False advertising

False advertising or deceptive advertising is the use of false or misleading statements when promoting a product. It may include misrepresentation of the product at hand, which may negatively affect many stakeholders, especially consumers. Advertising has the potential to persuade people into commercial transactions that they may have otherwise avoided. Many governments around the world use regulations to control deceptive, misleading or untrue advertising. Truth refers to the 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 obvious of contexts, is illegal in most countries. However, advertisers continue to find ways to deceive consumers in ways that are legal or unenforceable.

Persuasive impact on consumers

“All advertising seeks to influence the decisions consumers make" (Kumar & Raju, 2013). Advertising is particularly effective when targeting vulnerable groups such as consumer emotions. Personal or climatic factors are important to consider when it comes to the audience's emotions. Cognitive feelings relate to our mental process. For example, a familiar experience can sometimes trigger a feeling or reaction. In an emotion-based ad, a consumer may have encountered the same event or emotion before. This also applies to bodily experiences where feelings like hunger and pain inform us about our physical state.

"Mood effects the way messages are received and processed” (Owolabi,2009). Your mood can make you see things differently; people in a positive mood rely on the heuristic cues to make impulsive decisions. In contrast, people in a negative mood “ruminate more before reacting, they are less easily swayed by weak arguments” (Owolabi,2009). This is also known as the "Feelings-as-information theory," in which “people attend to their feelings as a source of information, with different feelings providing different types of information.” (Schwarz, 2010).

“We conceptualize mood as influencing response to an advertisement as occurring on two levels” (Latour K & M, 2009). Therefore, after the consumer has seen the advertisement, they are either more or less likely to accept the information given about the brand's product. This is when "consumers subconsciously transfer their mood from the environment toward the advertised brand” (Latour K & M, 2009). “Positive mood is thought to enhance decision making because it fosters cognitive elaboration” (Latour K & M, 2009). This is why advertisements that are on television when more people are at home relaxing, are more sought after. At this point, the majority of consumers are in a positive frame of mind, making them less likely to notice any false information in the advertisement and more likely to develop positive feelings toward the brand. This makes it easy for marketers to take advantage of these consumers because they are in a mood where they are easily influenced.

There a quite a few different processing strategies that consumers use while watching an advertisement without realizing. This is used by marketers by developing an understanding on how to persuade and attract their target audience to purchase their product. Many experiments have been carried out to discover these strategies. The Cornell University School of Hotel Administration discovered how participants reacted to false advertising: “We found that positive mood can have both explicit effects and implicit effects” (Latour K & M, 2009). Their results showed that participants in a positive mood have a greater detection of false information. This is important information for marketers because even though consumers in a positive mood detected the false information, the advertisement had which created them to have negative feelings, those consumers replaced it with positive feelings towards the brand due to their positive mood condition.

Nowadays children and advertising seem to be an issue because they are exposed to all sorts of advertisements through different social media channels such as television, radio, billboards and the internet. Encoding is very important in children's advertising on television because they need to be able to grab children's attention towards the screen. A study found that children age three to eight were more attentive to commercials that were higher in audio than in video complexity (Calvert, 2008). Therefore, marketers use audio features such as sounds effects and loud music. Children are one of the most vulnerable groups that marketers target, as they don’t yet understand commercial intent. Advertisers are trying to make the consumer buy the product that is being advertised, therefore they produce that product in the best light which may not be entirely true and unfortunately children are unaware of this because they are young and innocent.

Children believe anything they read and see as they “use animistic thinking, believing that imaginary events and characters can be real” (Calvert,2008) which is why junk food advertising, especially sugar coated cereals are aimed at children because they are greatly influenced by these advertisements as they don’t know it’s bad for their health. When children see a fit person on television eating junk food or a bright colourful advertisement with cartoons they think it’s good for them and that the food being advertised is healthy, however these children don’t know that the junk food being advertised has no nutritional value. When children see something they want on television, they will beg their parents to buy them that product which was the advertises intent as they know children are easily influenced. “Advertising is part of creating product illusion, and sometimes that illusion process can go beyond its intended boundary” (LaTour K & M, 2009). These junk food advertisements have resulted in children consuming more junk food after watching it on television and is one of the factors contributing to the rise of childhood obesity.

Everyday environment

False advertising is the use of misleading, false and unproven information to advertise products to consumers. This act of false advertising happens throughout the world in a variety of ways.[1] A prime example of a company using false advertising to entice customers to consume their products are fast food giants, Burger King. The company has been found guilty on numerous occasions of advertising their burgers to be bigger than they are. Not only do the burgers appear to be larger they also have a significantly bigger amount of filling. The burgers get touched up by photoshop and are often very different in appearance to the burgers that the chain actually supplies to customers ("Advertising watchdog finds Burger King guilty of telling a whopper over serving size", 2010) (Brown, A, 2015). This act of falsely advertising a product is illegal in most countries and can have serious consequences to a business including lawsuits and creating a negative brand reputation ("False advertising | Consumer Protection", 2016).

Another form of false advertising is blatantly advertising that a product has some type of health benefit or contains vitamins or minerals that it in fact does not.[2] Many companies globally have been responsible of committing this type of act, one being the Ribena fruit drink company. The company was accused of breaching the fair trading act 15 times. The main claim that the company was making was that its cartoned drink contained 7 mg of Vitamin C per 100ml. After tests the drink was in fact proven to have no Vitamin C content.[2] This false advertising has negative side effects for consumers. The consumers are not getting the vitamin intake that was advertised and this in turn leads to their trust and willingness to buy being lowered (Romani, S, 2006). Romani states that consumers who have had encounters with false advertising are significantly affected in their day to day buying routine. The consumers become suspicious of advertisements, and their trustworthiness towards brands becomes very low. Victims who have been fooled by false advertisements naturally have less willingness to buy products. This therefore leads to other companies being affected due to another company’s lies (Romani, S, 2006).

