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Deceptive advertising |
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This article or section deals primarily with the United States and does not represent a worldwide view of the subject. Please improve this article or discuss the issue on the talk page. |
False advertising or deceptive advertising is the use of false or misleading statements in advertising. As advertising has the potential to persuade people into commercial transactions that they might otherwise avoid, many governments around the world use regulations to control false, deceptive or misleading advertising.
Service providers often tack-on fees and surcharges that are not disclosed to the customer in the advertised price. One of the most common is for activation of services such as mobile phones, but is also common in broadband and telephony. Other fees are pilfered from gift cards and bank accounts. In most cases, the fees are hidden in fine print, though in a few cases they are so confused and obfuscated by ambiguous terminology that they are essentially undisclosed.
This may also occur with the bait-and-switch tactic. BellSouth, for example, often advertises DSL service at low prices and with no installation charges, but in many of the same areas offers only FITL/FTTC service, which requires installation of separate Ethernet wiring into the home at significant cost.
Cable and telephone customers in the U.S. are often hit with a "regulatory cost recovery fee" (among other names), which sounds like it is mandated by the government, but which is actually the provider charging the customer for having to abide by the law. These are allegedly for local number portability and the Universal Service Fund, however consumer advocates allege that, because these fees are totally unregulated and are often well above what the companies are required to contribute, these fees are simply being used to skim extra profit from subscribers.
Rebates were originally intended to pass savings directly from the manufacturer to the consumer. However in the U.S. they have become probably the biggest way to trick shoppers into paying more than the advertised price. Stores advertise a "sale" price and note only in the fine print that it is not the price at which it is actually sold for, but instead an "after rebate" price, which also fails to include sales tax. Many rebate fulfillment companies have been accused of intentionally reneging on obligations to return money to the customers.
In comparing a sale price to a "regular" price for the same product, advertisers can inflate the "regular" price in order to create the impression that the sale price is very low. The intent is obviously to mislead consumers into thinking that they are saving money by purchasing the "on-sale" item or service by advertising a large-percentage "discount". Some clothing stores in particular have essentially every item on "sale", and some grocery stores advertise "savings" over their "regular" prices for those using loyalty cards.
In the United Kingdom, under the Sale of Goods Act, any item in a sale must have been sold at the non-sale price for at least 28 consecutive days. Many companies sidestep this requirement by selling items at very high prices in a single store (often in expensive parts of London) for 28 days, before selling the items at the "sale" price in their other stores.
Another closely-related trick is the "sale" which becomes more or less permanent, though the actual price or percent off may fluctuate, or even briefly go back to the inflated regular price. In the U.S. this is often seen in craft and home décor stores such as Michaels and Jo-Ann, and to a lesser extent Hobby Lobby and Garden Ridge. Because these stores carry a high proportion of seasonal merchandise (Christmas, Halloween, summer, etc.), those products are constantly on "sale" from the time it is all stocked on the sales floor until the time it is all gone at closeout. This defies the definition of a sale event.
Some stores, especially discount stores like variety stores, use the disclaimer that "selected items" are on sale. However, the items actually "selected" may be arbitrary. This allows the cashier to refuse to correct the price of an item to what is shown on the sign the store placed on the shelf where those items are sold, which is the price which the store must legally honor.
Psychological pricing "lowers" the price of item, usually by one cent (or local equivalent), to fool customers into thinking the price is somehow "less" than the price point the seller has set. This works because people tend to pay attention only to the most significant digit in the price.
Another similar trick is to hide the cents in small print. Gas stations in the U.S. almost always tack-on nearly an extra cent per gallon, by advertising as 2.859, for example. This is also done by other retailers, such as 199.99 for an item that is, for all intents and purposes, 200 dollars.
Some U.S. stores advertise one price on the signs for each item throughout the store, but add the small print "plus 10% at register" at the bottom. This makes real-price comparisons more difficult. In addition, the "cost" to which the 10% is added is not the real wholesale cost as it implies, but also shipping and overhead, thus making it more like "cost plus more costs plus 10%". This is common at some lesser grocery stores such as Food Depot, which end up being nearly the price of regular stores, and often more compared to the other stores' sale prices.
This type of false advertising concludes that more is better. By increasing the price of a firecracker, for example, to five times its original marginal profit-based price, a 5-for-1 "special" sale is offered while still keeping the same profit line.
In other cases the free product is of lower quality than the originally-purchased item.
Often, buy-one-get-one "deals" are simply an excuse to use the word "FREE" in advertising. The item may simply be "50% off" or "half price", or the shopper may actually be forced to buy at least two, or even in multiples of two. Because the shopper must buy something first, the "free" item is not truly gratis.
A bait-and-switch is an offer of a service or product at a very low price (often a loss leader), with little or no intention to sell said service or product as advertised. If available at all, this low price is accomplished by lowering standards on the advertised product, such as guarantees, credit terms, or quality, thereby making it undesirable.
