Misleading Advertising

## **Definition**

Misleading advertising refers to any form advertisement that is capable of deliberately deceiving the persons to whom it is addressed, distorting people’s behaviors, omitting some important information, and harming the interests of the competitors. The evaluation criteria have been made by the European Union Commission in order to help in determining if an advertisement is misleading. For the purpose of combating and controlling these misleading advertisements, many states introduced regulations for the consumer protection.

## **Types of Misleading Advertising**

#### **Bait-and-switch**

Bait-and-switch

Bait and switch is a sales tactic that lures consumers by promoting a product or service at an inconceivably low price. Once the consumers visit the store and become tempted to make a purchase, the business then tries to sell the consumers products and services at a higher cost. The bait-and-switch advertising is considered as deceptive by the Federal Trade Commission (FTC).

#### **Puffery**

When advertisers claim that there is no competition to their product, it is called “puffing.” They give to their goods and services such good attributes that makes consumers believe that there are no other products which could substitute what they are offering, although in this case, the names of other competing brands are not identified.

#### **High-Pressure Sales Tactics**

High-pressure sales tactics can make saying "yes" to a sale the easiest way in order to end a stressful negotiation. Although considered as annoying, many companies continue to apply this approach simply because it is effective. On the other hand, the awareness of the consumers about this tactic can give them power over the company. (See also Hard-selling)

#### **Source-Based**

Source Based practice of misleading advertising may emanate from two types of sources: Experts, or Typical (only satisfied) consumers. Generally, the opinions formulated by these sources towards a product or service are being considered by consumers as “credible” because of their reputation and social influence.

#### **Omission of Material Facts**

Omitting important information about a product or service which the consumers have the right to know is indeed a very serious issue. The absence of directions for the safe and proper use of a product, and the lack of warnings for possible effects on the product’s consumption will definitely mislead many consumers.

#### **Disparagement**

Disparagement occurs when the advertiser deliberately, either explicitly or implicitly, present the negative image of a competitor. The main goal of this tactic is to give to the consumers the best possible picture of their product.

## **Consequences of Misleading Advertising**

When a company or brand uses some sort of misleading advertising in order to gain a profit, they are unaware of the negative effects it can cause towards the consumers and competitors. It does not only endanger consumers’ well-being, but it can also leave long-lasting consequences on its own reputation.

The practice of deceptive advertising implies giving hidden and untruthful information that deters people from making reasonable decisions. Below are the following consequences it can bring to the consumers:

#### **Broken trust**

People who believed in a certain brand will tend to feel betrayed. As a result, this could cause a company to experience a decrease in their profit, and could also provide them a negative image. Some products can also endanger the consumers’ health (misleading drugs advertising), or promise some things that are not true which may lead to harmful consequences.

#### **Unfair Competition**

In Unfair competitions, competitors are always trying to innovate and create better products to offer to their stakeholders at a lower cost. But then it happened that certain company is more ready to invest in misleading advertising than in innovation, and it creates very tense situation on the market.

#### **Financial and Emotional Loss**

Due to ignorance, people can spend a huge amount of money and hope to get better in a psycho-physical condition, and they continue to buy misrepresented things even without any beneficial results.

#### **Reputational Loss**

One may say that the worst thing in false advertising is the betrayal of the consumers, but it is not often realized that the company’s reputation is at stake. Due to the omnipresence of the technology today, everything is transparent; so what company gets at the end is just a negative image of itself and a damage and loss of credibility.

## **Examples**

“Guaranteed results,” “Not tested on animals,” or “Scientifically-tested” appear to be the most-used claim for a product due to which many manufactures have been caught in making false statements or pushing the truth too much.

Millions that the companies lose each year due to their misleading advertisements are not comparable to the damage in their reputations.

#### **Volkswagen**

After being accused in 2015 of cheating during seven years on their emission tests in the United States, the Federal Trade Commission (FTC) filed a lawsuit last March 2016 against Volkswagen, which claimed that the company had deceived customers with the advertising campaign they used in promoting “Clean Diesel” vehicles.

#### **Red Bull**

After nearly two decades of “Red Bull gives you wings,” the company agreed to pay $13 million after settling in a class action lawsuit accused of making false and misleading advertising claims.
The Company agreed to plead guilty recently on January 2017, and a US Federal Judge ordered them to pay $2.8 billion criminal fine.

