Example of report on false advertising in the united states

Advertising is used as a means to publicize a particular product or service to its target market. Companies often vie to produce the most creative, lucrative, and efficient advertisements in their respective industries. However, in the high demand for such advertisements, certain campaigns tend to neglect their responsibility of proper advertising. Various forms of deceptive advertising are seen almost everywhere and the most notorious will be tackled later on. To be specific, any form of advertisement that lures consumers to purchase a product or service due to a misunderstanding may be considered as false advertising or deceptive advertising. These advertisements often delude the consumer to think that they will profit more by purchasing the commodity while the benefit often lies on the side of the manufacturers. There are many forms of false advertising and the damage they cause range as well. One of the more common cases is the inflated price comparison. Companies raise the prices of their commodities while offering a sale price which is actually the real price of their product. This lures the consumer into thinking that he or she is able to save more when in fact, he or she was just paying for the regular price. Another form of deceptive advertising is products being sold with a rebate. The rebate is often given quite some time after the purchase has been made which makes it difficult for the consumer to claim it. Numerous companies are known for rejecting or ignoring rebates claimed by their customers or defer the rebate. Introductory prices may also serve as false advertising. If customers aren’t observant, they may not realize that the prices they see now are only for a limited time and will eventually rise again. This is a form of advertising that takes advantage of the naivety of the consumers and may be considered as false advertising. Another form of deceptive advertising is the usage of fillers in packaging. The fillers tend to enlarge or blow up the façade of the product, but once opened, the customers are underwhelmed to see the product. In this case, it is a subtler form of deceptive advertising.

Legislation has also gone through lengths to protect the consumers from deceptive advertising. The Lanham Act (15 U. S. C. A. § 1051 et seq., ch. 540, 60 Stat. 427 [1988 & Supp. V 1993]) is the primary law that is against trademark infringement and deceptive advertising. Since it prohibits many illicit activities against exclusive trademarks, it is also recognized as the Trademark Act. The Lanham Act is considered as the first comprehensive federal trademark law since prior to its conception, trademark laws were state laws. In 1870, the first trademark law was passed in Congress and further amended in 1876. However, it was deemed as unconstitutional in 1879 by the U. S. Supreme Court. By 1930, a more consolidated legislation for trademark rights was brought forth by Fritz Lanham. It was passed in 1946 and named after him. It was an act that was geared to protect not only the businessmen but also the consumers.

The Lanham Act is divided into four subchapters. The first subchapter is called The Principal Register. This subchapter defines the requirements necessary for a particular mark to be registered on The Principal Register; a register that gives marks their right to be exclusive and prevents others from infringing it. There are also prohibitions against marks that are confusing, marks that resemble other marks too well, generic marks, scandalous marks, among others. Moreover, it also requires an affidavit of continued use which is to be provided after five years of registration. The second subchapter, entitled The Supplemental Register, outlines a registration for the said register. This is to accommodate those that cannot be registered under The Principal Register for now, but may be in the future such as those that are simply descriptive. Although it does not provide the entire protection that The Principal Register has, The Supplemental Register informs the people that a particular mark is in use. It also provides procedural benefits.