Another example of false advertising is fine print hidden on advertisements. Examples of this are when stores have advertisements on display saying up to 50% off store wide with an unnoticeable fine print stating otherwise. This encourages consumers to enter into the shop as they may be able to purchase their desired product with a discount of up to 50%. Generally stores will in fact only have a minuscule amount of products at 50% off and the rest of the store remains full price ("Fine print | Commerce Commission", 2016). If there is fine print on the advertisement but the overall impression is misleading then it is actually illegal for the store to advertise this way. This act of false advertising through the use of fine print occurs in all sorts of advertising methods from print to television ("Fine print | Commerce Commission", 2016). A form of false advertising similar to fine print is when a store misleads consumers with advertisements but do not actually have any fine print at all. An example of this is when a branch of bicycle stores advertised that they were having a closing down sale. The stores had no real intention of closing down and instead continued to bring in more stock. The shop continued the sales for several months and made a multitude of bicycle sales. These sales were from consumers who visited the store primarily for the sale as the shop was supposed to be closing down ("Pricing | Commerce Commission", 2016). The store got issued with a warning by the commerce commission and if it was to falsely advertise like that again further action would be taken.

False advertising can take place when companies mislead consumers on packaging, misrepresenting weights and ingredients in certain food goods ("Fair trading act", 2016). A classic example is chip packets being half full. The consumers naturally think the bigger the bag the more goods it has inside of it. This leads to consumers getting bigger bags for expectedly bigger amounts of goods. This is not the case as due to the oversized packaging that some companies use, in many cases the net weight of smaller bags can in fact be greater than the larger ones. The companies put nitrogen into the packaging to make them appear full when they are not. This is a prime case of using over sized packaging to falsely advertise a product ("Why Are Potato Chip Bags Always Half-Empty?", 2016). Taco Bell had an advertisement stating their tacos contained a special ‘seasoned beef’. The ‘seasoned beef’ was in fact just including oat products as the seasoning. This tricked the customers into believing the meat was of a higher quality than it actually was. Oat products are described as being a filler and this in turn made the meat product fall into a lower classification ("Taco Bell Uses Humor, Social Media to Dig Itself Out of Beef Scandal", 2016). Falsely advertising food products is a real issue and happens continuously in today's world("Fair Trading Act", 2016).

Pricing-based methods

Hidden fees and surcharges

.[3][4] Hidden fees and surcharges – Hidden fees can be a way for companies to trick the unwary consumer into paying excess fees (for example tax, shipping fees, insurance etc.) on a product that was advertised at a specific price as a way to increase profit without raising the price on the actual item. Hidden fees were implemented by corporations in the US to try escape heavy price wars as they could make more money off a product this way without actually raising the listed price and losing business that way to competitors with more competitive prices. Hidden fees can be a gold mine for corporations as a company like AT&T in the United States can make as much as $475 million a year just by charging its long distance customers 99 cents monthly under a “regulatory assessment fee”. Airlines and mobile phone companies are the top 2 source of these so-called hidden fees and surcharges while banks are a close third with charges on credit cards etc. The most widely used form of hidden fees and surcharges are located in what is called the “fine print” which is used in advertising to show disclaimers such as health warnings, what age group is recommended for the product and most importantly more fees or what fees could be excluded from the price. Another way for companies to introduce new fees is to give people services free for a month and then billing monthly for the service afterwards. Another method used to exclude tax and surcharges from the advertised price. This is generally used by airline companies advertising flights with the disclaimer surcharges and tax excluded from the price. A flight advertised at $300 may end up costing $800. Another way to hide fees that is commonly used is to not include “shipping fees” into the price of goods online. This makes an item look reasonably cheaper than it would be at traditional brick and mortar stores only to be jack up again once the shipping cost is added[5][6]

Other deceptive methods

Deceptive advertising

Deceptive advertising is the conscious decision to purposely misinform the targeted audience. This exists when the ads intended output differs from the situations known reality. Though we must remember deceit does differ from lying in two major ways. Firstly lying is always a communicated verbally whereas deceit is not only verbal but can also come in a non-verbal form.[7] Secondly deception implies that the attempt to deceive was successful opposed to lying which is simply the attempt to distribute this false information.[7] Thus deceptive advertising can also be looked at as ‘misleading advertising’.[7] Not all misleading advertising leads to purchasing decisions, a consumer can be misled but not encouraged to act on the given information. Deceptive advertising can cause moral issues regarding competitors within a market. This is due to the unfair advantage attained from the distribution of false information leaving competitors at a competitive loss.[7] This can also drive down price competition as if a company attains more loyal consumers through this deceptive advertising they can set their prices higher. Humour can be of great aid to deceptive advertising and more often than not distracts the audience from the existence of said deception.[8]

Deceptive ads can be classified as follows.

Examples of deceptive advertising can be seen when adverts are retouched through the use of photo editing software. This is most prevalent in cosmetic and weight loss commercials. These adverts portray false and unobtainable results to the consumer and give a false impression of the product's true capabilities. If retouching is not discovered or fixed a company can be at a competitive advantage with consumers purchasing their seemingly more effective product, thus leaving competitors at a loss.

Manipulation of measurement units and standards

Manipulation of measurement units and standards can be described as a seller deceiving customers by informing them with facts that either are not true or are using a standard or standards that wouldn’t be widely used or understood which results in the customer being misinformed or confused. A good example of this would be hard drives used in computers as MB which stands for megabyte can have 2 different values depending on what measuring system is used. The metric system measuring of a MB equals to 106 (1,000,000), while the other system equals to 220 (1048,576) which is about a 5% difference. The error also keeps increasing each order of magnitude going up to about 7% at a gigabyte (1,073,741,824 instead of 1,000,000,000), and a nearly 10% difference once it reaches a terabyte. Two companies ended up being sued in class action suits for this, namely Seagate Technology and Western Digital. To help fight against the issue a number of standards and trade organizations approved standards. In 2000, a new set of binary prefixes were recommended, including Mi and Gid. These units are numerically identical to the established computer science convention, easing transition. Other operating systems either continue to use the older convention or the new.