As part of the settlements Red Bull had to reimburse their customers with a $15 voucher for Red Bull products or a $10 check. The action suit covered the people who have bought the product within the last 10 years.

#### **Kellogg’s**

The scandal in 2010 took place; the reason was its misleading advertising with the Kellogg's Rice Krispies—for its immunity-boosting properties—and the 2013 “children's attentiveness, memory and other cognitive functions” from the Mini-Wheats. In 2016, the cereal company was banned for telling that its Special K product is nutritive and full of vitamins. Customers were allowed to claim a $5 back per box.

## **Regulations**

#### **European Union**

The European Union Commission has adopted a Directive for its community members regarding to the regulation of the false and misleading advertisements and disclosed information, as well as for the purpose of protecting the traders from its adverse consequences. However, the Directive only provides a limited scope of protection for the traders that will be affected by such misleading practices.

Additionally, the Directive is also an effort that is made in order to harmonize the provisions for practices of comparative advertising across the member states.

The Directive enumerates a number of criteria in order to determine whether an advertisement is considered as false or misleading:

* The characteristics of products or services (i.e. availability, nature, uses, composition, quantity, origin);
* Calculation of price; and
* Identity and background of the advertisers (i.e. nature, attributes, rights, assets, ownership, qualifications)

The implementation of the Directive across the member states of the European Union depends on their local authorities.

Nevertheless, if an advertisement or information has been proven false or misleading, EU member states should confer with the administrative authorities in order to perform necessary measures. Such practice committed under the Directive shall order for legal proceedings (i.e. total termination of the advertisement, or prohibition of publication).

It is also important to note that the Directive is not written in order to create a unified measure for the treatment of the misleading advertising practices within the European Union. Instead, the Directive functions as a guide in order to encourage each member states to remain vigilant in regulating advertisements and product information that are false and misleading, which is anchored in protecting both the traders and consumers from unfair consequences.

## **References**

1. ↑ Muela-Molina, C., & Perelló-Oliver, S. (2013). Misleading Advertising: A Study of Radio Spots in Spain. Convergencia: Revista de Ciencias Sociales, Vol. 20, No. 62, pp. 13-43.
2. ↑ Hastak, M., & Mazis, M. B. (2011). Deception by Implication: A Typology of Truthful but Misleading Advertising and Labeling Claims. Journal of Public Policy & Marketing, Research Gate, pp.2-29.
3. ↑ Shah, K. (2014). Advertising And Integrated Marketing Communications. New Delhi: McGraw Hill Education (India) Private Limited.
4. ↑ http://www.businessinsider.com/red-bull-settles-false-advertising-lawsuit-for-13-million-2014-10?IR=T
5. ↑ http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32006L0114&from=EN

## **Other References**

* The Law of Contract, Law in Context, Law in context: Butterworths, Hugh Collins, Cambridge University Press, 2003, p. 198-200
* Ethics in Marketing: International Cases and Perspectives, Patrick E. Murphy, Gene R. Laczniak, Andrea Prothero. Routledge, 2012, pp. 11-12
* Encyclopedia of White-Collar & Corporate Crime, Volume 1,Encyclopedia of White-collar & Corporate Crime, Lawrence M. Salinger, Lawrence M. Salinger, SAGE, 2005
* The Art of the Hard Sell: Subtle High Pressure Tactics that Really Work, Robert L. Shook, Piatkus, 1991
* Impact of Misleading Advertisements: Issues and Remedies C. Jeeva, Bonfring International Journal of Industrial Engineering and Management Science, Vol. 6, No. 4, November 2016, p. 155  (accessed on 25 October 2017)
* Impact of Deceptive Marketing on Consumers Behavior: A Case of Cellular Industry of Pakistan Journal of Marketing and Consumer Research ISSN 2422-8451 An International Peer-reviewed Journal Vol.18, 2015, p. 95  (accessed on 25 October 2017)
* ETHICAL BRANDING AND CORPORATE REPUTATION Corporate Communications: An International Journal, Volume 10, Number 4, 2005, pp. 10-15 (accessed on 25 October 2017)
* https://www.theguardian.com/media/2016/jul/20/kelloggs-special-k-ads-banned-health-claims
* http://www.businessinsider.com/false-advertising-scandals-2016-3?IR=T