the product of another company.\r\n\r\n<\/div>\r\n<div class=\"bcc-box bcc-info\">\r\n<h3>Exercises<\/h3>\r\n<section id=\"self-check-questions\">\r\n<ol>\r\n\t<li>Look around this week for an example of a merchant offering something for \u201cfree.\u201d Do you think there is anything deceptive about the merchant\u2019s offer? If they offer \u201cfree shipping,\u201d how do you know that the shipping cost is not hidden in the price? In any case, why do consumers need protection from an agency that polices merchant offerings that include the word <em class=\"im_emphasis\">free<\/em>?<\/li>\r\n\t<li>Find the FTC\u2019s guide against deceptive pricing (<a class=\"im_link\" href=\"http:\/\/www.ftc.gov\/bcp\/guides\/decptprc.htm\" target=\"_blank\">http:\/\/www.ftc.gov\/bcp\/guides\/decptprc.htm<\/a>). Can you find any merchants locally that appear to be in violation of the FTC\u2019s rules and principles?<\/li>\r\n<\/ol>\r\n<\/section><\/div>\r\n<div id=\"mayer_1.0-ch52_s02_s06_n02\" class=\"im_exercises im_editable im_block\"><\/div>\r\n<\/div>","rendered":"<div class=\"bcc-box bcc-highlight\">\n<h3>Learning Objectives<\/h3>\n<p>By the end of this section, you will be able to:<\/p>\n<ul id=\"mayer_1.0-ch52_s02_l01\" class=\"im_orderedlist\">\n<li>Name the categories of deceptive acts and practices that the Federal Trade Commission has found, and give examples.<\/li>\n<\/ul>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s01\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Failure to Disclose Pertinent Facts<\/h2>\n<p>Businesses are under no general obligation to disclose everything. Advertisers may put a bright face on their products as long as they do not make a direct material misrepresentation or misstatement. But under certain circumstances, a business may be required to disclose more than it did in order not to be involved in unfair or deceptive acts and practices. For example, failure to state the cost of a service might constitute deception. Thus a federal court has ruled that it is deceptive for a telephone service to fail to disclose that it cost fifteen dollars per call for customers dialing a special 900 number listed in newspaper advertisements offering jobs.<span id=\"mayer_1.0-fn49_001\" class=\"im_footnote\"><em class=\"im_emphasis\">FTC v. Transworld Courier Services, Inc.<\/em>, 59 A&amp;TR Rpt. 174 (N.D. Ga. 1990).<\/span> Likewise, if a fact not disclosed might have a material bearing on a consumer\u2019s decision whether to purchase the product, its omission might be tantamount to deception, as <em class=\"im_emphasis\">J. B. Williams Co. v. FTC<\/em> (see Section 27.5.1 &#8220;False and Misleading Representations&#8221;), suggests.<\/p>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s02\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Descriptions of Products<\/h2>\n<p>Although certain words are considered mere puffery (<em class=\"im_emphasis\">greatest<\/em>, <em class=\"im_emphasis\">best<\/em>), other words, which have more precise connotations, can cause trouble if they are misused. One example is the word <em class=\"im_emphasis\">new<\/em>. In most cases, the Federal Trade Commission (FTC) has held that if a product is more than six months old, it is not new and may not lawfully be advertised as such.<\/p>\n<p>The efficacy of products is perhaps their most often advertised aspect. An ad stating that a product will do more than it can is almost always deceptive if the claim is specific. Common examples that the FTC continues to do battle over are claims that a cream, pill, or other substance will \u201crejuvenate\u201d the body, \u201ccure\u201d baldness, \u201cpermanently remove\u201d wrinkles, or \u201crestore\u201d the vitality of hair.<\/p>\n<p>The composition of goods is another common category of deceptive claims. For example, a product advertised as \u201cwool\u201d had better be 100 percent wool; a mixture of wool and synthetic fabrics cannot be advertised as wool. The FTC has lists of dozens of descriptive words with appropriate definitions.