In another example, in the US, car engine displacement was changed from US customary units to metric, during the 1980s, to disguise that they were dramatically downsized. This was done while most other automotive measurements remained in US customary units.

In yet another example, Fretter Appliance stores claimed "I’ll give you five pounds of coffee if I can’t beat your best deal", but fulfilled the obligation with one-pound cans of coffee that had been relabeled "net weight — 5 pounds".[9]

In an example of standards manipulation, US car rental agencies routinely refer to cars as one class larger than they are, as defined by the United States Environmental Protection Agency standards. For example, they would refer to a car as "full-sized", while the EPA would call the same car "mid-sized".

Fillers and oversized packaging

Fillers

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 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 filler in peanut butter.[10] There are also non-meat fillers which may look starchy in their makeup; they are high in carbohydrate and low in nutritional value. One example is known as a cereal binder and usually contains some combination of flours and oatmeal.[11]

Oversized packaging

Some products may have a large container where most of the space is empty, leading the consumer to believe that the total amount of food is greater than it actually is. This practice is deceptive because it lies to consumers by the look of the products and make consumers actually not paying for what it really worth.[12]

Food is now cheaper than ever before due to the fast paced world we live in, as many families are always on the go and live a busy lifestyle. Fast food is a more viable option for dinner than taking time to make one. Cheeseburgers now sell for less than their cost and it is also cheaper than buying fresh fruit and vegetables from the supermarket. Because of this, the food industry is creating a high volume of food for less money leading to food fillers being used. Food fillers are often found in processed meats to increase the weight lowering the price per weight. “Meat extenders are non-meat substances with substantial protein content, whereas fillers are high in carbohydrates” (Meat, n.d). Some of these fillers may be harmful to consumers and are not required to be stated on the packaging. A lot of the fillers added to food such as cellulose, can’t be digested by us which makes it no calories when consumed. Soy which is used to fill a variety of foods to keep costs down, contains phytic acid which eliminates all the good nutrients from the consumers body. Olestra, also found in fat free pringles is another filler which is harming consumers as it interferes with the consumers body’s absorption of vitamins and minerals. In some countries fillers are illegal, for instance potassium bromate which is found in flour and baked goods such as bread is illegal in Canada, China and a lot other counties due to how harmful it can be to consumers.

Manipulation of terms

Listerine advertisement, 1932. The FTC found that the claim of these advertisements, reduced likelihood of catching cold, was false.

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, carbohydrates, salt, texture, viscosity, or even light in color. Unlike the term "organic", the term "natural" has no legal definition when describing food products. Labels such as "all-natural" are frequently used but are essentially meaningless. Tobacco companies, for many years, used terms like "low tar", "light", "ultra-light" or "mild" in order to imply that products with such labels had less detrimental effects on health, but in recent years the United States banned manufacturers from labeling tobacco products with these terms.[13]

Another example is the United Egg Producers' "Animal Care Certified" logo on egg cartons which, according to the Better Business Bureau, misled consumers by conveying a higher sense of animal care than was actually the case. The trade commission did not rule on the matter but did encourage UEP to change the logo, which they did, to read "United Egg Producers Certified".[14]

In 2010, Kellogg's popular Rice Krispies cereal claimed that the cereal can improve a child’s immunity with "25 percent Daily Value of Antioxidants and Nutrients -- Vitamins A, B, C and E," The cereal however did not live up to it words. Clinical studies have showed that on 1 in 9 kids have any kind of improvement in their immunity system- and half the kids weren’t affected at all. The company was forced to discontinue all advertising stating such claims.[15]

In the year 2015, Kellogg- the parent company for Kashi, advertised their product as “all natural”, but in reality, was full of genetically modified ingredients. Ingredients that are considered to be prescription drugs and federally- classified hazardous substances were found to be the primary ingredients in their products. In the lawsuit, Kashi was forced to pay $4 million to resolve the issue.[16]

Comparative advertising

Comparative advertising provides the consumer with information on superior characteristics of products compared to that of its rivals.[17] This is a perception enhancing technique and can have socially beneficial factors when used for honest, non-misleading purposes. These benefits become known when products start to become better differentiated within a business sector; companies are driven to improve the quality of their goods due to the increased constant competition and attention can be drawn to specific products features.[18] In business environments where comparative advertising is legal it gives the weaker brand a chance to increase sales through the direct comparison of product characteristics with the brand leader. The opportunity given from this comparison can be the factor in many companies survival.[19] Though any and all comparisons made must be factual and be able to be backed up through results of an approved test. If the consumer perceives messages to be fake or without logical reasoning, distrust and disbelief can be linked with a brand. Some negatives related to comparative advertising are the huge potential for media warfare, brand confusion, the loss of credibility in advertisement and the relaxation of price competition.[18] This relax in price competition is seen due to the distancing of brands who create themselves and superior perceived stance in the consumers mind.[18]

The large amount of hostility this form of advertising causes meant great worries formed regarding the potential for deceptive and misleading practices. As the validity of statements grew harder to prove many policies had to be put in place to discontinue any misleading practice. When used truthfully comparative advertising allows great growth in the transfer and retention of information and the encouragement of rational decision making.[19]

Comparative advertising has been seen recently in New Zealand between the large super Market chains of Pack’n Save and Countdown. Countdown filed complaints against Pack’n Save claiming misleading comparative statements were made regarding the pricing difference of the companies. The statements made by Pack’n Save, "Surprise, surprise, we're still the lowest" were deemed misleading and were against the laws set for comparative advertising.

