Deceptive trade practices can get your business into trouble with the law. Whenever you’re selling a product or service, you need to be sure that you are doing so in accordance with the law. If you’re accused of taking advantage of consumers, you may end up facing a lawsuit.
The Federal Trade Commission Act prohibits unfair and deceptive acts that affect commerce. This applies to anyone who engages in commerce. Unfair acts and practices that meet certain legal standards may lead to lawsuits.
What are the legal standards for unfairness or deception?
The FTC Act states that unfair acts or practices are those that:
- Can’t reasonably be avoided by consumers
- Cause, or are likely to cause, substantial injury to consumers
- Are not outweighed by benefits to consumers or competitors
Deceptive practices may include:
- Those that mislead, omit or misrepresent customers
- Those that were misrepresented or that have a reasonable interpretation as something different than they are by consumers
- Misleading omissions, practices or representations that are material to a case
To be unfair, an act or practice has to be likely to cause or to have caused injuries to consumers. This includes monetary harm coming to those people. Speculative harms are not usually sufficient for a case, and emotional impacts may not be enough to prove that a practice is unfair.
What can you do to avoid claims of unfairness or deception?
With your own products and services, it helps to be as clear as possible about what you’re offering, the costs involved and other factors that consumers could be potentially confused over. For example, if you offer a buy-one, get-one deal, you should include all information about that deal on your paperwork. Misleading the consumer into thinking they can get the deal when it’s only offered to the first 10 people, for example, may be unfair and lead to complaints, if not lawsuits.
This is a small example, but all promotional materials, marketing scripts and other agreements need to have all benefits, terms and limitations listed where the consumer can easily see them and be clear about what is being offered.