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What is False Advertising?

The term “false advertising”, or "deceptive advertising", applies to any promotions or advertising that misrepresent the nature, quality, characteristics, or origin of commercial activities, goods, and/or services. An ad can be deceptive in many aspects, including:

  • Price of a product
  • Quantity of a product
  • The quality or standard of the item
  • Times, dates, and locations that the product is available
  • Information regarding warranties
  • False facts regarding deals or sales
  • Confusion over interest rates or other factors

A business who knowingly releases an ad that contains misleading, deceptive, or untrue statements in order to sell their product can be held liable for injuries resulting from false advertising. Under state and federal laws, advertising may be considered deceptive even if the creator of the ad didn't intend for it to be so. That is, a deceptive advertising claim can be raised even if the ad contained a mistake.

The Federal Trade Commission (“FTC”) is the government agency responsible for enforcing 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 considered both a tort and a crime in the eyes of the law.

Though 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 who would then need to notify or penalize the business itself. Now, however, persons who have been injured by false advertising can pursue private lawsuits in accordance with the statutes enacted in their state.

For instance, suppose you purchased a protein bar that claimed to have certain nutritional benefits and no added sugars. If it is discovered that the protein bar in fact has none of the nutritional benefits the company claims it has and it also has added sugars, then you may be able to recover damages by taking legal action against the company.

What are Some Examples of False Advertising Practices?

There are many different ways that a business can engage in false advertising practices. Some of the most common methods include:

  • Adding misleading information (e.g., food contains no sugar, but actually does); 
  • Making inconsistent or incomplete comparisons to competitors' products and/or services; 
  • Using deceptive illustrations (e.g., a food item or product appears bigger than it is);
  • Advertising a certain price, but leaving out the fact there are extra fees; 
  • Claiming a company is having a “going out of business” sale to raise prices; and
  • Applying bait and switch tactics (i.e., advertising one product, substituting with a similar more expensive product, and claiming the advertised product is sold out). 

What are the Federal Protections Against False Advertising?

As previously mentioned, the FTC is the main federal government agency responsible for overseeing and enforcing false advertising regulations. However, given the enormous undertaking that this task requires, 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 in fact violate the law, it can take several actions.

First, the FTC will notify and attempt to get the business to correct its errors on its own. If the business ignores this request, 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 business to have them refrain 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 business to admit that earlier ads contained false statements. The law that authorizes 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 false 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 enforces the CFPA. The CFPA authorizes the CFPB to take legal action against financial organizations (e.g., banks, credit card companies, etc.) for unfair, abusive, or deceptive practices on behalf of consumers.

One other major law that protects consumers against false advertising and deceptive practices is the “Federal Food, Drug, and Cosmetic Act (“FFDCA”)”, which is enforced by the U.S. Food and Drug Administration (“FDA”). The FFDCA dictates the type of information that needs to be disclosed in both drug advertisements and on food labels.

What are the State Protections Against False Advertising?

As discussed above, almost every state now has a statute that protects consumers against unfair business practices and false advertising. Most states that have enacted false advertising laws have modeled them after the FTCA. Such state laws permit consumers who have been harmed by deceptive ads to sue companies responsible for the advertisement in question. A few states even provide for criminal punishment if fraud is part of the equation. 

For example, if the way a business falsely advertises a product rises to the level of fraud and is so harmful that it causes serious financial loss or health problems, that business can be charged with a misdemeanor offense. If convicted, the business can face fines and jail time. A sentence for false advertising jail can last for up to one year, depending on the number of repeated offenses the business has committed. 

Are There Any Legal Penalties for False Advertising?

Some penalties and consequences for deceptive advertising include:

  • Legal damages for losses caused to a consumer
  • Refund or exchange of a product
  • Public recall of a product (especially in cases where there is a defect with the product)
  • Injunction to have the ad removed or replaced
  • Civil fines

In many cases, these types of claims are handled and investigated by the Federal Trade Commission (FTC). Special laws exist depending on the type of product or service being rendered. For instance, there are very specific laws that govern advertising for professionals such as doctors and lawyers.

What is the Lanham Act?

The Lanham Act, also known as the Trademark Act of 1946, is the primary federal law that governs trademarks and unfair competition. The Act was responsible for creating a national trademark registration system and provides protection against trademark infringement, false advertising, and the use of similar marks (e.g., logos, service marks, symbols, etc.). 

Companies can use the trademark registration system to check that a mark they want to use is not already registered. 

In preventing trademark infringement and false advertising through its provisions, the goal of the Lanham Act is to promote fair competition among businesses and to protect consumers from false and deceptive business practices. 