Incomplete comparison

Main article: Incomplete comparison

"Better" means one item is superior to another in some way, while "best" means it is superior to all others in some way. However, advertisers frequently fail to list the way in each they are being compared (price, size, quality, etc.) and, in the case of "better", to what they are comparing (a competitor's product, an earlier version of their own product, or nothing at all). So, without defining how they are using the terms "better" or "best", the terms become meaningless. An ad which claims "Our cold medicine is better" could be just saying it is an improvement over taking nothing at all. Another often-seen example of this ploy is "better than the leading brand" often with some statistic attached, while the term leading brand is often left undefined. Advertisers can also include numbers and percentages within their incomplete comparisons to further confuse consumers. For example, a product might claim to be "50% stronger" than its competitor, although the grounds this claim is made on are questionable.

Inconsistent comparison

In an inconsistent comparison, an item is compared with many others, but only compared with each on the attributes where it wins, leaving the false impression that it is the best of all products, in all ways. One variation on this theme is web sites which also list some competitor prices for any given search, but do not list those competitors which beat their price (or the web site might compare their own sale prices with the regular prices offered by their competitors).

Pennzoil Company have had advertisement that showed their oil performing better than other motor oils including Castrol. Pennzoil has made claim that their motor gives the most protection against viscosity breakdown, gives better protection against engine failure and wear and provides longer engine life. The claims were made without any solid ground to back it up. Castrol then filed a lawsuit demanding Pennzoil to discontinued their claims about Pennzoil’s motor oil being better than them, while also request for compensatory and punitive damages.

Misleading illustrations

One common example is that of serving suggestion pictures on food product boxes, which show additional ingredients beyond those included in the package. Although the "serving suggestion" disclaimer is a legal requirement of an illustration which includes items not included in the purchase, if a customer fails to notice or understand this caption, they may incorrectly assume that all depicted items are all included.

Another example is advertised images of hamburgers, which may show the items to be larger than they really are. Often every ingredient is visible from the side being depicted in the advertisement, while in actuality they would be much less visible. Products which are sold unassembled or unfinished may also have a picture of the finished product, without a corresponding picture of what the customer is actually buying. Many fast food restaurants engage in misleading illustrations, and it becomes an issue of what the consumer thinks they will get versus what they actually get in terms of a product or service.

A third example is the commercials for certain video games, where trailers are essentially CGI short-films with graphics of a much higher caliber than the corresponding games.

Dannon’s popular Activia brand of yogurt has its consumers paying more than regular brand yogurts for its claims of nutritional benefits. The yogurt brand itself was in fact similar to every other kind of yogurt. Dannon falsely claimed the yogurt was “clinically” and “scientifically” proven to have numerous nutritional benefits, even going as far as having launched a TV ad campaign featuring actress Jamie Lee Curtis with those claims. Dannon was forced to pay $45 million in damages under the terms of class action settlements to its consumers.[20]

In the year 2011, New Balance (a popular shoe brand) was sued due to giving misleading information giving to its consumers. The brand claims that the shoes “uses hidden balance board technology that encourages muscle activation in the glutes, quads, hamstrings and calves, which in turn burns calories.” Studies later have shown that the sneakers do not necessarily boost health benefits and may even lead to injuries. The company was demanded by the plaintiff for class action certification and more than $5 million in compensation.[21]

Herbal supplement Airborne claimed to help ward off harmful bacteria and germs, preventing the flu and common cold. The Center for Science in the Public Interest (CSPI) have claimed that there were no studies that support Airborne’s effectiveness to a scientific standard. The product makers were then required to pay $23.3 million in a class-action lawsuit over false advertising.[22]

False coloring

When used to make people think food is riper, fresher, or otherwise healthier than it really is, food coloring can be a form of deception. When combined with added sugar or corn syrup, bright colors give the subconscious impression of healthy, ripe fruit, full of antioxidants and phytochemicals. One variation is packaging which obscures the true color of the foods contained within, such as red mesh bags containing yellow oranges or grapefruit, which then appear to be a ripe orange or red. Regularly stirring minced meat on sale at a deli can also make the meat on the surface stay red, implying that it is fresh, while it would quickly oxidize and brown, showing its true age, if left unstirred.

“The color of food packaging is considered to be extremely important in the marketing world” (Blackbird, Fox & Tornetta, 2013) as people see colour before they absorb anything else. Consumers buy items based on the colour they’ve seen it on the advertisement and they have a perception of what the packaging colours should also look like. However, when it comes to buying food, usually consumers can only judge the product based on the packaging and usually consumers judge products based on colour. People perceive each colour differently, for instance the colour blue is associated with trust, red is associated with excitement and green represents peacefulness. Marketers will use this knowledge to their advantage when creating advertisements, especially on the background colours of the product their trying to sell.

Certain colours are used to provoke specific types of emotions towards the product. And if marketers incorporate the right colours together, they will grab consumers attention immediately, therefore purchasing intent for the product being advertised would be expected to rise, because the impact the colour has on consumers is one of the most important aspects in advertising. Usually the product on the packaging has been photoshopped, therefore it’s more inviting for customers to purchase. The colours on the product are made more bright and vibrant than what it really is, as consumers will also recognise those colours with the brands personality. The most common aspect of false colouring is the pre frozen meals sold in supermarkets, for instance the pizzas. Their product packaging is usually red or orange as this targets the impulsive shoppers. On the pizza box, it shows golden yellow melted cheese, topped with red meat and ripe vegetables to make it seem fresh and tasty for a quick easy meal on the go. However, it never looks the same when you take it out of the box which is very disappointing for customers as they’re not getting what they had thought they had paid for. Buying online can also be a tricky one because the customer is judging from what it looks like in the photos that has been uploaded onto the website. When it comes to buying items such as lipsticks online, the website will usually have a colour coated circle of what you may be purchasing. This is very deceiving as quite often if the customer buys and opens it and uses it, the lipsticks are usually a few shades lighter to the colour sample the consumer thinks they have purchased. Online websites need to make colours more realistic for customers, especially if that company wants that customer to buy from them again.

