False advertising

False advertising or deceptive advertising is the use of false or misleading statements in advertising. As advertising has the potential to persuade people into commercial transactions that they might otherwise avoid, many governments around the world use regulations to control false, deceptive or misleading advertising. Truth in labeling refers to essentially the same concept, that customers have the right to know what they are buying, and that all necessary information should be on the label.

False advertising, in the most blatant of contexts, is illegal in most countries. However, advertisers still find ways to deceive consumers in ways that are not illegal.

Pricing-based methods

Hidden fees and surcharges

Service providers are often tack on fees and surcharges that are not disclosed to the customer in the advertised price. One of the most common is for activation of services such as mobile phones, but is also common in broadband, telephony and air travel. In most cases, the fees are hidden in fine print, though in a few cases they are so confused and obfuscated by ambiguous terminology that they are essentially undisclosed. Hidden fees are frequently used in airline and air travel advertising.

"Going out of business" sales

In many cases, the liquidators which are hired to sell merchandise from a closing store will actually raise the prices on items that were already marked-down on clearance. For items already marked-down to 50% off, this means the liquidator is doubling the price (quadrupling it for a 75%-off price), and then "discounting" it from there. Also common is for the sale prices at a retail chain's other stores to be lower than the liquidator's prices at the closing stores. Both of these were proven to be the case in November 2008, with the same liquidator (Hilco) committing both offenses: the markups at Linens 'n Things, and the higher prices on around one-third of the items compared to other Circuit City stores remaining open. Additionally, liquidators refuse to accept returns, so if a customer does find he or she has been overcharged, there is no apparent recourse.

Other deceptive methods

Manipulation of standards

Sellers may manipulate standards to mean something different than their widely-understood meaning. One example is with personal computer hard drives. While a megabyte has always meant 2²⁰ (1,048,576) bytes in computer science, disk manufacturers began using the irrelevant metric system (SI) prefix meaning of 10⁶ (1,000,000). By stating the sizes of hard drives in 'megabytes' of 1,000,000 bytes instead of 1,048,576, they overstate capacity by nearly 5%. With gigabytes, the error increases to over 7% (1,073,741,824 instead of 1,000,000,000), and nearly 10% for the newer terabyte. Seagate Technology and Western Digital, were sued in a class-action suit for this. Both companies agreed to settle the suit and reimburse customers in-kind, yet they still continue to advertise this way.

Fillers and oversized packaging

Some products are sold with fillers, which increase the legal weight of the product with something that costs the producer very little compared to what the consumer thinks that he or she is buying. Food is an example of this, where chicken meat is injected with broth or even brine (up to 15%), or TV dinners are filled with gravy or other sauce instead of meat. Malt and Cocoa Butter have been used as a color filler in peanut butter.

Undefined terms

Many terms do have some meaning, but the specific extent is not legally defined, leading to their abuse. A frequent example (until the term gained a legal definition) was "organic" food. "Light" food also is an even more common manipulation. The term has been variously used to mean low in calories, sugars, carbs, salt, texture, thickness (viscosity), or even light in color. Tobacco companies, for many years, used terms like "low tar", "light", "ultra-light", "mild" or "natural", but in recent years it was proved that those terms were considered misleading.

Another example is the United Egg Producers' "Animal Care Certified" logo on egg cartons which misled consumers by conveying a higher level of animal care than was actually the case. Both the Better Business Bureau and the Federal Trade Commission found the logo to be deceptive and the original logo can no longer be used.

Regulation and enforcement

United States

Advertising is regulated by the authority of the Federal Trade Commission, a United States administrative agency, to prohibit "unfair and deceptive acts or practices in commerce." While it makes laymen's sense to assume that being deceptive is being unfair, deceptiveness in practice has been treated separately by the FTC, leaving unfairness to refer only to other types. All commercial acts may be deceptive, not just advertising, but noncommercial activity such as advertising for political candidates is not subject to prosecution under the FTC Act. The 50 states have similar statutes, which generally are very similar to that of the FTC and in many cases copied so closely that they are known as "Little FTC Acts." While the terms "false" and "deceptive" are essentially the same for most, being deceptive is not the same as producing deception. What is illegal is the potential to deceive, which is interpreted to occur when consumers see the advertising to be stating to them, explicitly or implicitly, a claim that they may not realize is false and material. The latter means that the claim, if relied on for making a purchasing decision, is likely to be harmful by adversely affecting that decision. If an ad is implicitly false, evidence must be obtained for what consumers saw the ad saying, and for the materiality of that, and for the true facts about the advertised item, but no evidence is required that actual deception occurred, or that reliance occurred, or that the advertiser intended to deceive or knew that the claim was false.

The goal is prevention rather than punishment, reflecting the purpose of civil law in setting things right rather than that of criminal law. The typical sanction is to order the advertiser to stop its illegal acts, or to include disclosure of additional information that serves to avoid the chance of deception. Corrective advertising may be mandated,. But there are no fines or prison time except for the infrequent instances when an advertiser refuses to stop despite being ordered to do so.

The actual statute defines false advertising as a "means of advertisement other than labeling, which is misleading in a material respect; and in determining whether an advertisement is misleading, there shall be taken into account (among other things) not only representations made or suggested by statement, word, design, device, sound, or any combination thereof, but also the extent to which the advertisement fails to reveal facts material in the light of such representations or material with respect to consequences which may result from the use of the commodity to which the advertisement relates under the conditions prescribed in said advertisement, or under such conditions as are customary or usual."