<\/p>\n<p>Labeling of certain products is strictly regulated by specific statutes. Under the Food, Drug, and Cosmetic Act, artificial colors and flavors must be disclosed. Other specific federal statutes include the Wool Products Labeling Act, the Textile Fiber Products Identification Act, the Fur Products Labeling Act, and the Flammable Fabrics Act; these acts are enforced by the FTC. In 1966, Congress enacted the Fair Packaging and Labeling Act. It governs most consumer products and gives the FTC authority to issue regulations for proper labeling of most of them. In particular, the statute is designed to help standardize quantity descriptions (\u201csmall,\u201d \u201cmedium,\u201d and \u201clarge\u201d) and enable shoppers to compare the value of competing goods in the stores.<\/p>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s03\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Misleading Price and Savings Claims<\/h2>\n<p>\u201cBuy one, get another for half price.\u201d \u201cSuggested retail price: $25. Our price: $5.95.\u201d \u201cYours for only $95. You save $50.\u201d Claims such as these assault the eye and ear daily. Unless these ads are strictly true, they are violations of Section 5 of the FTC Act. To regulate deceptive price and savings claims, the FTC has issued a series of <em class=\"im_emphasis\">Guides against Deceptive Pricing<\/em> that set forth certain principles by which the commission will judge the merits of price claims. These guides are not themselves law, but they are important clues to how the FTC will act when faced with a price claim case and they may even provide guidance to state courts hearing claims of deceptive pricing ads.<\/p>\n<p>In general, the guides deal with five claims, as follows:<\/p>\n<ul id=\"mayer_1.0-ch49_s02_s03_l01\" class=\"im_itemizedlist im_editable im_block\">\n<li><strong class=\"im_emphasis im_bold\">Comparisons of the sale price to a former price.<\/strong> The former price must have been offered for a substantial period of time in the near past for a seller to be justified in referring to it. A product that once had a price tag of $50, but that never actually sold for more than $40, cannot be hawked at \u201cthe former price of $50.\u201d Under the FTC guides, a reduction of at least 10 percent is necessary to make the claim true.<\/li>\n<li><strong class=\"im_emphasis im_bold\">Comparable products.<\/strong> \u201cThis same mattress and box spring would cost you $450 at retail.\u201d The advertisement is true only if the seller is in fact offering the same merchandise and if the price quoted is genuine.<\/li>\n<li><strong class=\"im_emphasis im_bold\">\u201cSuggested\u201d retail price.<\/strong> The same rules apply as those just mentioned. But in the case of a \u201cmanufacturer\u2019s suggested\u201d price, an additional wrinkle can occur: the manufacturer might help the retailer deceive by listing a \u201csuggested\u201d price that is in fact considerably greater than the going price in the retailer\u2019s trading area. Whether it is the manufacturer who is doing his own selling or the retailer who takes advantage of the \u201clist price\u201d ticket on the goods, the resulting claim of a bargain is deceptive if the product does not sell for the list price in any market or in the market of the retailer.<\/li>\n<li><strong class=\"im_emphasis im_bold\">Bargain based on the purchase of something else.<\/strong> The usual statement in these cases is \u201cBuy one, get one free\u201d (or at some percentage of the usual selling price). Again, the watchwords are <em class=\"im_emphasis\">literal accuracy<\/em>. If the package of batteries normally sells in the advertiser\u2019s store for ninety-nine cents, and two packages are now selling for that price, then the advertisement is unexceptionable. But advertisers are often tempted to raise the original selling price or reduce the size or quantity of the bargain product; doing so is deceptive.<\/li>\n<li><strong class=\"im_emphasis im_bold\">False claims to explain a \u201csale\u201d price.<\/strong> \u201cGiant clearance sale\u201d or \u201cgoing out of business\u201d or \u201climited offer\u201d are common advertising gimmicks. If true, they are legitimate, but it takes very little to make them deceptive. A \u201climited offer\u201d that goes on forever (or a sale price charged beyond the date on which a sale is said to end) is deceptive. Likewise, false claims that imply the manufacturer is charging the customer a small price are illegitimate. These include claims like \u201cwholesale price,\u201d \u201cmanufacturer\u2019s close-outs,\u201d \u201cirregulars,\u201d or \u201cseconds.