Angel dusting

Angel dusting is a process where an ingredient which would be beneficial, in a reasonable quantity, is instead added in an insignificant quantity which will have no consumer benefit, so they can make the claim that it contains that ingredient, and mislead the consumer into expecting that they will gain the benefit. For example, a cereal may claim it contains "12 essential vitamins and minerals," but the amounts of each may be only 1% or less of the Reference Daily Intake, providing virtually no benefit to nutrition.

"Chemical free"

Many products come with some form of the statement "chemical free!" or "no chemicals!". As everything on Earth, save a few elementary particles formed by radioactive decay or present in minute quantities from solar wind and sunlight, is made of chemicals, it is in-fact impossible to have a chemical free product. The intention of this message is often to indicate the product contains no exceptionally harmful chemicals, but as the word chemical itself has a stigma, it is often used without clarification.

Bait-and-switch

Bait and switch is a deceptive form of advertising or marketing tactic generally used to lure in customers into the store. Basically, the company will advertise their product at a very cheap and enticing price which will attract the customers. Once they do, the store/company will then try to sell something that is more expensive and valuable than what they originally advertised. Regardless of the fact that only 1% of the shoppers will actually buy the more expensive product, the advertiser using the bait remains to gain profit.[23] Bait advertising is also commonly used in online job advertisements by deceiving the potential candidate about working conditions, pay, or different variables encompassing business that are basically not genuine. Aircraft likewise, publicize in this way by baiting their potential clients with an incredible airfare bargains, just to up the cost or change the notice to be that of a considerably more costly flight.[24] Businesses needs to remember a few guidelines that will help them avoid engaging in misleading or deceptive conduct:

Bait advertising is a very serious matter in most countries but in some, it is acceptable to an extent. But in Australia, if a person is caught out doing bait advertising within their company, they will be charged to a maximum penalty of $1.1 million per breach. An infringement notice without going to court is set at $6,600 per breach for private companies and for a more well-known and publicized company, they can get penalized up to $66,000. One complaint could trigger a fine of up to $1.1 million.[27]

Guarantee without a remedy specified

If a company does not say what they will do if the product fails to meet expectations, then they are free to do very little. This is due to a legal technicality that states that a contract cannot be enforced unless it provides a basis not only for determining a breach but also for giving a remedy in the event of a breach.[28]

"No risk"

Advertisers frequently claim there is no risk to trying their product, when clearly there is. For example, they may charge the customer's credit card for the product, offering a full refund if not satisfied. However, the risks of such an offer are numerous. Customers may not get the product at all, they may be billed for things they did not want, they may need to call the company to authorize a return and be unable to do so, they may not be refunded the shipping and handling costs, or they may be responsible for the return shipping.

Acceptance by default

This refers to a contract or agreement where no response is interpreted as a positive response in favor of the business. An example of this is where a customer must explicitly "opt-out" of a particular feature or service, or be charged for that feature or service. Another example is where a subscription automatically renews unless the customer explicitly requests it to stop. This is even conducted when the customer may have specified a specific length of subscription up front, that is then exceeded and renewed without notification to the customer.

Undisclosed dishonest business practices

Banks, for example, will sometimes reorder charges against an account to maximize the number of overdrafts. The bank processes the largest charge first, causing the account to be overdrawn, so that all subsequent smaller charges also overdraft, resulting in multiple overdraft fees, even if, under the original order, only one overdraft would have occurred.[29] In 2011, several banks, including Bank of America, JPMorgan Chase, TD Bank and Citizens Financial Group paid hundreds of millions in settlements over the practice.[29] Similarly, where a sequence of transactions includes both deposits and withdrawals, a bank may sequence the transactions so that the withdrawals are processed before the deposits, to create an overdraft.[30]

Deception in advertising is the use of making claims that cannot be guaranteed or substantiated.[31][32][33] Advertisements cannot make claims about the quality or the origin of the product unless they are true. Examples of this demonstrate undisclosed defects in the quality of the product, or if the advertisement is promoted to be used for a purpose that it is not originally designed for. Another form of deception is that advertisers cannot claim a product was made in another country or location. An example of this is a product stating “made in the UK,” when it was made in another location.[33][34] A final form in deception of this matter is when the advertiser makes a claim about the availability or price of the product whilst they have no intentions of selling or intend to sell the product for a higher price.

The Federal Trade Commission look to manage environmental claims made through advertising. Statements and terms like ‘recyclable,’ ‘biodegradable’ and ‘environmentally friendly’ need to be evaluated by reliable scientific evidence.[33][34] The template of this is categorised by the initial use and main component of the product. For example, a roll of plastic wrap in a recyclable box cannot be deemed as recyclable product as the main component of the product, the plastic wrap, is not recyclable. The advertiser can only state that the box is recyclable.

Demonstrated on many online ads the use of ‘free trials’ is an advertising manoeuvre to have consumers become hands-on with the products or services before purchase, without any money spent. The Federal Trade Commission manage what is deemed as a free trial. An advertisement that offers a free trial in exchange for credit cards details cannot be stated as a free trial as there is a component of expenditure.[33][35]

Aggression based methods

The CPR[34][36] defines Undue influences as, ‘exploiting a position of power in relation to the consumer so as to apply pressure, even without using or threatening to use physical force, in a way which significantly limits the consumer’s ability to make an informed decision’. This can be described as going to a computer engineer to fix a certain component of your computer. Whilst they fix it, the engineer makes undisclosed repairs and costly adjustments to the computer without consent. Then the engineer demands to not return the computer until the payment for all repairs and changes are paid, thus having power over the customer. This can be seen as an exploitation of their position of power as the engineer is demanding more than what was previously disclosed and will not return the product until their demands are met.[36]

One form the Undue Influence is carried out is through aggressive practice, which can vary, dependant on location and target of advertising. CPRs (Consumer Protection from Unfair Trading Regulations) and FTC (Federal Trade Commission) state characteristics which are evaluated to determine whether the commercial practice of advertising is aggressive. These can be evaluated as timing, location, persistence, intentions, threatening behaviour/language and abusive behaviour/language.[32][34][37] A trader who only offers cash payments, willing to drive to consumer to an ATM to withdraw money is a violation of persistence, location and nature, it is also undue influence. Another example is a business trader taking clients on a holiday in a remote area. The trader only offers transport back until the consumers agree and sign to the deal. This is witnessed as a form of coercion and undue influence regarding the nature of the sale and location.

