Nowadays, advertising has a significant impact on purchasing choices of customers. Therefore, some traders spread false information about their products through the advertisements to make people buy their goods. This notion appeared together with the first advertisements because it allows companies to increase their sales without any additional investments. In addition, punishment for false advertising appeared only in the twentieth century, so earlier traders used benefits of freedom of speech (Sheehan). The aim of this paper is to research advertising abuse by a merchant and its impact on customers. In particular, the dimensions of the problem will be defined. Besides, the types and examples of false advertising will be investigated. Finally, the possible solutions to the problem will be offered.
Creating Misleading Impression
According to the law, traders are not permitted to give false statements that can make an incorrect impression. This refers to products’ advertising, packaging and data given to customers by online shopping services. Besides, it includes statements that traders create online and in the media, particularly testimonials placed on their official websites or accounts in social media. For instance, businesses can mislead purchasing choices of their clients giving false statements about the style, model, quality or history of goods or services. Apart from that, companies sometimes provide false information about the accessories, performance characteristics, benefits, sponsorship or use of their goods or services. The availability of repair centers or spare parts is also a common area where advertising abuse takes place. Finally, it is also not allowed to make false or incorrect claims about the need for the products or services or any exclusions on them. It is not important if the trader wanted to mislead the customers or not. If the total impression after seeing a product’s advertisement makes a misleading impression in the buyer’s head (e.g. it can be caused by the price, value or the quality), then such conduct can be considered to be advertising abuse, which is against the law. However, there is an exception to the following rule. Traders sometimes tend to exaggerate their claims about a product significantly, so nobody would think about them seriously. For instance, a restaurant can claim that it has “the best pizza in the city”. Such kind of advertisement is called “puffery” and it is perceived as misleading (Australian Competition & Consumer Commission).
Examples of Misleading Statements
Misleading purchasing statements can include such claims as:
- a mobile phone provider does not inform its customer about absence of coverage in his or her area during signing an agreement
- a representative of a real estate agency does not provide the complete information about a house by advertising a beach apartment that is far from the beach
- a store advertises that a dress “costs” $400 and is “now” $200 while the store never asked such price for the dress
- a trader predicts the health improvement after taking some health product without having any evidence that such improvement can be achieved
- a transport company applies an image of a plane to make an impression that cargo is transported by air, when it is actually taken by a truck
- an organization gives incorrect information about the advantages of work-at-home model (Australian Competition & Consumer Commission).
Types of Misleading Advertising
First, traders often use fine print and qualifications when they want to mislead purchasing choices of their customers. In fact, it is common for adverts to have some data in fine print but this information should respond to the general message of the advert. For instance, if a trader says that a product is sold for “free” but the fine print states that some money should be given, the advertisement can be a case of giving misleading information. Second, comparative advertising is commonly used. In this case, advertisements might contain comparisons of products or services of certain trader to other offerings on the market. These comparisons may be based on such aspects as cost, variety, quality or size. Comparative advertising is considered false if the comparison is incorrect or gives wrong information about the analyzed products. Third, traders tend to apply bait advertising. For example, it happens when an advert promotes prices on goods that can be hardly found in stores or not available at all. These prices are usually called ‘sale’ prices. However, it is not considered misleading if the trader openly says that the product from advertisement is in short supply or is sold for a short time. Finally, traders mislead customers by environmental or “green” statements. These claims are usually posted on such goods as toilet paper, nappies, and detergents as well as larger appliances. They can have testimonials about recycling, energy efficiency, and influence on animals and environment (e.g. “green” or “fully recycled”). Traders making these statements should be able to prove that their products are really “green” (Australian Competition & Consumer Commission).
From time to time both small and large traders are accused of misleading advertising. For instance, the Federal Trade Commission (FTC) claims that Sony misled the customers by advertising the “game-changing” characteristics of the PlayStation Vita when the gadget was launched in the United States. To avoid any legal problems due advertising abuse, the company agreed on everything with FTC. Therefore, Sony will be giving a partial refund of $25 or a $50 voucher for certain games or services to the customers that purchased the console until June 1st, 2012. According to the FTC, Sony uses such features as Cross-Platform Gaming, Remote Play, 3G connectivity and Cross-Save to mislead buyers. The FTC mentions that some of these benefits either did not work as it was said in the advertisement or were not found in the console at all (Alvarez).
Damage from False Advertising
Advertising abuse has negative effects not only on customers (e.g. making wrong purchasing choices) but also on a trader causing legal and finical issues as well as losing customer loyalty. For example, if advertising abuse is detected, then the FTC might research further to check whether the trader breaches any laws. The FTC watches the content of the advertisement from the point of view of a customer trying to determine whether the actual or hidden statements are misleading. The FTC also estimates the rest of data (e.g. availability of report about side effects of a medicine). Besides, the FTC may create a cease-and desist order and send it the trader asking to stop using an advertisement. The advert must be improved to meet the FTC standards before starting running it again. For example, sometimes, companies need to correct wrong data or add some details. Besides, future advertisements may be asked to include some new disclaimers or the information about prior misleading practices. As for financial losses, they can be significant. First, the trader may lose money spent on making an advertisement. Second, the organization also must pay a fine for a current advertising abuse as well as future cases. In case the trader is sued, they need to pay to clients that filed the lawsuit and also to the state for reviewing the following law violation (Frost).
Solution to the Issue
If advertising in print media, television and other traditional sources is more or less regulated and protected from misleading, advertising in the Internet creates certain problems; particularly people are often manipulated by false reviews in Yelp, Amazon, CitySearch or Google. To solve the issue, owners of platforms that suggest users reviews, must design a joint program to fight the fakery. They also need to inform users about their demands in the Terms & Conditions section. In addition, the platforms should allow making reviews only to users that have purchased a product (e.g. Amazon has already introduced this rule). Besides, the platforms can ask stakeholders about the fraud-detection programs to detect and delete fakery. It is also reasonable to separate advertising items from “editorial” content in shady cases. Finally, internet-based organizations can find a “Better Business Bureau” for publishing reviews on their websites. The access to the bureau would be given only to platforms that actively participated in the fight against false reviews and answered to retailer complaints. Ordinary customers would see the list of members of this organization (Makovsky).
In conclusion, advertising misleading is widely spread today because it allows traders to affect purchasing choices of customers. The problem was intensified after starting actively using the Internet in advertising. For example, some traders post false reviews about their competitors to destroy their reputation. At the same time, false advertising has negative effects not only on buyers but also on the companies themselves leading them to financial and legal issues as well as losing of customer loyalty. As for solutions, they are firstly necessary for the online advertising because advertisements in print media, television, and radio are more or less regulated. In particular, the platforms have to unite and create a joint program with clear measures aimed at fighting false reviews. On the other hand, the case with Sony demonstrates that not all companies are afraid of punishment for false advertising, so probably laws should be made stricter.