\u201d<\/li>\n<\/ul>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s04\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Bait-and-Switch Advertisements<\/h2>\n<p>A common sales pitch in retail is the <span class=\"im_margin_term\"><span class=\"im_glossterm\">bait and switch<\/span><\/span>. The retailer \u201cbaits\u201d the prospective customer by dangling an alluring offer, but the offer either disappears or is disparaged once the customer arrives. Suppose someone sees this advertisement: \u201cSteinway Grand Piano\u2014only $1,000.\u201d But when the customer arrives at the store, he finds that the advertised product has \u201csold out.\u201d The retailer then tries to sell the disappointed customer a higher priced product. Or the salesperson may have the product, but she will disparage it\u2014pointing out that it does not really live up to the advertised expectations\u2014and will exhort the customer to buy the \u201cbetter,\u201d more expensive model. These and related tactics are all violations of Section 5 of the FTC Act. In its <em class=\"im_emphasis\">Guides Against Bait Advertising<\/em>, the FTC lists several such unfair practices, including the following: (1) refusing to demonstrate the advertised product, (2) disparaging the product (e.g., by exhibiting a visibly inferior grade of product next to higher-priced merchandise), (3) failing to stock enough of the advertised product to meet anticipated demand (although the advertiser may say \u201csupplies limited,\u201d if that is the case), (4) stating that delivery of the advertised product will take an inordinate amount of time, (5) demonstrating a defective product, and (6) deliberately discouraging the would-be buyer from purchasing the advertised product.<\/p>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s05\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Free Offers<\/h2>\n<p>Careless advertisers will discover that <em class=\"im_emphasis\">free<\/em>, perhaps the most powerful word in advertising, comes at a cost. As just noted, a product is not free if it is conditional on buying another product and the price of the \u201cfree\u201d product is included in the purchased product (\u201cBuy one tube and get another tube free\u201d). Just how far the commission is prepared to take this rule is clear from <em class=\"im_emphasis\">F.T.C. v. Mary Carter Paint Co<\/em>.<span id=\"mayer_1.0-fn49_002\" class=\"im_footnote\"><em class=\"im_emphasis\">F.T.C. v. Mary Carter Paint Co.<\/em>, 382 U.S. 46 (1965).<\/span> In that case, the company offered, from the time it began business, to sell on a two-for-one basis: \u201cevery second can FREE, gallon or quart.\u201d The problem was that it had never priced and sold single cans of paint, so the FTC assumed that the price of the second can was included in the first, even though Mary Carter claimed it had established single-can prices that were comparable to those for paint of comparable quality sold by competing manufacturers. The Supreme Court sustained the commission\u2019s finding of deception.<\/p>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s06\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Product Comparisons and Disparagements<\/h2>\n<p><span class=\"im_margin_term\"><span class=\"im_glossterm\">Product disparagement<\/span><\/span>\u2014saying defamatory things about a competitor\u2019s product\u2014is a common-law tort, actionable under state law. It is also actionable under Section 5 of the FTC Act. The FTC brands as disparagement the making of specific untrue statements about a competitor\u2019s product. The agency labels an indirect form of disparagement \u201ccomparative misrepresentation\u201d\u2014making false claims of superiority of one\u2019s own product. Again, the common-law puffing rule would permit the manufacturer of an over-the-counter pain reliever to make the general statement \u201cOur pill is the best.\u201d But the claim that a pill \u201cworks three times as fast as the leading competitor\u2019s\u201d violates Section 5 if untrue.<\/p>\n<p>Truth has always been a defense to claims of product disparagement, but even that common-law rule has been eroded in recent years with the application of the <em class=\"im_emphasis\">significance<\/em> doctrine. A statement may be technically true but insignificant and made in such a way as to be misleading. For example, <em class=\"im_emphasis\">P. Lorillard Co. v. Federal Trade Commission<\/em> (Section 27.5.2 &#8220;Product Comparisons&#8221;) concerned a comparative study published in <em class=\"im_emphasis\">Reader\u2019s Digest<\/em> of tar and nicotine in cigarettes. The article suggested that the differences were inconsequential to health, but the company making the cigarette with the smallest amount of tar and nicotine touted the fact anyway.