Claims of false advertising happen all the time. But what is false advertising?
We know that advertisements have the power to persuade customers into taking certain actions. What happens when companies use false advertising?
Nearly every company uses advertising to market and grow their business. Advertising has grown as a tool so much that it is nearly impossible to go a single day without hearing or seeing some kind of advertisement.
For this reason, many governments have regulations in place to control false or misleading advertisements in order to protect consumers. False advertising is the use of misleading, false or deceptive statements in advertising and the misrepresentation of a product, which may negatively affect consumers.
The Federal Trade Commission (FTC) was created with the goal of protecting American consumers, preventing fraud, deception and unfair business practices in the marketplace, while maintaining market competition.
Advertisements are a part people's everyday lives. They hear ads on the TV or radio and they see ads on online or on billboards. The FTC enforces federal laws that require ads to be truthful, not misleading, and when appropriate, backed with scientific evidence. https://www.ftc.gov/news-events/media-resources/truth-advertising
The FTC is particularly careful at inspecting advertisements that deal with claims that can affect an American consumer's health or wallets. These products include medicine, food, alcohol, tobacco, and technology.
If the FTC finds fraud, they file legal action in federal district court. When the FTC finds a company using false advertising, they can file orders with the federal district court to freeze the company's assets, order them to stop scams, and get compensation for victims.
Some examples of false advertising includes:
- Hiding fees on a product. A company may advertise a product at a low price, but then add on additional fees, such as taxes, insurance, and shipping, in order to increase profit.
- Creating deceptive ads that omit important information.
- Using misleading illustrations to encourage people to buy products.
The following major companies were all busted for false advertising claims in the last few years:
- In 2015, Target agreed to pay nearly $4 million, settling a lawsuit that alleged Target charged customers prices that were much higher than what they had advertised.
- In 2014, Walmart agreed to pay $66,000, settling charges that alleged that Walmart overcharged on advertised prices of 12-packs of Coca Cola.
- In 2013, major retailers: Macy's, Amazon, and Sears agreed to pay hundreds of thousands of dollars in fines for misrepresenting products, mainly labeling rayon fabric as bamboo.