unfair trade practices examples
Hi dear friends, solsarin in this article is talking about “unfair trade practices examples”. we are happy to have you on our website.
What are Unfair Trade Practices?
UNFAIR TRADE PRACTICES
The phrase unfair trade practices can be defined as any business practice or act that is deceptive, fraudulent, or causes injury to a consumer. These practices can include acts that are deemed unlawful, such as those that violate a consumer protection law. Some examples of unfair trade methods are: the false representation of a good or service; false free gift or prize offers; non-compliance with manufacturing standards; false advertising; or deceptive pricing.
UNFAIR ADVERTISING
A simple definition of unfair advertising is false advertising that misrepresents a product, service, or price. A broader description of the term will include unfair sales strategies, such as “bait and switch,” a practice of advertising one item at a low price with the intent of actually selling other items. Unfair ads can be categorized as those with incorrect pricing, fake endorsements, false statements, or exaggerated performance descriptions. Deceptive guarantees are also considered a form of unfair advertising.
Unfair Trade Practices and Examples
Product Guarantees and False Endorsements
Companies must be prepared to honor product guarantees. For example, if a product is advertised with a 50 percent money-back guarantee, then that must be provided to customers who meet the requirement(s) attached to the guarantee. Similarly, companies may not create false endorsements and testimonials about their products.
Unfair Advertising
False advertising includes the misrepresentation of a product, service, or price. It may be more expansively defined to include unfair sales strategies, such as advertising one item and then selling another item in its place, e.g., one that is higher priced, lower quality and/or less in demand. This method is most commonly referred to as “bait and switch.” Additional examples of unfair advertising include incorrect pricing, fake endorsements, deceptive guarantees, making false statements, and providing descriptions that exaggerate the performance of the product or service.
Example
For months, Ivan had searched for just the right window curtain to match the décor of his new high rise condo. Finally, while browsing through Amazon, he saw two gray velvet curtains that featured a damask pattern, with taupe and gold accents and specks of ice blue glitter accents. He could not have designed a more perfect color palette for the window treatments if he tried. Moreover, the velvet blackout touch was just what he needed. Excited, he hit the “Buy Now” button and waited a couple of days for his order to arrive. When it did, what a huge disappointment!
He could see, if he stared long and hard enough, how someone with a vivid imagination might consider the curtain to be an abstract interpretation of what was advertised. However, most people would see that the product was not at all close to what was advertised. The velvet was closer to linen, the damask pattern was closer to swirls, and the taupe and gold accents with specks of ice blue were closer to silver and purple, with specks of mauve.
After running a Google reverse image search of the original product photo, he saw it featured in an interior design magazine. When Ivan looked up the product endorsements and reviews, he saw that all of the reviewers had only posted reviews for that particular seller’s products, and that they had posted nothing but glowing reviews for each of the products. It was clear to Ivan that the seller was guilty of false advertising, as well as faking endorsements. Ivan has enough information to submit a consumer complaint to the Federal Trade Commission.
Taking Advantage of Customers
The FTC also pays particular attention to business ventures that target vulnerable populations. For example, some telemarketing efforts employ intense pressuring tactics to target seniors and people who don’t speak English.
Example
Devin is involved in the telemarketing of spy gadgets, such as bugs and bug detectors. He has had a lot of trouble finding a market for these products. One day, he speaks with an older citizen who asks him about the benefits of the bug detector. Devin starts to knowingly make unsubstantiated claims that there have been news reports that home bugging is on the rise. His false claims works like a charm. Spooked, the elderly customer buys the most expensive bug detector product.
Seeing his success, Devin purchases a report of households in his geographic selling area that are headed by people over the age of 70. Over the next few months, his sales increase at an explosive rate. When he is recognized by management for his leading sales numbers, they also inquire about the secret to his success as they seek to replicate it in training materials for other sales professionals. When Devin proudly explains his tactics, he is terminated by the company.
The company calls the customers impacted by his false claims, explains that there was a misrepresentation by one their sales associates regarding the scope of known bugging activity, allows them to keep their bug detectors, and refunds them the money they spent purchasing the products. The sales associate engaged in unfair trade practices, but the company took appropriate steps to correct it.
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.
Example
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.
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.
Unconscionable Trade Practice
In addition to unfair trade practices, the law prohibits any unconscionable trade practice. This is defined as any act or practice in connection with the offering of or actual sale, lease, rental, or loan of any goods or services, in the extension of credit, or in the collection of debts which is detrimental to a person because it
- takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree; or
- results in a gross disparity between the value received by a person and the price paid.
Chain Referral Sales
Chain referral sales are also prohibited by law. A chain referral sale is one in which the buyer is induced to purchase merchandise with the promise of a commission, reduced price, or rebate on the condition that the buyer will give the seller names of other prospective buyers.
Misrepresentation of Motor Vehicles
It is illegal to willfully misrepresent the age or condition of a motor vehicle. The seller cannot reset the odometer, regroove the tires, or perform chassis repair unless he/she informs the buyer that the work has been performed. The seller of a used motor vehicle must give the buyer, at the time of sale, an affidavit that
- describes the vehicle;
- states, to the best of the seller’s knowledge, whether there has been an alteration or chassis repair due to wreck damage;
- indicates the mileage on the vehicle at the time of the sale; and
- indicates that, to the best of the seller’s knowledge, the odometer has not been altered.
In the case of a private party sale of a vehicle to another private party, an affidavit shall be given only upon the request of the purchasing private party.
Exception
The laws that are permitted under the regulatory body of New Mexico and the United States will not apply under the Unfair Trade Practices Act. Although, any actions that the state of New Mexico laws do not state will then refer to the Unfair Trade Practices Act.
Penalty
If someone is admittedly breaking any of the laws under the Unfair Trade Practices Act, in the state of New Mexico, an attorney general will be appointed by the court to recover a civil penalty not exceeding $5,000 per violation. If the person who violated the Unfair Trade Practices Act was a first-time offender, then the appointed attorney general may accept a written assurance that the person who broke the law will stop any unlawful practices under the Unfair Trade Practices Act. The attorney general will set a date and write up an agreement that they will return their customers’ money and will accept returns of the property or other things that were sold through the unlawful business transaction.
Enforcement
The Federal Trade Commission and the Attorney General of New Mexico are responsible for enforcing the Unfair Trade Practices Act. If you feel that you have been misled under the Unfair Trade Practices Act, please contact the New Mexico Attorney General’s Office or the Federal Trade Commission.
