5 Ways to Steer Clear of False Advertising

by QuickBooks

2 min read

Now that outspoken consumer advocate Elizabeth Warren has won her bid for the U.S. Senate, business leaders nationwide are anticipating increased scrutiny of their practices to make sure they’re complying with truth-in-advertising laws.

Warren was instrumental in the 2010 creation of the Consumer Financial Protection Bureau, which investigates claims of false advertising at the federal level. Attorneys general continue to investigate and enforce consumer protection laws at the state level. They work in partnership with both the Consumer Financial Protection Bureau and the FTC to “set enforcement priorities,” says Richard Cordray, director of the Consumer Financial Protection Bureau. The USA.gov Index of State and Local Consumer Agencies lists consumer protection offices at the state and local levels.

Here are five tips for making sure your advertising claims are fair and accurate:

1. Avoid bait-and-switch advertising. The Federal Trade Commission defines “bait advertising” as “an alluring but insincere offer to sell a product or service, which the advertiser in truth does not intend or want to sell.” The typical scheme is to offer a cheap product and then up-sell the customer. The intent of the merchant determines whether or not a bait-and-switch scheme has occurred. For example, a merchant’s compensatory practices may discourage a sales rep from actively selling the advertised special, if that rep will make significantly more selling an unadvertised, but more costly product. This scenario could result in a claim of false advertising, according to the U.S. Code of Federal Regulations.

2. Stock an adequate supply of advertised items. If a merchant advertises a product, stocks limited inventory, and attempts to up-sell the customer when demand exceeds supply, that’s usually considered false advertising, too. According to the County of Los Angeles Department of Consumer Affairs, merchants offering tempting discounts on popular items could run afoul of the law if they fail to stock enough items to meet “reasonable demand.”

3. Temper eco-friendly claims. On Oct. 1, the FTC completed revisions to its Green Guides. The commission determined that terms such as “eco-friendly” and “green” are deceptive unless they’re “qualified in some manner.” The commission also emphasized the need for merchants to qualify terms such as “recyclable” and “biodegradable.” These new guides provide an indication of how the agency may handle allegations of false advertising involving eco-friendly products.

4. Avoid false “going out of business” claims. It’s not uncommon for a merchant to plan a liquidation sale at the end of year, as it taps holiday shoppers to clear existing inventory. However, authorities charged with enforcing false-advertising laws may levy penalties against a business that isn’t closing or relocating or that exceeds time limits for concluding the sale. For example, in Washington state, a moving sale may not be advertised more than 14 days before the sale starts. Be aware of the laws in your state before pursuing a liquidation sale.

5. Make sure the fine print supports larger claims. If an offer states a price or option in large type and then states a different option in small print, that’s one more example of deceptive advertising. Be sure to follow all rules related to the size of fine print, too. For example, the New York City Department of Consumer Affairs requires small print in advertising to be no smaller than 10-point type [PDF].

Related Articles

Pricing Strategies For Products And Services

Pricing is a balancing act that involves psychology, art and science. You…

Read more

Your Financing Options

Current financing options are broken into three categories: Small Business or High-Growth…

Read more

How to Choose the Right Location for Your Small Business

You’ve done the initial legwork. You know your target market and the…

Read more