False advertising: an essay
The role of advertising in our free market society is to help develop products that meet consumer demands and to stimulate effective price competition. Advertising informs consumers about product availability, product features, and pricing information. Such information is vital to our competitive process. Advertisers employ unfair business practices to gain an unfair advantage over their competitors and mislead consumers. The following essay examines the common types of deceptive acts and practices involved and the federal government agency that regulates advertisers. Government regulation provides a delicate balance between free commercial enterprise and consumer protection.
Companies rely on advertising as a vital communication tool to reach potential consumers. Important company information and product features are passed on to consumers in an attempt to offer them products that meet their wants and needs. In addition to print, radio, and television, the laws governing advertising also cover signs, billboards, pamphlets, pictures or emblems, and direct and oral advertisements to consumers. To some extent, advertising is protected by our courts under “commercial freedom of speech” guidelines. However, the information transmitted to consumers must be perceived as “truthful” in order to be protected against arbitrary government intrusion.
Consumers are protected from advertisers who intentionally or inadvertently mislead when promoting their products. Two main areas consumers are protected from are misleading advertising and unfair acts or practices. False advertising is when an advertisement is misleading through a statement, word, device, sound, or omission made or suggested of material fact regarding the consequences that may result from the use of the product. This definition refers to foods, drugs, devices and cosmetics. Additionally, an advertisement may be viewed as a false or misleading representation due to an implied representation.
Generally speaking, an act or practice is considered unfair when it harms consumers, harms public policy, or is based on the immoral, unethical, or unscrupulous nature of the practice. A good example of how advertising harms consumers was when regulators decided it was unfair for cigarette manufacturers to ignore the health risks of cigarette smoking. This led to legislation requiring health warnings on cigarette advertising.
The Federal Trade Commission is the federal government agency that regulates, monitors, and challenges advertising claims believed to be unlawfully misleading. The FTC uses the following criteria when determining to challenge an advertising representation:
1) The ad makes a representation, omission, or uses a practice that is likely to mislead the consumer. The representation may be explicit (literal claim) or implied (indirect or by implication) in the advertisement.
2) The representation, omission, or practice is misleading when viewed from the perspective of a reasonable consumer.
3) The representation, omission or practice is material. The FTC assesses the extent to which the questionable ad influences buying behavior or patterns. A representation, omission or practice is material when purchasing behaviors or patterns are affected.
The FTC has the authority to penalize violating companies that violate the false advertising rules. There are several types of remedies and penalties available to the FTC to enforce the law. Such remedies and sanctions include:
Injunction: a court order prohibiting or compelling future conduct.
Cease and Desist Orders: Prohibits the business from engaging in the act or practice found to be deceptive.
Affirmative Disclosure Orders: The company is prohibited from making the claim in the future without making additional disclosure.
Corrective Advertising: Requires the advertiser to state in all future advertising that specific claims made in the past were false.
Multiple Product Order – Applies to all future advertising for all products sold by the business.
Consent order: the company agrees to cease certain activities without admitting wrongdoing.
The basic goal of the FTC is to increase the accuracy of product information available to consumers. They do this by imposing regulations on very specific advertising practices such as; simulated demonstrations, endorsements or testimonials, price-based promotions, advertisements related to the availability of credit, and product labeling.
To avoid FTC scrutiny, advertisers must be able to substantiate their claims about a product’s attributes or performance through a “reasonable basis.” An advertiser who claims their product “kills cold and flu-causing germs” or “stimulates 25-pound weight loss in a week” must gather sufficient evidence of the claims’ validity, usually before it is printed. or stream the ad. If a complaint is filed with the FTC regarding the accuracy of an advertising claim, the FTC will evaluate the reasonableness of the advertisers’ justification to determine whether it serves the public interest. The reasonable basis doctrine applies to foods, drugs, devices, and cosmetics because their effect on the public is direct and their use can be life-threatening.
The huge amount of money spent on advertising is a testament to the importance of advertising in our economic system. In a sense, advertising feeds the economy. Unfortunately, the integrity of the advertising community must be monitored. The misleading advertising law is continually updated and improved to reflect changing product lines that appeal to an audience with specific and growing needs and wants. Government regulation provides the balance between the important issues of commercial freedom of expression, free commercial enterprise, and consumer protection.