What are the Steps to Sue Someone for False Advertising?

The steps for suing for false advertising will depend on many factors, such as the type of law that applies (e.g., federal versus state) and the cause of action (e.g., unfair competition, false advertising, fraud, etc.). 

Cases that involve federal matters will first need to be filed with the appropriate government agency before it can get to court. In such instances, the government agency responsible for overseeing the matter will sue on behalf of wronged consumers. 

When a claim for false advertising is based on state law, however, the statutes in the jurisdiction hearing the case will control the process. Also, in class action false advertising lawsuits that affect many individuals or involve businesses from more than one state, the Uniform Deceptive Trade Practices Act (“UDTPA”) may provide guidance as well. 

In general, a person seeking relief for false advertising should first report the complaint to their local consumer affairs agency. The state agency will provide instructions for how to file a complaint, and can help a person to determine if they have a private right of action and how much their case could be worth in damages. If the individual does have a case, they should speak to a local business attorney to obtain further legal advice. 

Depending on how many consumers were affected, the attorney may recommend filing a class action lawsuit instead of an individual case. Regardless of which path is chosen, both will require filing the claim in court, serving the complaint on the opposing party, going through the pre-trial stages, and eventually either settling with the other side or proceeding with a trial. 

The penalties for false advertising can range from civil to criminal. If a plaintiff successfully sues a company for false advertising, they may recover monetary damages awards and can request that the court issue an injunction against the company to prohibit false advertising practices. 

On the other hand, if the business is charged and convicted of committing false advertising in a criminal court, they may have to pay hefty criminal fines, serve some amount of jail time, and change their business practices. In some cases, a business may even be ordered to pay restitution to its victims. 

How Can I Make Sure My Advertisements Don't Violate the Law?

Aside from either reviewing both federal and state regulations or hiring a lawyer to explain them, there is currently no set framework to follow to ensure an advertisement does not violate the law. However, there are several basic rules to abide by when advertising that will help a business to avoid running into legal trouble. These include:

    • Refrain from making deceptive or misleading statements when advertising a product or service. In other words, do not make claims that are knowingly false. Like in the protein bar example above, do not say a product can do something it cannot. 
    • Remember to get permission to use endorsement materials, such as quotes, photographs of celebrities, scientific studies, and so forth. Do not just place it on the product or in an ad without getting consent and verifying its accuracy. 
    • The same holds true when attempting to knock out the competition. Review statements that put down other businesses for truth and try to avoid making comparisons if possible. If the business feels it is necessary to compare itself to its competitors, then make sure to at least treat them fairly and honestly.
    • If a business is advertising a sale or promotion, then that business must have a sufficient amount of the sale items in stock. If this is not possible, say something in the ad that notifies consumers about such limitations. State regulations will typically define how much product a business should have in stock when running a promotion or sale. 
    • Using the word “free” in a promotion can also lead to legal ramifications. All terms and conditions must be stated in the offer. For example, if a business advertisement says, “buy one, get one free,” it must state things like whether that includes taxes on the second “free” bottle, if it pertains to the same brand, and so on. 
    • If a business advertises that they offer easy access to credit lines or money-back guarantees, they must have proof that supports those claims.
    • Finally, if nothing else, always strive to be truthful with consumers. This is an extremely important guideline to follow, especially when it comes to advertising the price of goods and/or services. 

Do I Need an Attorney for Help with False Advertising Issues?

Working with an experienced lawyer for false advertising issues can be a valuable asset for your claim. A lawyer who handles false advertising cases on a regular basis will already be familiar with the laws that apply, will know which claims are strong enough to make it to court, and will be able to predict the possible outcomes of your case based on the relevant facts. 

Thus, if you believe you have suffered a harm, a financial loss, or a health scare as a result of false advertising, then it may be in your best interest to consult a local business lawyer to learn more about your options for legal recourse. Your lawyer will be able to assess the facts of your claim, can determine whether you have a viable case, and can help you with the proper legal procedures to get you the relief you need.

In addition to the benefits just mentioned, your lawyer can also explain how the laws in your jurisdiction may affect your claim, can discuss the potential remedies you might recover if your case is successful, and can provide representation in court. 

Alternatively, if you are a business who is being sued for false advertising or needs advice regarding how to avoid false advertising issues, then you should hire a business lawyer for further legal advice. 

Your lawyer will be able to answer any questions or concerns you may have about false advertising, and can make sure your business ads are compliant with both state and federal laws. In the event you are being sued, your lawyer can also help you prepare your defense, determine whether there are any defenses you can raise against a claim, and represent you in court.

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