False advertising occurs when a company publishes an advertisement in a deceptive fashion about the price, quality, or purpose of its products and services. There are numerous state and federal laws regarding the specifics of what constitutes false advertising claims and what companies can and cannot say.
An example of a false advertising claim is a company advertising a product at one price and then charging you another price when you complete the order or advertising a special price for a service but after your purchase, you discover that the serviced offered at this price is not what’s expected. We can probably all think of times when we’ve run into false advertising situations and, apart from being illegal, you know that it makes you not want to deal with the company in the future.
Often, no legal action is taken for false advertising because the financial hurt to consumers is small and the biggest hurt is to the company’s reputation. However, sometimes, the loss from false advertising is enough for the consumer to take action or, more commonly, for a group of consumers to come together and file a class action lawsuit. These class action lawsuits often settle for significant damages. One example is the tobacco litigation, where a variety of false advertising claims were made against the tobacco industry regarding claims in their advertising and on the physical product about the health and safety of their products. The four largest players in the industry entered into a master settlement agreement to pay over $206 billion over the course of 25 years and abide by a number of restrictions on their on-going advertising campaigns.
Businesses should be careful not to engage in bait and switch, high-pressure sales tactics, or use deceptive contracts designed to inflate sales at the expense of honesty. False advertising can all result in, at best, disgruntled customers, and at worst, a lawsuit where damages are owed.
Examples of Specific Advertising Claims
One example of regulated advertising claims is the Federal Trade Commission’s regulations on using the label “Made in America” or “Made in the USA.” Businesses who want to use this label must ensure that not only final assembly, but substantially all of their product is made in the United States. Failure to meet this standard can result in action not only from consumers, but also from the FTC.
Another example is the use of “organic” and using the USDA organic seal in reference to the content of products. The US Department of Agriculture certifies foods that are labeled organic are grown and processed using specific federal guidelines. While small farmers are exempt from getting their products reviewed by a certifying agent, most businesses wanting to claim their products fall under this category must comply with the guidelines.
For more guidance on advertising claims, reach out to the experienced business attorneys at Chase Law Group, P.C. at (310) 545-7700. We can help you ensure you’re running campaigns that comply with all state and federal laws and help you draft effective, but not deceptive, sales contracts.