Subchapter III is called the General Provisions and this holds the very gist of the act. Section 43 in particular, narrates in detail what actions are to be taken against infringed trademarks. These provisions have the power to restrict the capabilities of infringed marks by using injunction and damages. The provision in Section 43(a) prohibits unregistered marks that are likely to be confused with registered marks. Section 43(a)(1)(B) is used for occasions when misleading statements have led to hurt business. This section in particular helps prohibit the instances of deceptive advertising as well as Section 43(a)(1)(A) which is a provision when false or misleading statements are proven to have harmed consumers. In the two sections, the claimant must be able to prove that a false or misleading statement was committed in commerce and the statement causes probable harm to the plaintiff. Furthermore, in Section 43(a)(1)(B), the claimant must also be able to prove that the statement was used in an advertisement or promotion.
The four subchapter deals with the Madrid Protocol: a treaty that refers to the Madrid System for recognizing international marks. It is a filing treaty which makes it easier and more efficient for trademark holders that wish to have their trademark recognized internationally. The application is done under one language, one country and one currency making it more convenient for the trademark holders. A local agent is no longer necessary in filing an application. An International Registration may be issued, although the choice of protecting the mark in question still falls in the hands of the individual countries. Should they choose to protect that mark, it would be as if the mark has been registered in their respective offices.
Generally, the Lanham Act serves to prohibit marks that provide confusion with other marks, that are too general, that are scandalous and offensive to the majority, and other standards such as these. It also gives provisions to false or misleading statements that lead consumer and business to harm. These provisions in particular serve well in prohibiting misleading advertising. Should the given act be violated, grave offenses wait to those that infringe upon registered marks in the forms of injunctions and damages. However, even with the Lanham Act in legislation, there are still numerous cases of false advertising that run rampant.
In the case of the Federal Trading Commission vs. Hasbro and the advertising agency Baca in 1993 and 1996, Hasbro was accused and proven guilty that they misrepresented the toys GI Joe and “ Color Blaster”. On the packaging, they made it seem as if these toys are capable of many features that apparently, they cannot do. The penalty was to stop the ad campaign and that they could be penalized 10, 000 USD for future infringement. They were also penalized 175, 000 USD for the incident. By 1996, Hasbro paid 280, 000 USD more for violation of the 1993 agreement.
In the case of Federal Trading Commission vs. New Balance Athletic Shoes, Inc and Hyde Athletic Industries, Inc, the companies claimed that all of their shoes were manufactured in the United States while a significant amount of their shoes were manufactured entirely abroad. For this, the companies signed a settlement agreement that they will stop claiming that all their shoes were manufactured in the United States.
In 2000, the Federal Trading Commission brought Apple to court. Apple advertised that consumers had free access to its live technical support for as long as they owned an Apple product. Consequently, they began charging 35 USD for this service. Their penalty was to sign an agreement that they were to hold true to their promise and provide reimbursement for those who were made to pay for the service.
Within the same year, the case FTC vs. Bumblebee Seafoods was also taken to court. Their can labels stated “ 75 cents OFF Next Purchasing Details Inside Label.” Upon reading the inside of the label, it says that consumers are ineligible for the discount unless they purchase an additional five cans. The company was told to stop such practices and they were also ordered to provide coupons that offered a 75 cent discount for every purchase of two cans or multi-packs of tuna.
The year after that, a group of filmgoers brought Sony Pictures Entertainment to court, claiming that a fake movie critic praised its films in advertisements. It was a 1. 5 USD settlement. Film goers who saw the film were given a five-dollar reimbursement and any money left over is handed off to charity. The company itself suspended its two marketing executives who thought up the fake critic advertisement.
In FTC vs. Interstate Bakeries Inc, the company well-known for manufacturing Wonder Bread, and the advertising agency Campbell Mithun, the company ran an ad campaign that claimed the calcium in their product aided children’s memory and brain function. This was resolved in a settlement that prohibited the company from making health benefit claims without substantial evidence and research.
In 2003, FTC vs. Exxon, the company claimed that its Supreme gasoline cleans engines and reduces automobile maintenance cost. They were told to stop providing unsubstantiated claims.
The case of 47 states vs. Blockbuster in 2005 dealt with the rental company that lifted their fees on late rentals yet charged their customers with a fee for restocking after one week. If the video was not returned in 30 days, the customer was charged with the retail price. They were told to clearly state to their customers their policies and conditions. They were also told to offer refunds for customers or credit for their purchased items and to pay 630, 000 USD to those who filed the case against them as reimbursement for litigation charges.
During a NAD forum in 2005, the case of Georgia Pacific Corporation (who manufactured Brawny Paper Towels) vs. Procter and Gamble (maker of Bounty Paper Towels) arose. An ad of Procter and Gamble showed compared the two towels by testing their wiping and tearing capabilities. This ad highlighted Bounty’s toughness despite being damp. This ad in particular showed lab results as compared to consumer use. Procter and Gamble disagreed with NAD’s conclusion but consented to its recommendation for future advertising.
