Federal and state law prohibits businesses from engaging in activities that are “unfair” or “deceptive.” The key federal law on this subject for most businesses is the Federal Trade Commission Act, enforced, of course, by the Federal Trade Commission. Similar state laws are often called “mini-FTC Acts” or “UDAP” statutes and are enforced by the states’ Attorneys General or other consumer protection offices.
Unfair and Deceptive Practices Definition
While there is no definition of “unfair” or “deceptive” in the FTC Act, the FTC has issued guidance on the subject which has since been codified into law. The FTC’s test of “unfairness” requires that there be a consumer injury, and the injury be
- not outweighed by offsetting consumer or competitive benefits, and
- not be one that consumers could have reasonably avoided.
The FTC test for “deception” examines
- whether the representation, omission or practice is likely to mislead,
- the reasonableness of the practice from the perspective of a consumer or group of consumers, and
- the materiality of the act or practice, which involves analyzing whether the act or practice is likely to influence or otherwise “affect the consumer’s conduct or decision with regard to a product or service,” resulting in likely injury.
Specific Business Practices Prohibited
Many state laws, in addition to a broad prohibition of unfair or deceptive practices, list specific practices that are deemed unfair or deceptive, such as:
- False statement about a product’s effectiveness, quality or ingredients
- Advertising sale items that are not actually available for sale
- Deceptive guarantees or failing to fully disclose the material terms of a guarantee
- “Bait and switch” advertising
- Fictitious testimonials
- Enrolling a consumer in a “negative option” program without fully disclosing the material terms, such as how to terminate
The FTC may fine a business $11,000 per violation, obtain other civil damages, force the business to refund customers, and obtain an injunction against the business. Civil fines and remedies can easily reach into the millions of dollars.
Consumers have no private right of action under the FTC Act, however many of the parallel state statutes, such as Florida’s, do provide private rights of action. Consumers may file a complaint with the FTC however, though the FTC obviously has limited resources with which to investigate complaints. Consumers may also file complaints to the Better Business Bureau, but this is only effective if the business is a BBB member.