Significant impairment or limitation is simply to significantly impair or significantly limit a consumer’s decisions (Rotford & Taylor 2009). One example of this is limiting the products sold to a particular consumer so that their decision is only based on a small portion of the products available. An example of this is a shoe clinic only offering two out of five running shoes for a consumer who wants to buy shoes specific for running. Rather than offer the full range the clinic only offers the two most expensive, influencing and limiting the consumer’s decision and impair them of other offers.[34] Another example is a trader staying in a consumer’s home for so long that the consumer feels compelled to sign a contract for a product.

Freedom of choice or conduct is not solely based on whether the product is purchased or not, but goes over options that impact the final transactional decision. Aggressive persuasion or threatening causes consumers to purchase products for a more expensive price and be left at a disadvantage.[34] Another is witnessed as a shame factor, otherwise deemed as way to manipulate consumer’s emotions to limit their freedom in choice.[34] An example of this is for a funeral parlour to sell a coffin. The consumer in grieving is persistently persuaded to buy the more expensive coffin to avoid shaming the family.

Puffing

“Puffing” is constantly used as a scapegoat/defense for misleading or deceptive advertising. Puffing is the act of exaggerating a products worth through the use of meaningless unsubstantiated terms, based on opinion rather than fact.[17] Examples of this include many superlatives and statements such as “greatest of all time”, “best in town” and “out of this world”. Typically puffing is not an illegal form of false advertising and can be looked at as a humorous way to grab and attract the attention of the consumer.[8] Though claims like ‘Top Quality’ can have regulatory and legal consequences and can be looked at as illegal misrepresentation,[38] if not supported through the products capabilities. Though puffing is said to sway attitudes and contribute to purchase decision, it has overall been proven to be a not very effective form of advertising and marketers have begun to steer clear of it, due to the consequences that loom from its use.[39]

Puffing can be come in written, verbal and more recently visual forms. Verbal puffery can be broken down into six categories, “best”, “best possible”, “better”, specially good” and “subjective qualities”.[40] Subjective claims has proven to be the only category to impact consumer’s beliefs. The use of visual puffery which is just beginning to be explored is an alternate route of communicating product benefits. Studies have begun to look at the impact visuals can make in forming a deceptive perception of a products performance. Where the imagery of adverts adds to the perception of the products use, interacting in a symbiotic relationship.[39] This allows the consumer to form an unsubstantiated opinion of the product without actual trial or use. Though the effectiveness of visual puffery is yet to be fully solidified, evidence of its existence is definitely prevalent in our society.[39]

Puffing can be used as a defense when it is verbally communicated rather than written, often this can be formatted as an opinion rather than a fact.[41] If a statement is very general and is related to buying rather than the good itself it can be considered puffery.

An example of puffery would be a restaurant claiming it had the world’s best tasting food. This uplifts the brands image at first glance, but consumers have become much more aware of advertising claims like this and don’t believe such exaggerated claims.[8] If anything companies that use puffery are setting unobtainable standards for themselves to live up to. As consumers are becoming more savvy avoiding these un-quantifiable statements would be recommended for advertising.

The truth effect

Advertisers and marketers can use the truth effect to change the way consumers view their products. Fennis and Stroebe (2010) state that the truth effect is the repetition of an advertised claim. Repetition makes it easier for consumers to process the advertisement, which can lead to the “misattribution for truthfulness” (Sundar, Kards, & Wright, 2015, p 375) and increase the acceptance, or believability, of the claim. Advertisers and marketers can create content which triggers a certain decision making process and increases the company’s claim; Sundar et al. (2015) use the example of a “voiceover” (p 384) to remind consumers about the trust they should put into the company. The truth effect does not affect all consumers in the same way because of the varying ways individuals use the decision making process; it has become a “psychological phenomenon” (Unkelbach, Bayer, Alves, Koch, & Stahl, 2011). One example of the truth effect is, in New Zealand, GlaxoSmithKline, the makers of Ribena, were fined $217,500 for misleading and misinforming their consumers about the vitamin C content in their blackcurrant drink (“Ribena-maker fined $217,500 for misleading vitamin C ads”, 2007). They claimed in their advertisements that the blackcurrants used in Ribena had four times the vitamin C of oranges, but there was no detectable vitamin C when the drink was tested. New Zealand consumers were led to believe that Ribena contained 7 mg of vitamin C per 100ml (“Ribena-maker fined $217,500 for misleading vitamin C ads”, 2007). Without even testing the drink, consumers believed the company’s claims through the repetition of their advertisements stating that claim creating a truth effect about the product.

Sundar et al. (2015) talk about the term fluency as a determinant of the truth effect. Fluency is the feeling of ease or difficulty of how information can be processed by consumers through advertisements and marketing. They go on to say that fluency can be increased through a range of methods, one of them being repetition. There are two ways in which repetition can increase fluency: first, increase feelings of familiarity, and second, the form of communication to the consumer- through advertising or a marketing event- identifies the “truth effect” and the “illusory truth effect”; these experiences of fluency can be mistaken for believability (Sundar et al., 2015, p 377). Consumer sensitivity and responsiveness to feelings of fluency can change their perception and judgement of a company’s product; they are less likely to misbelieve a company’s claim, otherwise. Unkelbach et al. (2011) state that consumers use fluency as a cue to make their judgements about what is deemed true as repetition and fluency can influence emotions, which makes fluency a subjective experience. Depending on the context of the advertisement or marketing event, fluency can be interpreted a variety of ways by consumers because they are individuals with different ways of processing information. Advertisers and marketers have control over the fluency of the information they provide to their consumers and, as with the Ribena example above, they have the power to mislead and misinform consumers about their products, as well as the power to create a positive product image.