<\/p>\n<p>During the 1970s, to help enforce its rules against comparative misrepresentations, the FTC began to insist that advertisers fully document any quantitative claims that their products were superior to others. This meant that the advertiser should have proof of accuracy not only if the commission comes calling; the advertiser should collect the information beforehand. If it does not, the claim will be held presumptively deceptive.<\/p>\n<p>The FTC Act and state laws against misleading advertising are not the only statutes aimed at product comparisons. One important more recent federal law is the Trademark Law Revision Act of 1988, amending the original Lanham Act that protects trademarks as intellectual property (see Chapter 30 &#8220;Intellectual Property&#8221;). For many years, the federal courts had ruled that a provision in the Lanham Act prohibiting false statements in advertisements was limited to an advertiser\u2019s false statements about its own goods or services only. The 1988 amendments overturned that line of court cases, broadening the rule to cover false statements about someone else\u2019s goods or services as well. The amendments also prohibit false or misleading claims about another company\u2019s commercial activities, such as the nature of its warranties. The revised Lanham Act now permits a company injured by a competitor\u2019s false advertising to sue directly in federal court.<\/p>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s07\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Endorsements<\/h2>\n<p>How wonderful to have a superstar (or maybe yesterday\u2019s superstar) appear on television drooling over your product. Presumably, millions of people would buy a throat spray if Lady Gaga swore by it, or a pair of jeans if Justin Bieber wore them, or a face cream if Paris Hilton blessed it. In more subtle ways, numerous products are touted every day with one form of testimonial or another: \u201cThree out of four doctors recommend\u2026\u201d or \u201cDrivers across the country use.\u2026\u201d In this area, there are endless opportunities for deception.<\/p>\n<p>It is not a deception for a well-known personality to endorse a product without disclosing that she is being paid to do so. But the person giving the testimonial must in fact use the product; if she does not, the endorsement is deceptive. Suppose an astronaut just returned to Earth is talked into endorsing suspenders (\u201cThey keep your pants from floating away\u201d) that he was seen to be wearing on televised shots of the orbital mission. If he has customarily worn them, he may properly endorse them. But if he stops wearing them for another brand or because he has decided to go back to wearing belts, reruns of the TV commercials must be pulled from the air.<\/p>\n<div id=\"mayer_1.0-ch49_s02_s07_f01\" class=\"im_figure im_large im_editable im_block\">\n<p><span class=\"im_title-prefix\">Figure 27.2<\/span><\/p>\n<p><a href=\"https:\/\/textimgs.s3.amazonaws.com\/buslegalenv\/section_30\/d8ba2c93d642b69d56f49bd45db4f653.jpg\" target=\"_blank\"><img decoding=\"async\" src=\"https:\/\/textimgs.s3.amazonaws.com\/buslegalenv\/images\/sm_d8ba2c93d642b69d56f49bd45db4f653.jpg#fixme\" alt=\"\" \/><\/a><\/p>\n<p>Consent Decree: Pat Boone and Cooga Mooga, Inc.<\/p>\n<\/div>\n<p>That a particular consumer is in fact ecstatic about a product does not save a false statement: it is deceptive to present this glowing testimonial to the public if there are no facts to back up the customer\u2019s claim. The assertion \u201cI was cured by apricot pits\u201d to market a cancer remedy would not pass FTC muster. Nor may an endorser give a testimonial involving subjects known only to experts if the endorser is not himself that kind of expert, as shown in the consent decree negotiated by the FTC with singer Pat Boone (Figure 27.2).