In another NAD Forum of the same year, Procter and Gamble (maker of Pringles® original Potato Crisps) brought up PepsiCo/Frito-Lay, Inc (maker of Lay’s Stax® Original Potato Crisps). Frito-Lay claimed that “ America prefers the taste of Lay’s Stax® Original Potato Crisps over Pringles® Original Potato Crisps. Oddly enough, no penalty was carried out. An outside, independent double-blind test was conducted and the results supported Frito-Lay’s claim.
In a CARU Forum in 2005, McDonald’s was being dealt with. It did not provide all available options as part of its Mighty Kids Meals. McDonald’s disagreed with the forum’s decision but agreed to take into consideration its recommendations for future advertising. The advertisement already completed its on-air rotation at this point.
Kyle Gray, an individual customer, took PepsiCo in New Jersey to court in 2005. He claims that “ Tropicana Peach Papaya” had in fact, no papaya juice and pear juice (“ Deceptive Advertising, n. d.)”. Most of the drink was composed of corn syrup and contains only a pinch of pear juice. PepsiCo signed a settlement where it agreed to apply modifications to its product labeling. The company also paid 2, 500 USD to Kyle Gray, made a substantial financial donation for the American Heart Association and handed out an addition 50, 000 USB for the legal expenses fees of those who filed the lawsuit.
In 1914, Listerine was the first mouthwash to be sold over-the-counter. By 1921, it has carried away into falsely advertising the mouthwash by declaring itself as a cure-all. From sore throats and coughs to healing bumps and bruises and to preventing dandruff, Listerine suddenly had a miraculous manner in dealing with ailments outside the mouth. It was filed several false advertising lawsuits. By 1975, the Federal Trading Commission even ordered the company to spend 10 million USD for corrective advertisement. Even as late as 2005, it was also charged with yet another false advertising suit which claimed that their products were as effective as flossing, using biased clinical trials to support their claim.
Lydia Pickham, considered as the world’s first successful businesswoman, released a vegetable compound that claimed to cure all ailments womanly for only one dollar a bottle. After careful examination, it was later on revealed that it contained less than 1% vegetable compound and more than 20% alcohol. If a customer took the recommended dosage of one tablespoon every 2-4 hours, she would have consumed five ounces of more than 13. 5% of alcohol. The Federal Trade Commission resolved to be stricter regarding advertising claims based on medicine.
Amoco Oil Company signed a settlement agreement with the Federal Trading Commission that stated that their claims in advertisements were proven to be false. Its “ Crystal Clear Amoco Ultimate” claimed that its clear gasoline had superior engine performance and even had unsubstantiated environmental claims. Truth of the matter was, the industries were experiencing a clear revolution at that time and Amoco decided to capitalize on that. Since their claims have been unfounded, they were forced to strip the ad campaign.
In 1919, a Dr. William Frederick Koch advertised a cure-all. For only 25 USD (1948 prices) a bottle, one held the key to all ailments: a drug he calls glyoxylide. The FDA confirmed that his magical drug was no more than distilled water. Moreover, they found out he treated his cancer patients with detoxification in the form of enemas, fresh fruit and vegetable juices and very little painkillers. Amidst the towering cases, there was never enough viable evidence to take the case to court during that time.
Airborne is yet another cure-all that entered the industry a decade ago. It claimed to be the cure for colds and to boost one’s immune system. With the atrocity of their unsubstantiated claims, Airborne was penalized with more than 23 million USD in fines for false advertising. David Scharadt, the proponent of the lawsuit, insisted that Airborne’s claims were unfounded and went so far as to label it a placebo.
These numerous examples illustrate the stubbornness of companies to capitalize on the trust and ignorance of their customers. Several of them served to woo the customers with features that are too good to be true and make claims without research to back it up. These forms of advertising are blatant examples of fraudulent activity that take advantage of customers. Others, such as the case of FTC vs. Bumble Bee Seafoods, use advertising as an entrapment. Only after purchasing the product were they told of the entirety of the policy regarding the discount. Customers are being cheated to purchase products because they are being misled by deceptive advertising.
There is a very significant lesson in these cases. Most of the time, consumers are easily fooled by the flashy advertisements they see everywhere. Billboards, post ads, television advertisements, internet pop-up ads—all of these bombard the consumers with products and service that they perhaps do not really need. There is nothing wrong with marketing a particular product and publicizing it to the targeted customers. But to take advantage of their trust by employing various means of false advertisement shows how some companies are willing to commit fraudulent actions to boost their profit. Cheating their customers seems to be much easier than to actually provide quality products.
The regulatory board that is the Federal Trading Commission vigilantly ensures that the consumers are protected from these abusive practices. With the help of legislation such as the Lanham Act, they are able to exercise regulation over the wealthy magnates of industries who opt for the easier but immoral manner of advertising to their customers.
But to the very core of it, the customers themselves have a choice to purchase or not to purchase. It is all a matter of being a vigilant and responsible consumer by reading labels carefully, or reviewing which products really perform as they say they do. All sectors involved—the consumers, the companies and the FTC—must perform as responsibly as they can if a well-functioning relationship between the consumers and the industry is aspired.

Works Cited

“ Deceptive Advertising: A Summary of Case Studies”. EconEdLink. n. d. Web. 16 June 2012.
“ Lanham Act”. Wikipedia. 30 May 2012. Web. 16 June 2012.
Steagall, Kristen. 6 Cases of Shamelessly False Advertising. 30 July 2008. Web. 16 June 2012.
“ What is False Advertising?” WiseGeek. 2012. Web. 16 June 2012.