Sundar et al. (2015) and Maio and Esses (2001) both use the term need for affect as an important moderator of the truth effect. Maio and Esses (2001) define the need for affect as “the general motivation of people to approach or avoid situations and activities that are emotion inducing for themselves and others” (p 585). The need for affect includes the belief that emotions are useful for shaping decisions and judgements during the consumer decision making process; tying in with a company’s repeated advertisement, the need for affect helps consumers make decisions and construct attitudes about the product. The need for affect is composed of two features: first, it assumes that consumers pursue experiences in a variety of ways to achieve affective experiences, and second, it includes a motivation to avoid and approach emotions (Maio & Esses, 2001). Maio and Esses (2001) go on to say that consumers high in need for affect are more likely to “(a) possess extreme attitudes across a variety of issues, (b) choose to view emotional entertainment, and (c) become involved in an emotion-inducing event” (p 583-584), when compared to people low in need for affect. The use and focus of emotion is important to advertisers and marketers because they have the ability to: first, manipulate consumer attention on emotional and subjective emotions prior to product exposure, second, assess the scale of need for affect, or third, manipulate consumer attention on emotional and subjective emotions within the appeal (Sundar et al., 2015). Along with repetition, these three factors have the potential to lead consumers into believing false advertising.

Beauty and cosmetic products have regularly come under scrutiny in the media. In the article by Knapton (2015) four in five beauty claims cannot be substantiated, nearly one in four wrinkle removal claims tested scientifically were proven to include “outright lies” (Knapton, 2015). Advertisers and marketers use terms such as ‘dermatologically tested’ and ‘clinically proven’, but they have been proven to be false claims. Knapton (2015) uses the example of L’Oreal’s 2012 advertisement promoting their anti-wrinkle cream, Revialift, featuring Oscar-winning actress Rachel Weisz; this print advertisement was banned because it exaggerated the performance of the product where the actress’ skin was flawless through the use of digital enhancements. This is an example of false and misleading advertising; consumers are being mislead about the properties and effect of the cream. As L’Oreal is a trusted and well-known global brand, consumers are lead to believe in the company’s scientifically proven results of their beauty products without actual proof that the product works. The truth effect can be strongly linked to the beauty and cosmetics industry.

Regulation and enforcement

United States

In the United States, the federal government regulates advertising through the Federal Trade Commission (FTC), and additionally enables private litigation through various statutes, most significantly the Lanham Act (trademark and unfair competition). In the 2013-2014, the United States Supreme Court is reviewing two false advertising cases: Static Control v. Lexmark (who has standing to sue under the Lanham Act for false advertising) and POM Wonderful LLC v. Coca-Cola Co..

State governments have a variety of unfair competition laws, which regulate false advertising, trademark, and related issues.

Federal advertising regulations

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."[42] 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.[43] 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,[44][45] 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.[46]

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." [47]

State advertising regulation

In addition to federal laws, each state has its own unfair competition law to prohibit false and misleading advertising.[48] In California, one such statute is the Unfair Competition Law[49] [hereinafter “UCL”], Business and Professions Code §§ 17200 et seq. The UCL “borrows heavily from section 5 of the Federal Trade Commission Act” but has developed its own body of case law.[50]

United Kingdom

Advertising in the UK is managed under the Consumer Protection from Unfair Trading Regulations 2008[34] (CPR), effectively the successor to the Trade Descriptions Act 1968 it is designed to implement the Unfair Commercial Practices Directive, part of a common set of European minimum standards for consumer protection and legally bind advertisers in England, Scotland, Wales and parts of Ireland.[33][34] These regulations focus on business to consumer interactions. These are modelled by a table used for assessing unfairness, evaluations being made against four tests expressed in the regulations that indicate deceptive advertising:

These factors of deceptive advertising are critically analysed as they may crucially impair a consumer's ability to make an informed decision, thereby limiting their freedom of choice.

This system resembles American practice as reflected by the FTC in terms of disallowing false and deceptive messaging, prohibition of unfair and unethical commercial practices and omitting important information, but it differs in monitoring aggressive sales practices (regulation seven) which included high-pressure sales practices that go beyond persuasion. Harassment and coercion are not defined but rather interpreted as any undue physical and psychological pressure (in advertising).

Even if proven cases of false advertising do not inevitably result in civil or criminal repercussions: the Office of Fair Trading states in the instance of false advertising, companies are not always faced with civil and criminal repercussions, it is based on the seriousness of the infringement and each case is analysed individually, allowing the standards authority to promote compliance with regards to their enforcement policies, priorities and available resources. Another area of departure from American practice relates to a general prohibition on the use of competitors' logotypes, trademarks or similar copy to that used in a competitor's own advertising by another, particularly when making a comparison.

Under CPR legislation there are different standards authorities for each country:

New Zealand

The Commerce Commission of New Zealand was first established in the year 1986.[51] The purpose of its Commission purpose was to promotes competition in New Zealand market, while also prohibits any types of misleading and deceptive actions perform by traders. The Commission also enforces pieces of legislation that, through regulation, provide the benefits of competition in markets where effective competition does not exist. This includes telecommunications, dairy, electricity, gas pipelines and airport sectors.

The Commission is an independent Crown entity established under section 8 of the Commerce Act 1986.[51] The Commission is not subject to the government when carrying out its enforcement and regulatory control activities. The Commerce Commission's purpose is to achieve the best possible outcomes in competitive and regulated markets for the long-term benefit of New Zealanders.

One particular Act out of many that was issue by the Commission is The Fair Trading Act, which has existed since 1986 in order to promote fair competition and trading in the country.[52] The Act in many ways has contributed to the economic well being of all New Zealanders. It prohibits certain conduct in trade, provides for the disclosure of information available to the consumer relating to the supply of goods and services and promotes product safety.

