Business Law - Deceptive Advertising

Hey, thanks for joining me for this lecture where we're going to be talking about deceptive advertising and specifically the role of the FTC and trying to determine what constitutes deceptive practices in the workplace. Now deceptive advertising is a critical concern and of course understanding how the FTC evaluates it is important for both businesses and consumers. So for starters, let's clarify what I mean when I say deceptive advertising. Now deceptive advertising involves making some sort of false or misleading claim about a product or a service to influence consumers purchasing decisions.

Now this can include false statements, omissions meaning leaving important things out or any practice that creates a false impression. Now the Federal Trade Commission or the FTC which we learned about in our last video is the key regulatory body and has the authority to address and take action against deceptive advertising under section 5 of the FTC Act. Now this section prohibits unfair deceptive practices in commerce. So how does the FTC determine what constitutes deceptive advertising?

Well the FTC relies on a set of criteria that helps assess whether an advertisement is deceptive. The first thing they look at is what is called material representation. So under material representation the common question that is asked is is there a representation omission or practice that is likely to mislead the consumer. So the FTC will look at whether the claim is important to consumers and will likely influence their purchasing decision in some way.

The other thing the FTC will look at is what we call the reasonable consumer standard. So the FTC is going to consider how a reasonable consumer would interpret the ad. And if the average consumer is likely to be deceived then the advertisement may be deemed to be deceptive. Now with regards to advertisement one important thing is what we call ad substantiation.

So advertisers are expected to have some sort of evidence to support their claims especially if they're material. So if an ad makes a specific representation about a product's performance or attributes then the advertiser is expected to have adequate substantiation and as a result to help kind of refute some sort of deceptive advertising claim. The last thing that's important when evaluating these types of claims is context. Now context of course matters.

So the overall context of the advertisement is crucial and the FTC is going to examine not only the specific claims but also the general impression created by the entire ad in order to determine if it's potentially deceptive. Now in considering all that we just went over it's important to note the concept of puffery in advertising. Now puffery involves exaggerated statements or claims that the average consumer wouldn't take literally. While the FTC focuses on preventing deceptive practices it generally doesn't scrutinize puffery as it's considered subjective and it's not likely to mislead a reasonable consumer.

Now a great example of this is Red Bull's constant use of the phrase. Red Bull gives you wings because a reasonably prudent person wouldn't expect to drink a can of red bull in all of a sudden develop wings that would be incredibly unrealistic and that would also fall under puffery. So if you're thinking about bringing a deceptive advertising claim against red bull because you didn't in fact develop wings and can fly which is kind of cool but unrealistic that would most likely be considered puffery and any claim would be thrown out. So now that we've explored the role of puffery let's take a look at some examples of deceptive advertising.

Now a couple of examples that can illustrate this. So the first thing is false claims. So a great example of this could be for specifically weight loss products that promises or that promise rather significant results without any sort of scientific backing. And so if they're claiming that if you take a particular weight loss drug and we'll lose 30 pounds then and have no scientific evidence to support that in terms of like case studies and trials and those sorts of things then it may be deemed deceptive.

The other thing are hidden fees and this has come across or come about a lot recently. Concealing fees until the checkout process can be misleading as it kind of omits the true cost of the product or service and so it's important for those things to be transparent. If all of a sudden you get the checkout and there's all these little itemized fees there could be a case for deceptive advertising at those were not disclosed at the very very beginning of the process. Now in the FTC identifies deceptive advertising it can take a variety of courses of action including things like cease and desist orders, pursuing civil pennant, pursuing civil penalties and corrective advertising and an attempt to rectify the deceptive impressions that were created due to the deceptive advertising.

Thanks for joining me for this video on deceptive advertising I hope you enjoyed it. Thank you for watching and we'll see you next time.