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False Advertising And Deceptive Trade Practices

Introduction

Both New York and federal law contain a number of provisions designed to protect consumers from deceptive business practices. Click on the link below to find more information about this topic.

• False Advertising
• False Labels
• Business Names
• The Word "Free" in Advertising
• Deceptive Business Practices
• Bait and Switch Advertising

False Advertising

§ N. Y. General Business Law § 350 et seq.

False advertising means advertising or labeling of a good or employment opportunity that is misleading in a material respect. For instance, it is false advertising to display or announce the price of an item, after deduction of a rebate, unless conspicuous notice is given in the advertisement that a mail-in rebate is necessary to obtain the lower price. To determine whether an advertisement is misleading, one must analyze:

1. The representations made by statement, word, design, device, sound, or any combination thereof in the advertisement or label, and,
   
   
2. the extent to which the advertisement fails to disclose material facts. For instance, it would be misleading for an advertisement for employment to fail to reveal that a specific salary advertised is only available if the employee receives a specific commission.

Consumers who have alleged that they suffered damages from a business’ use of false advertising are entitled to file a civil suit for recovery. The Attorney General is also empowered to sue for false advertisement on behalf of the State of New York, after first providing notice to the alleged wrongdoer,¹ and may recover a civil penalty of not more than $5,000 per violation. New York law provides a defense where the advertisement complies with another New York or a federal law. False advertisement can also be a class A misdemeanor. ²

False Labels

§ N.Y. General Business Law §§ 392-c, 392-d

False labeling, or the selling of items falsely labeled, with the intent to defraud, is a misdemeanor.³ This includes false statements concerning quantity, quality, identity, origin, or manufacture: this covers essentially anything appearing on a label. Concealing or obliterating the label mark of the place where the product originated is also a misdemeanor.

Selling or manufacturing goods bearing a false trademark or false designation of origin is also a misdemeanor.⁴

Business Names

§ N.Y. General Business Law §§ 131, 133 & 397

It is a misdemeanor for a person, firm, partnership, association, or corporation (“business”) selling merchandise to fail to prominently display its legal name either in its front window or the exterior of the building. It is also a misdemeanor for a business to use for any purpose deceptive or misleading business names or addresses. The use of the name of a not-for-profit or charitable organization by a for-profit company without the not-for-profit’s prior written approval is also a misdemeanor under the law.

The Word "Free" in Advertising

§ 16 C.F.R. § 251.1

The Federal Trade Commission (FTC) has provided guidance to businesses that use the words “free,” “gift,” or “bonus” in their advertising. If a consumer must buy or do something in order to get a “free” item, the following conditions must be clearly disclosed:

• When making “free” or similar offers, all the terms, conditions and obligations upon which receipt and retention of the “free” item should be set forth clearly and conspicuously at the outset of the offer so as to leave no reasonable probability that the terms of the offer might be misunderstood.
• No “free” offer should be made in connection with introducing a new product or service offered for sale at a specific price, unless the offeror expects to discontinue the offer after a limited time and intends to sell the new product at the same price it was promoted with the “free” offer.
• If a purchase of a regular priced item must be made by the consumer in order to get the “free” item, the price charged must be the same lowest price that is most recently charged for a substantial period of time, i.e., a 30-day period.

Deceptive Business Practices

§ N.Y. General Business Law § 349
§ 15 U.S.C. § 45

Unfair acts and deceptive practices carried out in the course of business or trade are prohibited in New York State. Section 349 of the General Business Law specifically prohibits this activity.

Consumer complaints involving false advertising or deceptive trade practices should be sent to the New York State Attorney General. Consumers may also choose to sue for damages on their own. This option allows consumers to recover their actual damages or the sum of $50.00, whichever is greater.⁵ Also recoverable are attorney’s fees and treble damages up to $1,000.00 where it is shown that the violation was willful or knowing.

The FTC also has the power to regulate unfair or deceptive acts or practices against most types of businesses affecting commerce. Complaints involving out-of-state transactions should be referred to the FTC. Consumers are not empowered to sue on their own behalf under this statute, but New York courts have traditionally held that any violation of the federal statute can be considered a violation of General Business Law § 346.⁶

Bait and Switch Advertising

§ N. Y. General Business Law § 396

A store cannot advertise or offer for sale merchandise or services with the purpose of either not selling the good or service at the advertised price, or not selling it at all. Unscrupulous merchants have been prosecuted by the State Attorney General for advertising an item at a sale price without having the item in stock. In this “bait and switch” tactic, merchants will try to convince consumers to buy a more expensive item than the one advertised.