Marketing, Deceptive

Deceptive marketing is a subset of deceptive business practices that occur, according to the U.S. Federal Trade Commission (FTC), when there is “a misrepresentation, omission, or practice that is likely to mislead the consumer acting reasonably [Page 644]in the circumstances, to the consumer's detriment.” Marketing deception is legally distinct from other forms of deception because it focuses on injury to the consumer as a result of the lie or deception, regardless of intent. In the United States and most countries with consumer protection laws, the specific meanings of “deceptive practices” and “injury” are not spelled out in statutory form. Rather, the legal interpretation of marketing deception comes from case law and the principle of stare decisis, precedents from prior decisions that are adhered to in future legal cases.

Marketing is the subset of business practices that affect consumers directly through exchange between buyer and seller. Consumer value, or utility, is created when the exchange satisfies the consumer's wants and needs. Producer value, or profit, is derived from receiving compensation. Marketing consists of a mix of activities involving product, price, promotion, and distribution (place). While marketing deception is most often associated with advertising and promotion, other forms of material influence occur when a product does not perform as expected, prices are unfairly manipulated, or products are not available as represented. Marketing deception occurs when the producer or seller uses deceptive practices in any of these marketing activities in order to gain an unfair advantage over competitors or consumers.

In commercial exchange, the free flow of information is viewed as essential to helping the consumer know the prices and choose between products. Marketing deception must be legally defined because First Amendment rights have been extended by the courts to advertising and other forms of speech that promote commercial transactions. However, the U.S. Supreme Court has ruled that only truthful commercial speech is protected. False, misleading, or deceptive advertising or other forms of promotion are not protected by the law.

Exploiting the public's concern over vitamin deficiency as America entered World War II, the Doughnut Corporation unsuccessfully sought the endorsement of the Nutrition Division of the War Food Administration for “Vitamin Donuts.” The Food and Drug Administration, also skeptical of these types of claims, eventually developed a rational program for food enrichment.

A consumer or buyer is considered to have been injured when a misrepresentation, omission, or deceptive practice is a material one. In the legal environment, material means that a consumer's actions or decisions are affected in ways that are different from what would have occurred had the consumer not been deceived. For example, aspirin is a specific pain-killing compound that is identical in all products called aspirin. If Brand A claims that its aspirin product is more effective than aspirin from Brand B, and consumers then choose Brand A because of this claim, a material deception has occurred.

Deceptive advertising can be explicitly false, or it may make misleading claims that are true but lead consumers into making false or incorrect inferences. Inferences of meaning are difficult to [Page 645]regulate. There may be considerable doubt about what has occurred in the mind of an individual consumer and whether or not the implication has misled the consumer. Advertising or other sales presentations may use “puffery,” praising the product with vague and general subjective opinions, superlatives, or exaggerations but without stating specific facts. Legally, this is often treated as allowable exaggeration, the FTC position being that consumers expect inflated claims in advertising, recognize it, and do not believe it. The Uniform Commercial Code of 1996 upheld the right of advertisers to use puffery, placing the burden of proof that the buyer was misled on the buyer.

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