Misrepresenting a Product
At times, the FTC may be quite technical in its definition of certain terms. For this reason, companies should be
very clear about their usage of various phrases and words. For example, the word “new” may only be used to
refer to a product that is less than six months old. Other terms may be the subject of debate or litigation, such
as whether a lotion will actually “rejuvenate” skin or whether a tablet will actually “cure” baldness. Indeed, a
sweater should not be called “wool” unless that is its complete composition. There are many examples, so it is
important for businesses to have an understanding of the FTC’s rules on this topic.
Giving Misleading Price Information
The FTC sanctions misleading price information as an unfair trade practice. Examples of misleading price
information include false sales in which a “limited time offer” might actually be available forever, or running a
“Going Out of Business” sale without any plans to go out of business while advertising that items are
discounted, although the prices have not changed.
Failing to Disclose Pertinent Information
Merchants must disclose facts that would reasonably influence the consumer’s decision to make a purchase.
Withholding pertinent information from customers may be viewed by the FTC as equal in severity to the
process of using overtly incorrect or deceptive information. For example, sellers should always disclose the full
price of their products or services before accepting payment for them.
12.2
The Federal Trade Commission
The FTC was created in 1914 to address the problem of monopolies and trusts. Following the Civil War, a wave
of consolidation and growth among companies triggered increased public debate. Through handshake
agreements, issuance of stock, and pooling arrangements, companies could fix prices and outputs, thus
effectively stopping competition and raising consumer prices. A substantial number of mergers gave control
over key industries to small groups of businesses. Where companies did not merge, other arrangements were
made to have a similar effect. Conglomerates controlled most of the relevant industries that produced
household necessities. Goods used in production were also the product of highly concentrated trusts, such as
the United States Steel Corporation and the International Paper Company. Concerns about industrialization
and a changing economy, with shifting norms for personal lives, triggered antitrust sentiment.
E X A M P L E  1 2 . 3
A brick and mortar store has an online promotion for a “buy one, get one” offer for the season’s hottest
new phone, stating that the offer is only available on Black Friday. The store opens at 5:00 a.m., and
customers start lining up with their sleeping bags in tow the evening prior to the morning opening time.
After customers almost stampede one another, they learn that they will have to also purchase a phone plan
that is inflated by 100% of its regular price to qualify for the deal. Nowhere in the literature or promotions
was the phone plan, or its over-inflated price, mentioned as a requirement to get the buy one get one free
phone deal.
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Chapter 12 Unfair Trade Practices and the Federal Trade Commission
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