Another method is to offer a "limited quantity" deal, with only a few of the advertised product[s] per store. Once the consumer is in the store, sales personnel will try to coax him or her to purchase a different and more expensive product. This is more common, as it is often legal if there is a disclosure of the limited quantity available.
An introductory offer is an offer for an ongoing service that is valid for a limited period. After this period, the price or terms of the agreement change, often without further notice to any consumers which have accepted the initial offer. This differs from bait and switch because the terms or "bait" are in fact actually delivered (making it only deceptive rather than inherently false), but the switch still occurs later on.
The most common form of this is credit cards, which offer low interest rates to start and then rise greatly afterward. Enormous increases in rates are often triggered by a single late or overdraft, in addition to the enormous fees for the late or overdraft. Credit card companies have been criticized in the U.S. for luring college and university students with these offers and then making huge profits from the fees and rates after the students get themselves into debt.
Introductory offers are also very common for cable TV, satellite TV, VoIP, and Internet services, especially those with bundling. The intent is to get the consumer used to receiving the service before the price goes up, so that they will continue on as customers with a much higher profit margin for the service provider.
By utilizing advertisement with titles such as "going out of business", "store closing", "liquidation sale" or "bankruptcy sale" a message of urgency and "dumped" prices is conveyed - where in reality the business has no plans on closing its store or going out of business. Some cities in the U.S. now require permits for these types of advertisements to combat the false advertising. A few stores have done a "going out for business" sale, perhaps hoping that the small word substitution will go unnoticed.
Another trick is to make the unit of pricing smaller than the mandatory unit of sale. One example is airlines, where a one-way price is quoted, even though it is impossible to get a one-way ticket for that price, and the flyer is instead forced to pay for a two-way ticket. Similarly, loudspeakers are often quoted as single units, even though the buyer is forced to buy two.
In grocery stores, Kroger (and potentially others) used to advertise a box of cookies for ten cents, using a giant fluorescent red-orange sticker. However, under the enormous "10¢", there was tiny fine print, less than the size of the large "1", which says "per cookie". This was further reinforced by the fact that the box was clear plastic, allowing the shopper to actually see all of the cookies.
Some stores will use ads which show products that are not even on sale at all. Since the great majority of advertising is for sales, this often misleads the consumer into thinking that the items are at a special price, when in fact they are not. Wal-Mart and others are known for engaging in this, especially during the Christmas rush.
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Utilizing words such as descriptive terms or location terms to increase the perceived value of a product. An example would be advertising sparkling white wine from Burgundy as "Champagne", or Vidalia onions which are from Texas instead of near Vidalia, Georgia. These can also be considered infringement of trademarks in many cases. Another example is the United Egg Producers' "Animal Care Certified" logo on egg cartons which misled consumers by conveying a higher level of animal care than was actually the case. Both the Better Business Bureau and the Federal Trade Commission found the logo to be deceptive and it can no longer be used.
Seagate Technology and Western Digital, makers of computer storage devices, were sued for misrepresenting the capacity of their hard drives. The class-action suit filed against the two companies accused them of using a definition of gigabyte that overstated available capacity by about 7%. Both companies agreed to settle the suit and reimburse customers in-kind.12
Internet service providers may advertise their service as offering "up to 8 Mbit/s", whereas on average use it could be just 1 Mbit/s. The use of "up to" in the description protects them legally, while raising false hopes in the customers. Further, in the fine print it is mentioned that this includes both the download and upload speeds, deteriorating the customer's usage experience even more.
Some products are sold with fillers, which increase the legal weight of the product with something that costs the producer very little compared to what the consumer thinks that he or she is buying. Food is an example of this, where chicken meat is injected with broth or even brine, or TV dinners are filled with gravy or other sauce instead of meat. Both malt and ham have been used as a color filler in peanut butter.3 Canned tuna may also be labeled with a weight that includes the water or vegetable oil, though these are almost always drained off and are therefore useless. In addition weight in either ounces, grams, milliliters, pounds... etc. is printed on the package to indicate the weight of the actual content.
In other cases, packages are under-filled, simply leaving empty space at the top, in products such as coffee cans which cannot be seen into until being purchased and opened at home. Particularly deceptive is when the same size of packaging is used for less product than it used to be. This deceives consumers into continuing to buy the product, which they expect to have the same amount it always has. To evade legal problems, the label is changed to reflect the actual new amount, but this is essentially fine print which anyone is unlikely to notice.
A similar problem in Christmas lights and other light strings is that the length of each set has gotten shorter since the 1980s despite containing the same number of lights. The length of the set is given in small print while the number of lights is in large print. Some also fail to list the lighted length, instead including the lead-in cord.
