Chapter Outline
12.1 Unfair Trade Practices
12.2 The Federal Trade Commission
Introduction
Learning Outcomes
•
Analyze laws pertaining to unfair trade practices and the agency that scrutinizes them.
12.1
Unfair Trade Practices
The term “unfair trade practice” describes the use of deceptive, fraudulent, or unethical methods to gain
business advantage or to cause injury to a consumer. Unfair trade practices are considered unlawful under the
Consumer Protection Act. The purpose of the law is to ensure that consumers have the opportunity to make
informed, rational decisions about the goods and services they purchase.
Unfair trade practices include false representation of a good or service, targeting vulnerable populations, false
advertising, tied selling, false free prize or gift offers, false or deceptive pricing, and non-compliance with
manufacturing standards. Alternative names for unfair trade practices are “deceptive trade practices” or
“unfair business practices.”
Section 5(a) (https://www.federalreserve.gov/boarddocs/supmanual/cch/ftca.pdf) of the Federal Trade
Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” Per the rule, unfair
practices are those that cause, or are likely to cause, injury to consumers, those that consumers cannot avoid,
and those in which the benefits of the product or service do not outweigh the deception. Deceptive practices
are defined as those in which the seller misrepresents or misleads the consumer, and the misleading practice
Figure 12.1 (Credit: Carol M. Highsmith collection/ wikimedia/ Attribution 2.0 Generic (CC BY 2.0))
12
Unfair Trade Practices and the Federal Trade Commission