Unfair trade practices are practices a company or person engages in when they use dishonest, misleading, or unethical ways to get business. These practices may be targeted at consumers or rival companies.

What Are the Types of Unfair Trade Practices?

Unfair trade practices include any business actions declared illegal by law, such as:

What Is False Advertising?

The phrase “false advertising” applies to any publicity or advertising that misrepresents the nature, quality, characteristics, or origin of commercial activities, goods, or services. A business that knowingly releases an ad that contains misleading, deceptive, or untrue statements to sell its product can be held liable for injuries resulting from false advertising.

The Federal Trade Commission (“FTC”) is the government agency responsible for implementing regulations concerning unfair trade practices, which is how false advertising is classified. Depending on the relief sought, an action for false advertising can be filed in either a civil or criminal court. This is because false advertising is deemed both a tort and a crime in the eyes of the law.

It was not until more recently that private citizens were able to sue businesses for false advertising. Before states began implementing consumer protection and deceptive advertising laws, consumers could only submit complaints to the FTC, which would need to notify or penalize the business itself. However, individuals who have been injured by false advertising can pursue private lawsuits per the statutes enacted in their state.

For example, suppose you bought a protein bar that claimed to have specific nutritional benefits and no added sugars. Suppose it is discovered that the protein bar has none of the nutritional benefits the company claims it has and has added sugars. In that case, you may be able to recover damages by taking legal action against the company.

Any advertisement containing deceptive, inaccurate, or misleading representations is considered false. As mentioned above, this form of advertising is an unfair trade practice. False advertising includes:

  • False statements about a product’s effectiveness or quality
  • Fake endorsements
  • Fake testimonials
  • Phony picture of the product
  • Fraudulent prices in the advertisement
  • Bait and switch advertising

What Are the Federal Protections Against False Advertising?

The FTC is the main federal government agency responsible for overseeing and enforcing false advertising regulations. However, given this task’s enormous undertaking, the FTC relies on consumers and competitors alike to report unlawful and deceptive advertising. The FTC will then investigate the complaint, and if it discovers that an ad does violate the law, it can take several actions.

First, the FTC will tell and attempt to get the company to fix its mistakes on its own. If the company ignores this proposal, the FTC can issue a cease-and-desist order and file a lawsuit on behalf of injured consumers. During the case, the FTC may ask the court to grant an injunction against the company to have them abstain from continuing to employ false advertising practices.

The FTC can also issue fines and may have the business or their third-party advertiser release new ads that provide correct facts and information and may even force the company to recognize those earlier ads contained false statements. The regulation that allows the FTC to carry out such actions is known as the “Federal Trade Commission Act (“FTCA”)”; specifically, Section 5 of the Act.

Another federal law that protects against fraudulent advertising practices is the “Consumer Financial Protection Act (“CFPA”).” The CFPA was responsible for creating the Consumer Financial Protection Bureau (“CFPB”), which is the agency that implements the CFPA. The CFPA permits the CFPB to take legal action against financial organizations (e.g., banks, credit card companies, etc.) for dishonest, abusive, or misleading practices on behalf of consumers.

One other primary law that shields consumers against false advertising and deceptive practices is the “Federal Food, Drug, and Cosmetic Act (“FFDCA”),” which is implemented by the U.S. Food and Drug Administration (“FDA”). The FFDCA dictates the type of information that needs to be disclosed in drug advertisements and food labels.

What Are Deceptive Business Practices?

Whenever a business or an individual engages in an activity that is likely to deceive the public may be considered a “deceptive trade practice.” Deceptive trade practices are prohibited due to the adverse effects on consumers and the general public.

Federal and state regulations restrict the use of deceptive trade practices. The Uniform Deceptive Trade Practices Act (UDTPA) is an example of federal legislation regulating misleading trade practices. All states have adopted some form of the Act in their statutes. The Federal Trade Commission Act also oversees deceptive trade practices.

Deceptive trade practice laws cover an extensive range of business elements, including trade & commerce, consumer transactions, and goods & services.

An individual or a business engages in deceptive business practices when engaging in any business activity that may mislead the public. These practices are forbidden by law because of their adverse effects on the general public.

Examples of deceptive practices include:

  • Passing off fake goods as the real thing
  • Causing disorder and misunderstanding regarding the approval of the goods and services

What Are Some Examples of Deceptive Trade Practices?

Deceptive trade practices can take a variety of forms. The fundamental idea behind deceptive trade practice is that the activity results in misleading or misinforming the recipient of goods or services. The most everyday examples of deceptive trade practices are false advertising and tampering with odometers or other measuring devices.

Some other models of activities that would be considered deceptive trade practices may include:

  • Passing off goods or services as those of another causes misunderstanding or confusion regarding the source, certification, or approval of goods or services.
  • Using misleading designations or representations of the geographic origin of goods/services
  • Conveying that the goods or services have ingredients, characteristics, uses, qualities, or benefits that they do not have
  • Asserting that goods are new or original if they are used, second-hand, altered, or corrupted
  • Conveying that certain goods or services are of a certain quality, grade, standard, model, or style when they are of another
  • Faking the goods, services, or business of another entity through the use of misleading facts
  • Advertising products with the intent to sell them at a different price or quantity than advertised (for instance, price reductions)

Therefore, most deceptive trade practices are connected with the provision of goods and services.

Do Deceptive Trade Practices Laws Cover Other Issues Besides Goods and Services?

In addition to the provisions included in federal and state regulations, deceptive trade practices are also monitored and regulated by the Federal Trade Commission (FTC).

These concentrate more on the activities of business rather than the goods and services, including:

  • Using dishonest or unconscionable (one-sided) provisions in contracts
  • Using coercive or high-pressure sales and collections tactics
  • Engaging in criminal conduct
  • Taking advantage of factual circumstances, such as emergencies or the vulnerability of a particular marketing demographic

What Are the Remedies for Deceptive Trade Practices?

Consumers and people who have been victimized through deceptive trade practices may have a mixture of remedies available for them in court.

Some of these remedies include:

  • Monetary Compensation: A plaintiff who has established actual damages may be permitted statutory damages to reimburse them for losses. Some states implement treble damages in severe cases, which require the offender to pay triple the amount of the losses. Punitive damages and criminal prosecution may be available in some jurisdictions
  • Equitable Relief: A court may also order an injunction requiring the offender to follow specific measures or abstain from specified activities. Cease and desist orders are also commonly issued for deceptive trade practices.

Is Puffery An Unfair Trade Practice?

No. Puffery involves extravagant or exaggerated statements made to entice customers to buy a certain service or product. Engaging in puffery is not illegal because companies can “puff up” their products as long as it is opinion rather than fake facts.

Do I Need to Contact a Lawyer Regarding Unfair Trade Practices?

Unfair trade practices not only negatively impact the marketplace but can also result in sanctions from government agencies. Contact a business lawyer if you suspect or have been accused of unfair trade practices. The lawyer can advise you on how to proceed with your case.