False advertising involves untrue or misleading claims about products or services, violating laws enforced by the FTC and state authorities. Companies face legal consequences like fines, lawsuits, and cease-and-desist orders for deceptive practices under statutes like the Lanham Act and California’s False Advertising Law.
By Brad Nakase, Attorney
Email | Call (888) 600-8654
Have a quick question? I answered nearly 1500 FAQs.
Picture this: you’re wandering down the vitamin aisle at the store, and you see a bright, fancy bottle of pills. Curious, you pick it up and read on its packaging, ‘In just thirty days, regrow a full head of glossy hair!’ You rub your balding head and imagine the possibilities. Can this possibly be true?
Alas, more than likely, this is a scam and a classic example of false advertising. And believe it or not, false advertising can land companies in legal hot water. In fact, there are state and federal laws that address the issue. It is really a comprehensive term that covers both untrue advertising and deceptive or misleading advertising.
What happens to companies that violate these false advertising statutes? They can face criminal and civil challenges. On the country level, the FTC, or Federal Trade Commission, is responsible for checking accusations of false advertising. If there is a case against the company, it may receive warnings, fines, or lawsuits.
When a company is accused of false advertising in California, the complaint goes to the Office of the Attorney General. The exception to this would be if the company falls under the authority of another agency. Customers are free to report cases of false advertising to the Attorney General, or they can go ahead and file a lawsuit. If there are a lot of people with the same complaint, there could be a class action lawsuit.
When it comes to false advertising, the FTC is the head honcho in terms of national enforcement and regulation. Its job is to create regulations and rules that determine what can and cannot be in advertising and other practices that impact competition and the public.
The Federal Trade Commission Act invested the FTC with this power. It also created laws that control several U.S. fields of commerce, such as marketing and advertising. The FTC has the ability to issue new laws and enforce its rules. The Lanham Act is another notable law. It lets people file civil lawsuits when companies misrepresent the quality, nature, origins, and characteristics of its services or goods.
On a state level, California has the False Advertising Law. This covers a lot of abuses in advertising. The law itself is a bit hard to understand, so here’s a summary: a company cannot put out a statement that is misleading or false as a way of attracting customers. Think back to our opening example with the hair growth vitamins. Of course everyone with hair loss would want a magic pill that gives them a luscious head of hair! The vitamin company is making that outrageous (and false) claim to lure in unsuspecting customers.
Most false advertising complaints will go to the Attorney General. However, sometimes the accused company will fall under the authority of another agency like the Public Utilities Commission. There is also the state’s Department of Consumer Affairs, which issues licenses to some three and a half million professionals.
There are a few different kinds of unlawful advertising. In fact, false advertising is one of these, even though it is used as a catch-all phrase in conversation.
1. False advertising
This is when a company makes a statement that is plainly not true. Imagine a company selling a face cream that says it will erase all your wrinkles in two days.
2. Deceptive or misleading advertising
This is when the truth is manipulated to show off a quality or benefit that doesn’t really exist. Take the e-cigarette company Juul as an example. In their ads, they claimed their e-cigs had lower levels of nicotine than traditional cigarettes. It turns out they contained more nicotine!
3. Unfair advertising
This tends to happen when a company makes misleading or untrue claims about a rival.
Consumers in California can file a complaint about false advertising with the Attorney General or file their own lawsuit (including a class action). If the complaint is on a federal level, it needs to first be reported to the FTC. You are not able to file a lawsuit until the agency has reviewed the complaint. Often, they will file a lawsuit themselves or otherwise settle the issue.
First, the FTC will officially warn the company about following advertising laws. If the company does not correct its behavior, the FTC will get a cease-and-desist court order. If the company keeps peddling its false claims, then the FTC will take them to court. At the same time, the agency can fine the company for every day it refuses to comply.
Have a quick question? We answered nearly 2000 FAQs.
See all blogs: Business | Corporate | Employment Law
Most recent blogs:
Contact our attorney.