Published on April 17, 2020 by the FairShake Team
Do you know how to spot false advertising? Do you know what to do if you come across a company that’s using misleading marketing practices? Do you know how far laws can actually go to penalize companies that are found to be misleading their customers?
One of the best ways consumers can protect themselves is by clearly understanding the laws that are meant to protect them from businesses who don’t always act in the most scrupulous ways. If you’ve ever wondered about false advertising and misleading marketing—what they are, how to spot them, how laws protect you, and how you can report them if you see them—this guide is for you. Read on for our guide to false advertising and become a more informed consumer.
Disclaimer: This content is produced by FairShake for marketing purposes. While we do our best to provide quality research that you can use in your purchasing decisions, this is not intended as legal advice. FairShake is not an attorney. For legal advice, please consult an attorney.
We all know the old adage, “If it seems too good to be true, it probably is.”
That’s kind of the concept behind false advertising. A good rule of thumb to keep in mind when you’re keeping an eye out for misleading marketing practices.
What exactly counts as false advertising? According to truth in advertising laws (more on those in a minute), deceptive marketing is any that includes misleading, incorrect, or fraudulent information, whether the business does it intentionally or not.
It doesn’t matter where consumers encounter these advertisements. The Federal Trade Commission (FTC), the agency that enforces truth in advertising laws, says:
“whether it’s on the Internet, radio or television… in newspapers and magazines, online, in the mail, or on billboards or buses,” a business’ claim about its product or products cannot be misleading in any way; it must be truthful, and, whenever possible, backed by scientific evidence.
The FTC is particularly serious about any claims that could affect a consumer’s health or finances. Because of this, it tends to pretty tightly regulate advertising in industries like food, over-the-counter drugs, dietary supplements, cosmetics, alcohol, and tobacco. The FTC also has special guidelines for how funeral homes can advertise to help consumers make informed decisions during the most difficult times in their lives.
The rules about deceptive marketing and false advertising exist in the context of a patchwork of consumer protection laws at the state and federal level that relate to different industries. The Federal Trade Commission Act, which established the FTC in 1914, also includes a section that has become known as “truth in advertising” rules. These rules give the FTC jurisdiction to respond to complaints about false advertising from individuals or businesses. Some examples of the rules outlined in that section are:
To sum up the law: Businesses can’t lie to consumers, intentionally or not, to make their products or services look more appealing. If they do, that’s false advertising.
Unscrupulous businesses throughout history have come up with some creative ways to attempt to mislead their customers. Today, there are a lot of different forms we know of that false advertising can take. Keep in mind that this list isn’t exhaustive — businesses that want to deceive consumers come up with new ways to do so all the time. And the tactics listed below may not have consistent legal definitions across jurisdictions. However, these are some of the more common forms of false advertising consumers are likely to encounter.
Mislabeling is one of the most common forms of false advertising because it covers a broad range of deceptive practices. Mislabeling can include:
Sometimes businesses will attempt to lure in customers by offering incredible deals — that aren’t real. If they offer products or services at a particular price with no intention of ever selling them at that price, that may be bait-and-switch false advertising.
Sellers are legally obligated to share with consumers if a product might affect or harm their health. This is particularly important when it comes to advertisements for alcohol and medications — advertisers must disclose the potential health hazards and side effects that could occur. It’s illegal for sellers not to disclose any known information about a product that could lead to personal injury or property damage.
Sellers can also get themselves into trouble if they try to hype up their own products by comparing them to a competitor’s. Namely, if they make any false claims disparaging a competitor’s similar product in order to make their own product look better, that’s false advertising.
Relatedly mentioning a competitor’s product by name or using its image in an advertisement could infringe on the competitor’s trademark, which is also against the law.
Companies definitely try to skirt around this type of false advertising. Have you ever heard a commercial voiceover say the phrase, “Better than the leading brand?” That’s a way advertisers can compare their products to well-know competitors—without running up against the law.
This is where it starts to get tougher to tell whether a business is really using deceptive marketing tactics. “Puffery” is a term used to describe when businesses advertise using exaggerated claims that can’t be proven to be true or false.
These are usually pretty vague claims, so the business has plausible deniability. For example, a diner might claim to have “The best burgers in the tri-state area!” It’s impossible to prove or disprove, because “best burgers” is subjective.
