Deceptive Practices

Deceptive practices are incidences of unfair or deceptive acts that are deliberately made against consumers by businesses. In commerce, sellers may not omit, misrepresent, or make false statements that lead to a consumer decision that is injurious. Deceptive practices are formally defined in Section 5 of the Federal Trade Commission Act (FTCA) and administered and enforced by the Federal Trade Commission (referred to here as the Commission).

The FTCA prohibits unfair and deceptive practices in or affecting commerce. The Commission is an independent federal agency and the only organization sanctioned to enforce the FTCA. It is empowered to act in the interest of all consumers to prevent deceptive and unfair practices and protect consumers from commercial enterprises that mislead or affect consumer behavior or decisions about a product or service. It also has the authority to stipulate interpretive rules and general statements of policy. The Bureau of Consumer Protection is a part of the Commission, and it works directly with the consumer to enforce federal laws, provide information to educate consumers, and process fraud or identity theft complaints. The Commission's jurisdiction encompasses a wide variety of entities and individuals, including interstate and foreign commerce.

As incidences of deceptive and unfair practices have increased, consumer protection laws have expanded. For example, the Fair Credit Billing Act requires businesses to investigate billing errors and provide the consumer with a written acknowledgment of the complaint before the consumer's credit rating is affected. There are many more laws that are aimed at protecting consumers from harmful, unfair, and deceptive business practices. Most states have chosen to enact additional laws that increase the level of consumer protections and, in some cases, include both criminal and civil penalties. It varies by state.

The Commission is authorized to investigate, prohibit, and enforce the laws under its jurisdiction. Victims of deceptive practice may file a claim with the Commission. Following a review, the Commission will determine whether a harmful or deceptive practice has been committed. The accused must dispute the claim that is being investigated. If an appropriate rationale is not offered, the Commission will request a cease and desist order. If the issue perpetuates, it may be addressed in the civil courts in which the Commission will make a recommendation and report its findings to enforce a ruling. The Commission is involved with only civil suits, and it may impose fines up to $11,000.

Under the FTCA, commercial enterprises must not engage in harmful practices that deceive consumers. Some examples of deceptive practices include scams, false advertising, identity theft over the Internet, monopolistic practices, and bait-and-switch advertising techniques. For example, Microsoft Corporation was sued when it introduced its Vista operating system. It was accused of deceptive practices because the company had allowed personal computer makers to promote computers as “Windows Vista Capable” before the product was released in order to, allegedly, maintain strong sales between the time of the announcement and the release date. When Vista was released, consumers discovered that its compatibility with PCs bought the prior year was only applicable to one version of the software, the more basic version. Microsoft was [Page 554]accused of a “bait-and-switch” technique, where it lured its customers into buying PCs that did not support the functionality of all versions of the Vista software.

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