Manufacturers and sellers often use terms that sound advanced or deluxe to the average consumer, but really mean nothing at all. The most-abused term of the 2000s is "digital", often applied to things which are not digital in any way. Headphones are often labeled as "digital" or "digital ready", when in fact they are inherently and entirely analog. The term has also been applied to amplified radio antennas used to receive over-the-air television, even though digital TV signals are radio waves just as with analog television.
It is mandatory in most countries to have a date of expiry in products. Many countries enforce that a 'normal' food and beverage 'must' expire within six months or one year. However, some products, intentionally code the manufactured date and not the expiry date or the reverse (where the expiry date is printed but not the date of production).
The other form of information required is the net weight (which means, the actual weight of the product without the weight or size of packaging and fillers) of the product.
Many products also lack the country of manufacture and instead have the country forwarding the product. Some products have a list of countries permitted to sell the product but have no information of the country of origin.
Sellers may manipulate standards to mean something different than their widely-understood meaning. One example is with personal computer hard drives. While a megabyte has always meant 220 (1,048,576) bytes in computer science, disk manufacturers began using the irrelevant (to computer science) metric system (SI) prefix meaning of 106 (1,000,000) bytes, thereby overstating capacity by nearly 5%. With gigabytes, the error increases to over 7% (1,073,741,824 instead of 1,000,000,000).
Another such issue is with antennas, where dBi is used instead of dBd. In this instance, dBd refers to the gain (and therefore the ability to receive radio waves) an antenna has compared to a standard dipole antenna. However, dBi refers to an imaginary isotropic antenna that radiates equally in every direction, which could never be built. This makes the labeled antenna appear to have more gain than it actually does.
A different use of this tactic is in refinancing of mortgages, where a U.S. radio ad in June 2006 advertised an "apparent" interest rate of just "1¼%" several times, but slipped-in the real rate of over 6% just once in the ad. (See interest-only mortgage.)
The use of labels with statements concerning quality, identity, quantity, manufacture or origin that are misrepresented or false.
Another method of false labelling is hiding or destroying a label indicating the product's origin (e.g. "Made in Taiwan" or "Made in Botswana").
For foods, the expiry date may be changed, which in meats can cause dangerous levels of salmonella or other bacteria to grow. For other foods, they may simply become stale while still being safe to eat.
Tobacco companies, used for many years, terms like low tar light, ultra light, mild or natural, but in recent years it was proved that those terms were considered misleading.
Other offenses include failing to notify consumers of something they have the right to know, such as whether the food is genetically engineered, or whether meats have been treated with carbon monoxide (which displaces the oxygen that causes browning of raw beef).
Many well-known companies simply rent their names out to other lesser-known companies. This misleads the consumer to believe that he or she is getting a quality product, which will be backed-up by the company, when in reality this may not be the case. General Electric, for example, no longer makes its own Christmas lights, and never made USB hubs at all, though its logo appears on both. Another example is the IBM PCs which are now made by the Lenovo Group.
In the UK, most price based methods of false advertising are prohibited and strictly regulated. Hence, the methods detailed in the pricing section are rarely encountered and used only by the most disreputable operators, who are likely breaking the law by doing so.
Advertising is regulated by the authority of the Federal Trade Commission, a United States administrative agency, to prohibit "unfair and deceptive acts or practices in commerce."4 While it makes laymen's sense to assume that being deceptive is being unfair, deceptiveness in practice has been treated separately by the FTC, leaving unfairness to refer only to other types.5 All commercial acts may be deceptive, not just advertising, but noncommercial activity such as advertising for political candidates is not subject to prosecution under the FTC Act. The 50 states have similar statutes, which generally are very similar to that of the FTC and in many cases copied so closely that they are known as "Little FTC Acts." While the terms "false" and "deceptive" are essentially the same for most, being deceptive is not the same as producing deception. What is illegal is the potential to deceive, which is interpreted to occur when consumers see the advertising to be stating to them, explicitly or implicitly, a claim that they may not realize is false and material. The latter means that the claim, if relied on for making a purchasing decision, is likely to be harmful by adversely affecting that decision. If an ad is implicitly false, evidence must be obtained for what consumers saw the ad saying, and for the materiality of that, and for the true facts about the advertised item, but no evidence is required that actual deception occurred, or that reliance occurred, or that the advertiser intended to deceive or knew that the claim was false.
The goal is prevention rather than punishment, reflecting the purpose of civil law in setting things right rather than that of criminal law. The typical sanction is to order the advertiser to stop its illegal acts, or to include disclosure of additional information that serves to avoid the chance of deception. Corrective advertising may be mandated 6,7. But there are no fines or prison time except for the infrequent instances when an advertiser refuses to stop despite being ordered to do so.8
The actual statute defines false advertising as a "means of advertisement other than labeling, which is misleading in a material respect; and in determining whether an advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual." 9
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