The Act helps the Commerce Commission to pursue the goal of consumers being confident of the accuracy of information they receive when making choices in purchasing goods and services. Although the Act does not require businesses to provide all information to consumers in every circumstances, businesses are obliged to ensure the information they do provide is accurate, and important information is not kept away from the consumers. This enables consumers to make informed choices about goods and services.[52]

The way the Act is that it provides any consumer in New Zealand with their own rights. If any of the rights were compromised, the consumer may consult with the trader or take any legal actions under the Act.[52] The rights are: misleading or deceptive conduct: anything said by a retailer that may give the consumer false impressions about the goods or services they are buying. Unsubstantiated representations: retailers can not make any representations about the good or service if they do not have reasonable grounds for making the claims.[53] False Representation of the good or service is also considered to be against the Act, as the information given to the consumer by the trader is not true, an example would be that of a shirt with a “Made in Italy” label while in truth it came from a factory in Bangladesh.[53]

Unfair practices are selling methods that intends to mislead the consumer. These practices are illegal under the Fair Trading Act:[53]

Furthermore, it is mandatory for traders to provide specific information about certain transactions, such as: Uninvited direct sales, extended warranties, lay by sales and auction sales. The consumer’s rights also include provisions for “consumer information standards”, these standards are made as regulations and are enforced by the Commerce Commission. In the year 2016, there are 5 consumer information standards:[53]

The Commission is responsible for enforcing the Act. However, anyone, both consumers and businesses alike – can rely on and take their own legal action under the Act. For example, the consumers if have been informed wrongly about the product or service that they have paid for- either from false representation of the product or misleading illustrations… The consumers may contact the trader and utilize their Rights which have been stated in the Act to make headway with the trader. If the issues have not been resolved, the consumer or anyone else can take actions under the Act, such action can be the application to the High Court for an injunction to stop the Act from being breached. Civil action is the best option for consumer small claims such as these, which are often resolved through a Disputes Tribunal.[53] The Tribunal can hear claims for cases up to $15,000 or $20,000 if both parties agree. The tribunal can award civil damages, which could include getting compensation or the amount of money the consumer has spent on the good or service back. But only the courts can impose fines. The Commission is also empowered to take enforcement action and will do so when allegations are sufficiently serious to meet its enforcement criteria.

The Act's primary focus is on anyone in trade – from a bank, hotel or department store through to the local plumber or corner dairy. The Act also applies to online sales. It applies to all aspects of the promotion and sale of goods and services – from advertising and pricing to sales techniques and financing. Businesses cannot contract out of their obligations under the Act.[51]

The Act also applies to certain activities whether or not the parties are 'in trade' – such as employment advertising, pyramid selling, and the supply of products covered by product safety and consumer information standards.[52]

Fair Trading Act - New Zealand

The fair trading act was created for consumer protection against deceptive forms of advertising; a sector which had previously not been protected under law in New Zealand. The three major benefits the Fair Trading Act of 1986 are the gain of market insights from the common wealth, it is a good adaptation of the American model and other countries are less likely to push boundaries of local laws. The act was formed for public benefit through the maintenance of a competitive business environment.[38] The act is said to bring a “code of morality upon businesses; obligations we’d expect of each other in our personal dealings”.[38] The reasons for the act coming into play are to protect the consumer from commercial deception and stop this deception giving companies a competitive advantage. Within the Fair Trading Act the words misleading and deceptive are never defined, this has been done intentionally to allow flexibility in decision making.[38] Though typically New Zealand tends to define something as deceptive if it has the ability to make someone believe somethings true when it is false.

Prohibited vs. allowed advertising. Puffery does not violate the Fair Trading act as it only uses meaningless terms to attract attention to a brand. If puffery ever violates the Fair Trading Act it is more likely to be perceived as illegal misrepresentation. Non-disclosure advertising can cause infringements regarding the Fair Trading Act as statements don’t only have to be factual but must also give a truthful impression.[17][38] To mislead doesn’t mean only to deceive with what is said it also includes what is left unsaid. Comparative Advertising only violates the act if it creates a false impression otherwise it can be used to communicate information and create differentiation between companies.[38] The use of tests and surveys are legal unless results are not accurate or have some way been distorted to give a false impression.[38] Those who unknowingly violate these terms of the Fair Trading Act tend to be dealt with more leniently.[38] Advertisers are not allowed to take advantage of vulnerable groups and cannot assume everyone is knowledgeable about all topics advertised.[38] Though overall advertising in New Zealand is becoming more helpful to consumers with less deceptive factual forms of advertising.

See also

References

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  2. 1 2 "Ribena-maker fined $217,500 for misleading vitamin C ads". New Zealand Herald. 2007-03-27. ISSN 1170-0777. Retrieved 2016-04-03.
  3. ↑ "Illegal Price Advertising". Boundless.com. 2015-07-21. Retrieved 2016-03-31.
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  31. ↑ McLendon, 1981
  32. 1 2 Gardner, 1975
  33. 1 2 3 4 5 Eighmey, 2014
  34. 1 2 3 4 5 6 7 8 9 Office of Trading, 2008
  35. ↑ Drumwright & Murphy, 2009
  36. 1 2 Rotford & Taylor, 2009
  37. ↑ Drumwright, 2009
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  39. 1 2 3 Toncar Fetscherin, Mark Marc (2012). "A study of visual puffery in fragrance advertising". European Journal of Marketing.
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  41. ↑ Chandran, Ravi (2004). "CONSUMER PROTECTION (FAIR TRADING) ACT". Singapore Journal of Legal Studies.
  42. ↑ 15 U.S.C. § 45.
  43. ↑ Richards, Jef I., Deceptive Advertising, Erlbaum (1990), at p. 20.
  44. ↑ Johar, Gita, "Intended and Unintended Effects of Corrective Advertising on Beliefs and Evaluations: An Exploratory Analysis", Journal of Consumer Psychology, 1996, 5(3), 209-230.
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External links

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