<\/p>\n<\/div>\n<div id=\"mayer_1.0-ch49_s02_s08\" class=\"im_section\">\n<h2 class=\"im_title im_editable im_block\">Pictorial and Television Advertising<\/h2>\n<p>Pictorial representations create special problems because the picture can belie the caption or the announcer\u2019s words. A picture showing an expensive car may be deceptive if the dealer does not stock those cars or if the only readily available cars are different models. The ways of deceiving by creating false inferences through pictures are limited only by imagination. White-coated \u201cdoctors,\u201d seals of the British monarchy, and plush offices can connote various things about a product, even if the advertisement never says that the man in the white coat is a doctor, that the product is related to the British crown, or that the company has its operations in the building depicted.<\/p>\n<p>Television demonstrations may also suggest nonexistent properties or qualities in a product. In one case, the commission ordered the manufacturer of a liquid cleaner to cease showing it in use near hot stoves and candles, implying falsely that it was nonflammable. A commercial showing a knife cutting through nails is deceptive if the nails were precut and different knives were used for the before and after shots.<\/p>\n<div id=\"mayer_1.0-ch49_s02_s08_n01\" class=\"im_key_takeaways im_editable im_block textbox\">\n<h3 class=\"im_title\">Key Takeaway<\/h3>\n<p>A variety of fairly common acts and practices have been held by the FTC to be deceptive (and illegal). These include the failure to disclose pertinent facts, misleading price and savings claims, bait and switch advertisements, careless use of the word \u201cfree,\u201d and comparative misrepresentation\u2014making misleading comparisons between your product and the product of another company.<\/p>\n<\/div>\n<div class=\"bcc-box bcc-info\">\n<h3>Exercises<\/h3>\n<section id=\"self-check-questions\">\n<ol>\n<li>Look around this week for an example of a merchant offering something for \u201cfree.\u201d Do you think there is anything deceptive about the merchant\u2019s offer? If they offer \u201cfree shipping,\u201d how do you know that the shipping cost is not hidden in the price? In any case, why do consumers need protection from an agency that polices merchant offerings that include the word <em class=\"im_emphasis\">free<\/em>?<\/li>\n<li>Find the FTC\u2019s guide against deceptive pricing (<a class=\"im_link\" href=\"http:\/\/www.ftc.gov\/bcp\/guides\/decptprc.htm\" target=\"_blank\">http:\/\/www.ftc.gov\/bcp\/guides\/decptprc.htm<\/a>). Can you find any merchants locally that appear to be in violation of the FTC\u2019s rules and principles?<\/li>\n<\/ol>\n<\/section>\n<\/div>\n<div id=\"mayer_1.0-ch52_s02_s06_n02\" class=\"im_exercises im_editable im_block\"><\/div>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-225\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>Business and the Legal Environment. <strong>Authored by<\/strong>: Anonymous. <strong>Provided by<\/strong>: Anonymous. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"http:\/\/2012books.lardbucket.org\/books\/business-and-the-legal-environment\/\">http:\/\/2012books.lardbucket.org\/books\/business-and-the-legal-environment\/<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by-nc-sa\/4.0\/\">CC BY-NC-SA: Attribution-NonCommercial-ShareAlike<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":5,"menu_order":183,"template":"","meta":{"_candela_citation":"[{\"type\":\"cc\",\"description\":\"Business and the Legal Environment\",\"author\":\"Anonymous\",\"organization\":\"Anonymous\",\"url\":\"http:\/\/2012books.lardbucket.org\/books\/business-and-the-legal-environment\/\",\"project\":\"\",\"license\":\"cc-by-nc-sa\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-225","chapter","type-chapter","status-publish","hentry"],"part":755,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/chapters\/225","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/wp\/v2\/users\/5"}],"version-history":[{"count":3,"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/chapters\/225\/revisions"}],"predecessor-version":[{"id":891,"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/chapters\/225\/revisions\/891"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/parts\/755"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/chapters\/225\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/wp\/v2\/media?parent=225"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/pressbooks\/v2\/chapter-type?post=225"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/wp\/v2\/contributor?post=225"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/clinton-buslegalenv\/wp-json\/wp\/v2\/license?post=225"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}