The General Types of Deceptive Advertising With Which The FTC is Most Concerned: Week 7 Critical Thinking - Legal Environment of Business

 

The Federal Trade Commission (TFC) gets the power to monitor advertising from the 1914 Federal Trade Commission Act’s section 5 (Kubasek, 2016). The section forbids practices in commerce that demonstrate unfairness and deceptive tendencies. Although the definition of what is “unfair” or “deceptive” is left to the courts and TFC, the Act instructs that investigation should focus on the impression the consumers get from the advertisement. According to Federal Trade Commission (2021), an ad becomes “deceptive” if it either leaves out or contains information with the potential to mislead consumers.

The case becomes stronger if the “material” information is critical for the consumer’s purchase and/or utilisation of the concerned product. On the other hand, the Federal Trade Commission considers an advertisement “unfair” if it could harm the consumer or when the product’s disadvantages exceed its benefits. Therefore, it is inappropriate to simply judge the advertisement by concentrating on the particular words and phrases it contains. The Act allows the Commission to utilize its understanding of the effect of the advertisement to determine it is deceptive.

• FTC has concerns about the impliedly false (or misleading) advertisements

According to Holmes (1981), both the non-stated and written information of an advertisement could mislead consumers. As it is, therefore, even if the written statements are true, an advertisement can still be deceptive if the information availed is not conclusive. This particularly happens in instances where the advertiser withholds the unfavourable details to avoid discrediting or contradicting the prior explanations (Federal Trade Commission, 2021). The unspoken information may as well be deceptive if the Commission finds out that the hidden intention of the advertiser is to mislead consumers.

An example is the P. Lorillard Co. v. FTC case in which the Commission brought before the Fourth Circuit on allegations that the company deceived consumers by only revealing a section of the truth in its advertisement. In this case, the fact was that a particular study published in Reader’s Digest that Lorillard’s Old Gold cigarettes had lower nicotine and tar content than its competitors, which is the exact thing Lorillard told consumers. Still, the company was sued for not including the second part of the study which stated that the difference was little enough and was as good as insignificant. The Fourth Circuit concluded that the company violated section 5 of the FTC Act.

• The second type of advertisements sought by FTC consists of directly false (or misleading) advertisements

A company that shares false information to mislead its target audiences breaches the terms of the FTC Act’s section 5 (Kubasek, 2016). It does not matter if the involved firm is not aware of the ads’ deceptive state or even if the company had no intention to deceive (Holmes, 1981). The Commission will not be required to present evidence if the ads’ tendency to deceive is apparent. Other than verbal, the deceptive features may be in the nonverbal forms like pictures or illustrations.

In 2003, the Commission had major concerns over dietary supplements (like Slim Down Solution) whose manufacturers, claimed had fat absorption ability and could lead the absorbed fat out of the human body without dieting or following some routine exercising. The ad was so convincing that a viewer would want to grab the supplement right away. However, the Commission alleged that claims were false (Swindle, 2003). Another example is the FTC v. Colgate-Palmolive Co. In this case, FTC accused the manufacturer together with its advertising agency of production of a misleading commercial.

The television commercial illustrated how the company made a shaving cream with the capability to “soften” anything even sandpaper. In the visual presentation, however, the advertiser made use of a Plexiglas layer containing loose sand in the place of sandpaper. The Supreme Court decided that the lack of disclosure that the advertiser used mock-up and the fact that they made viewers think they watched a true experiment, was deceptive. The Commission did not even need testimonies of consumers to confirm that the commercial content was misleading.

• FTC has concerns over material non-disclosure

If an organisation or its advertiser fails to provide consumers with material information, the advertisement can be defined as deceptive or unfair. Here, material information refers to a range of facts that if not revealed to consumers the advertisement qualifies to be a misleading one. Even then, the term is not very clear hence it is often applied alongside other doctrines that describe misleading and false or half-truth innuendos (Holmes, 1981). The Lorillard case, thus, belongs to this category as well because the company deceived potential buyers when it stated that its cigarettes had the least tar and nicotine while hiding the fact that the difference between these components in its cigarettes and those of competitors was quite minimal.

• FTC watches out for commercials with unsubstantiated advertising declarations

This doctrine of “ad substantiation” demands that advertisers should use substantial data to support the claims made on a product that is advertised. In fact, the advertiser should refer to the data before formulating the product claims. The consumers will check the proof to decide if the claims are factual. In other words, the FTC Act states that section 5 is violated if the advertiser does not have reasonable evidence to support the product claims that it makes (Kubasek, 2016).

There are specific strategies that the Commission expects to be followed when dealing with this type of advertisement. One, check for the reasonable basis upon which the advertisement claims are founded. In this process, the Commission’s model checks for the specific information that may convince a “reasonably prudent entrepreneur” with positive intentions that the claims he or she makes are backed by adequate proof (Federal Trade Commission, 2021).

Holmes (1981) argued that some of the factors that must be considered in this process include the nature and precision of the statements, features of the product, the potential effect on consumers in the event that the indicated claims are false, the level to which consumers may independently confirm the claims’ validity, and the accessibility of advertising (in case the need to substantiate the claims arises). Two, it is FTC’s duty to determine the evidence that is substantial enough to confirm the concerned claims.  Next, FTC expects the advertiser to have the same evidence so that he or she relies on it when coming up with the advertisement claims. Other than supporting evidence, the advertiser is required to express good faith and satisfactory prudence.