Puffery isn’t as likely to result in harm or financial losses as some of the other forms of false advertising on this list, but it’s still a lazy marketing tactic — and, according to the FTC, illegal. But, most instances of puffery fly under the FTC’s radar, or result in, at most, a warning or small fine. Since the risk of the FTC penalizing companies for this kind of false advertising is low, it is still a common tactic. It’s good for consumers to be aware of this so they can recognize when companies are using puffery to exaggerate the quality of their goods and services. Those might be companies you want to avoid dealing with.
Everyone knows about Red Bull’s famous slogan: It gives you wings!
But what’s clearly meant to be a humorous campaign actually got the energy drink giant in some financial trouble — in 2014, Red Bull spent $13 million settling a class action lawsuit brought by people who challenged their claim, and correctly pointed out that there was no scientific proof that Red Bull makes you able to fly.
This may not be the best example, because most reasonable people can see that Red Bull wasn’t claiming its drinks would make you sprout literal wings. But that lawsuit illustrates the important point that making scientific claims about a product that can’t be backed up by evidence is against truth in advertising laws.
In the late ‘90s, staying up late with the TV on meant you were going to see infomercials for fitness equipment starring the likes of Arnold Schwarzenegger and Cindy Crawford. The only problem was those stars, as much as they touted the fat-burning potential of whatever home gym they were shilling, never used those products. Eventually, the FTC caught on, and today, infomercials are a lot more transparent than they used to be.
That’s because giving a review or a testimonial for a product you’ve never used is a form of false advertising. In the internet age, influencer marketing is a common tactic for companies advertising their products. But the influencers have to actually try out the goods, or those ads might be against the law.
Consumers are likely painfully familiar with this form of false advertising. Companies may try to make their goods and services look more appealing by not fully disclosing the price. But leaving service fees, maintenance charges, and equipment fees out of an advertisement or contract is against the law.
Even putting those extra charges into hard-to-navigate fine print might be considered false advertising. Basically, if you receive a bill that includes charges you didn’t expect, it might be a case for the FTC.
Here’s what some of those types of false advertising look like in practice. Over time, even big companies have gotten caught using misleading marketing tactics, like in these cases.
Airborne became all the rage in the ‘90s, when it hit store shelves claiming its blend of vitamins and minerals could help mitigate common illnesses like colds or the flu. But scientists at the Center for Science in the Public Interest (CSPI) tested those claims, and found there was no real science that could back them up. Airborne ended up paying $23.3 million to settle a false advertising lawsuit.
In the early 2000s, artificial sweetener Splenda hit the market with a catchy slogan: “Made from sugar, so it tastes like sugar.”
But there was a problem with that method of advertising. The Sugars Association discovered that Splenda is actually a chemical compound that’s processed in a factory. It’s not “made from sugar” at all. Splenda ended up having to settle lawsuits from both the Sugars Association and its rival artificial sweetener company, Equal.
In just the last few years, Volkswagen came under heavy fire for its claims that its vehicles used clean diesel fuel that reduced harmful carbon emissions. In reality, the automaker was cheating on emissions tests by outfitting its cars with a piece of software that could detect when a test was taking place, and temporarily reduce its harmful exhaust to fool testers.
This went on for more than seven years, but eventually, the FTC filed a lawsuit against Volkswagen for its false advertising. In addition, the company faced up to $90 billion in fines for violating the Clean Air Act. If there’s any cautionary tale that should warn companies against deliberately using misleading marketing tactics, it’s this one.
Now that you know how to recognize false advertising, what are you supposed to do when you see it?
Since “truth in advertising” rules are contained in Section 5 of the Federal Trade Commission Act, the FTC is in charge of making sure businesses follow all the rules. So if you’ve been swindled by false advertising (or just seen a company using deceptive marketing tactics), your first step is to submit a consumer complaint to the FTC. They can then investigate and take action against the company, which can range from asking them to stop the false advertising, issuing a fine, or suing the company in court.
At the same time, while the FTC can punish companies, many of the rules on how you can get recourse if you’ve been harmed by false advertising will depend on your state’s laws related to Unfair and Deceptive Acts and Practices.
If you’ve lost money because of false advertising, getting a business to make it right can be difficult and time-consuming. If the company’s customer service department can’t (or won’t) help you resolve your complaint, you do have other options. One of those is consumer arbitration.
You’ll present your case to an independent arbitrator, who will hear both sides of the dispute and help you reach a resolution. Consumer arbitration tends to be faster and cheaper than going to court, but there’s still paperwork and potentially confusing legal processes built in. That’s where we can help. FairShake helps you navigate the consumer arbitration process, from filing your claim to getting the resolution you deserve.