Whenever a business or an individual engages in activity that is likely to mislead the public may be considered a “deceptive trade practice”. Deceptive trade practices are prohibited due to the negative effects they have on consumers and the general public.
Federal and state laws prohibit the use of deceptive trade practices. The Uniform Deceptive Trade Practices Act (UDTPA) is an example of federal legislation that regulates deceptive trade practices. All states have adopted some form of the Act in their own statutes. The Federal Trade Commission Act also governs deceptive trade practices.
Deceptive trade practice laws cover a very wide range of business aspects, including trade & commerce, consumer transactions, and goods & services.
Examples of Deceptive Trade Practices
Deceptive trade practices can take a variety of forms. The basic idea behind deceptive trade practice is that the activity results in misleading or misinforming the recipient of goods or services. The most common examples of deceptive trade practices are false advertising, and tampering with odometers or other measuring devices.
Some other examples of activities that would be considered deceptive trade practices may include:
- Passing off goods or services as those of another
- Causing a likelihood of misunderstanding or confusion regarding the source, certification, or approval of goods or services.
- Using deceptive designations or representations of the geographic origin of goods/services
- Representing that the goods or services have ingredients, characteristics, uses, qualities, or benefits that they do not actually have
- Claiming that goods are new or original if they are used, second-hand, altered, or deteriorated
- Representing that certain goods or services are of a certain quality, grade, standard, model, or style, when they are of another
- Misrepresenting the goods, services, or business of another entity through the use of misleading facts
- Advertising products with the intent to sell them at a different price or quantity than advertised (for example, price reductions)
Thus, the majority of deceptive trade practices are connected with the provision of goods and services.
False Advertising
The phrase “false advertising” applies to any publicity or advertising that misrepresents the nature, quality, characteristics, or origin of commercial activities, goods, or services. A business that knowingly releases an ad that contains misleading, deceptive, or untrue statements to sell its product can be held liable for injuries resulting from false advertising.
The Federal Trade Commission (“FTC”) is the government agency responsible for implementing regulations concerning unfair trade practices, which is how false advertising is classified. Depending on the relief sought, an action for false advertising can be filed in either a civil or criminal court. This is because false advertising is deemed both a tort and a crime in the eyes of the law.
It was not until more recently that private citizens were able to sue businesses for false advertising. Before states began implementing consumer protection and deceptive advertising laws, consumers could only submit complaints to the FTC, which would need to notify or penalize the business itself. However, individuals who have been injured by false advertising can pursue private lawsuits per the statutes enacted in their state.
For example, suppose you bought a protein bar that claimed to have specific nutritional benefits and no added sugars. Suppose it is discovered that the protein bar has none of the nutritional benefits the company claims it has and has added sugars. In that case, you may be able to recover damages by taking legal action against the company.
Any advertisement containing deceptive, inaccurate, or misleading representations is considered false. As mentioned above, this form of advertising is an unfair trade practice. False advertising includes:
- False statements about a product's effectiveness or quality
- Fake endorsements
- Fake testimonials
- Phony picture of the product
- Fraudulent prices in the advertisement
- Bait and switch advertising
Federal Protections Against False Advertising
The FTC is the main federal government agency responsible for overseeing and enforcing false advertising regulations. However, given this task's enormous undertaking, the FTC relies on consumers and competitors alike to report unlawful and deceptive advertising. The FTC will then investigate the complaint, and if it discovers that an ad does violate the law, it can take several actions.
First, the FTC will tell and attempt to get the company to fix its mistakes on its own. If the company ignores this proposal, the FTC can issue a cease-and-desist order and file a lawsuit on behalf of injured consumers. During the case, the FTC may ask the court to grant an injunction against the company to have them abstain from continuing to employ false advertising practices.
The FTC can also issue fines and may have the business or their third-party advertiser release new ads that provide correct facts and information and may even force the company to recognize those earlier ads contained false statements. The regulation that allows the FTC to carry out such actions is known as the “Federal Trade Commission Act (“FTCA”)”; specifically, Section 5 of the Act.
Another federal law that protects against fraudulent advertising practices is the “Consumer Financial Protection Act (“CFPA”).” The CFPA was responsible for creating the Consumer Financial Protection Bureau (“CFPB”), which is the agency that implements the CFPA. The CFPA permits the CFPB to take legal action against financial organizations (e.g., banks, credit card companies, etc.) for dishonest, abusive, or misleading practices on behalf of consumers.
One other primary law that shields consumers against false advertising and deceptive practices is the “Federal Food, Drug, and Cosmetic Act (“FFDCA”),” which is implemented by the U.S. Food and Drug Administration (“FDA”). The FFDCA dictates the type of information that needs to be disclosed in drug advertisements and food labels.
Do Deceptive Trade Practices Laws cover other issues besides Goods and Services?
Yes- in addition to the provisions contained in federal and state laws, deceptive trade practices are also monitored and regulated by the Federal Trade Commission (FTC)
These focus more on the activities of business rather than the goods and services, including:
- Using unfair or unconscionable (one-sided) provisions in contracts
- Using coercive or high pressure sales and collections tactics
- Engaging in illegal conduct
- Taking advantage of factual circumstances, such as emergency situations or the vulnerability of a particular marketing demographic
Remedies for Deceptive Trade Practices
Consumers and individuals who have been victimized through deceptive trade practices may have a variety remedies available for them in court. Some of these remedies include:
- Monetary Compensation: A plaintiff who has proven actual damages may be entitled to statutory damages to reimburse them for losses. Some states enforce treble damages in severe cases, which require the offender to pay triple the amount of the losses. Punitive damages and criminal prosecution may be available in some jurisdictions
- Equitable Relief: A court may also order an injunction which requires the offender to follow certain measures or abstain from specified activities. Cease and desist orders are also commonly issued for deceptive trade practices.
Some state statutes allow for “private enforcement”, which means that individual citizens may directly sue the business for deceptive trade practice violations. However, some states do not allow private enforcement or individual lawsuits. Instead, the state or the federal government itself will bring suit against the business organization.
Is Puffery An Unfair Trade Practice?
No. Puffery involves extravagant or exaggerated statements made to entice customers to buy a certain service or product. Engaging in puffery is not illegal because companies can “puff up” their products as long as it is opinion rather than fake facts.
Why Hire a Lawyer?
If you have been the victim of deceptive trade practices, you may have a variety of remedies available to you. You may wish to contact a business lawyer for advice on how to file a claim for damages. Experienced attorneys can also help defend businesses that are being accused of committing deceptive trade practices.
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