Deceptive Trade Practices
Federal Trade Commission
Both the federal law and the law of virtually every state include statutes that prohibit the use of deceptive or unfair trade methods of doing business. One of the first of these laws passed was the Federal Trade Commission Act, enacted in 1914. As originally written, the law forbade only "unfair methods of competition and commerce". The statute was designed to supplement the then recently enacted Sherman and Clayton antitrust acts.in 1938, the law was amended to also prohibit unfair and defective acts or practices in commerce. This change was designed to make those consumers injured by unfair trade practices protected by the law in the same way that merchants and manufacturers had been protected by the original enactment. The law is now mostly enforced by the Federal Trade Commission (FTC), the principal federal agency protecting consumer interests. The FTC enforces other important consumer protection laws, such as the Magnuson-Moss.
Critical Information
It is important to remember that under this federal law, the capacity to deceive, and not actual deception, is prohibited. This means that the FTC is not required to prove that deception actually occurred. If an advertisement, statement, or brochure fails to disclose important information or a business engages in other activities that may lead to deception, there may be a violation.
Uniform Deceptive Trade Practices Act
In addition, most states have now adopted either the Uniform Deceptive Trade Practices Act or their own similar laws. These laws protect consumers and other businesses in much the same way as the FTC Act. The Uniform Deceptive Trade Practices Act provides that a person or business has engaged in an illegal deceptive trade practice when the business or person does any of the following things:
Passes off goods or services as those of another.
Causes likelihood of confusion or misunderstanding as to the source or approval of goods or services; or an affiliation with or certification by someone else.
Uses deceptive representations or designations of the geographic source of the goods or service.
Represents that goods or services have sponsorship, approval, characteristics, ingredients, uses or benefits that they don't have, or that a person has some sponsorship, approval or connections that he or she does not.
Represents that the goods are original or new when they are not.
Represents that goods or services are of a particular standard, quality or grade, or of a particular style or model, when they are not.
Disparages the goods, services or business of someone else by false or misleading representations.
Advertises goods or services with no intent to sell them as advertised or that supplies needed to meet reasonable demand (unless the advertisement discloses a supply limitation).
Makes false or misleading statements of fact concerning the reasons for or the existence of price reduction.
Engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding.
While the laws vary somewhat in those states that have not adopted the Uniform Deceptive Trade Practices Act, the foregoing items represent the kind of items that are illegal in nearly every state.
Both the federal and state laws provide that not only may the government sue a business or person that has engaged in a deceptive trade practice, but usually competitors and consumers also have a right to sue. Many of these laws provide for payment of fines and penalties, as well as the right to collect attorneys fees by an aggrieved party.
Also remember that in addition to these laws, common law concepts, such as the tort of fraud, often still apply. Businesses are cautioned to used care in preparing advertising and promotional materials as many states vigorously enforce these laws to protect their consumers
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