Introduction
This Quick View provides in-house counsel, private practice lawyers, and compliance personnel with an understanding of deceptive trade practice laws and the types of acts or omissions that might constitute deceptive trade practices. An understanding of these laws is crucial to avoid substantial legal penalties, reduce the risk of expensive litigation, and ensure that your company operates within legal boundaries.
This Quick View covers:
- The Federal Trade Commission and deceptive trade practice laws
- The three elements for a practice to be considered deceptive
- Types of deceptive trade practices
This Quick View can be used in conjunction with the following Checklist: Mitigating risks related to deceptive trade practices.
Section 1 – The Federal Trade Commission and deceptive trade practice laws
The term ‘deceptive trade practices’ refers to unethical or fraudulent business activities that mislead consumers or involve the provision of false information. Deceptive trade practices can include false advertising, misrepresenting products or services, omitting crucial information, or any conduct that deceives or is likely to deceive consumers. Laws and regulations are in place to protect consumers from these practices.
Deceptive trade practices undermine consumer trust and market integrity. Consumer protection laws are designed to ensure that businesses operate honestly and transparently, maintaining a fair and trustworthy marketplace.
Closely related to deceptive trade practices, unfair trade practices encompass a range of unethical activities. These include tied selling, where consumers must purchase additional products or services to obtain what they originally wanted, and deceptive pricing tactics that create a false impression of savings. Misleading offers of free prizes or gifts with hidden conditions and noncompliance with manufacturing standards are also common examples of unfair practices. For more information on unfair trade practices, see How-to guides: Understanding antitrust and unfair trade practices law and your organization’s compliance obligations and How to identify and manage antitrust and unfair trade practice risk. The focus of the remainder of this resource is on deceptive trade practices.
1.1 Federal laws
The Federal Trade Commission (FTC) is the federal agency primarily tasked with promoting consumer protection. The FTC’s consumer protection mandate involves enforcing federal laws designed to prevent deceptive trade practices.
The main law that the FTC enforces is the Federal Trade Commission Act (FTCA), which is the foundation of the agency's authority. The FTCA was enacted in the US in 1914 to establish the FTC and equip the government with comprehensive legal tools to combat anticompetitive, unfair, and deceptive practices in the marketplace. Section 5(a) of the FTC Act (15 USC, section 45(a)(1)) prohibits ‘unfair or deceptive acts’ in commerce but does not clearly define these terms, which has led to debates about the FTC's enforcement power.
The FTCA authorizes the FTC to enforce the provisions of the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, specifically prohibiting deceptive advertising.
1.2 State laws
The state law landscape related to deceptive trade practices operates alongside the federal system. State laws tend to be more granular, barring particular acts and practices as well as prohibiting courses of conduct deemed ‘false or misleading.’ State laws may be more expeditiously enforced, as state enforcement agencies may have less crowded dockets and be more responsive to consumer complaints. All 50 states and the District of Columbia have some form of consumer protection laws, often called Unfair and Deceptive Acts and Practices Acts or Consumer Protection Acts. These laws generally prohibit deceptive practices in consumer transactions and, although the specifics of the laws may vary, many also address unfair or unconscionable practices. Some state laws include criminal penalties for severe violations.
In 1964, the National Conference of Commissioners on Uniform State Laws drafted a model Act – the Uniform Deceptive Trade Practices Act (UDTPA). The UDTPA was designed to create a consistent framework for states to address deceptive trade practices such as false or misleading advertising and other unfair business practices. A key provision of the UDTPA is a prohibition on deceptive trade practices, being any act likely to deceive consumers. The UDTPA states that a person engages in a deceptive trade practice when, in the course of their business, vocation, or occupation, that person:
- passes off goods or services as those of another;
- causes likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods or services;
- causes likelihood of confusion or of misunderstanding as to affiliation, connection, or association with, or certification by, another;
- uses deceptive representations or designations of geographic origin in connection with goods or services;
- represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that he does not have;
- represents that goods are original or new if they are deteriorated, altered, reconditioned, reclaimed, used, or second-hand;
- represents that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another;
- disparages the goods, services, or business of another by false or misleading representation of fact;
- advertises goods or services with intent not to sell them as advertised;
- advertises goods or services with intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity;
- makes false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions; or
- engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding.
The UDTPA also provides for remedies for harmed consumers, such as the right to rescind contracts, recover damages, and seek injunctive relief.
The UDTPA serves as a guide for states, many of which have adopted it or similar laws into their statutes to regulate deceptive practices within their jurisdictions. Enforcement is carried out by state attorney generals, consumer protection agencies, and other state authorities.
An example of a state law is the California Consumers Legal Remedies Act, found in the California Civil Code, sections 1750 et seq. This prohibits various unfair or deceptive acts and practices in transactions involving the sale or lease of goods or services to consumers. Specifically, it targets practices such as misrepresenting the source of goods, falsely claiming that reconditioned items are new, advertising products without sufficient stock to meet demand, asserting that unnecessary repairs are needed, presenting rebates with hidden conditions, and misrepresenting a salesperson’s authority to finalize a deal. Section 1780 of the Civil Code allows consumers harmed by these unlawful practices to seek actual damages (with a minimum of $1,000 for class actions), injunctions against the offending practices, restitution, punitive damages, court costs, and any other appropriate relief as determined by the court. Additionally, a prevailing plaintiff can recover attorney fees, while prevailing defendants typically cannot.
Section 2 – The three elements for a practice to be considered deceptive
2.1 The FTC Policy Statement on Deception
The FTC Policy Statement on Deception (the most recent guidance available from the FTC on deceptive practices) sets out three elements for a practice to be considered deceptive:
- is there a representation, omission or practice that is likely to mislead the consumer?
- is the practice deceptive from the perspective of a consumer acting reasonably in the circumstances?
- is the representation, omission, or practice a ‘material’ one?
The FTC has also issued an Enforcement Policy Statement on Deceptively Formatted Advertisements. This additional document provides insight into the principles underlying the FTC’s enforcement actions, advisory opinions, and other guidance. The following comment, from the Policy Statement, effectively summarizes the overall approach that the FTC takes in evaluating when it will consider claims as being deceptive:
‘Regardless of the medium in which an advertising or promotional message is disseminated, deception occurs when consumers acting reasonably under the circumstances are misled about its nature or source, and such misleading impression is likely to affect their decisions or conduct regarding the advertised product or the advertising.’
Each element of deceptive practices is considered in more detail below.
2.1.1 Representation, omission, or practice that is likely to mislead the consumer
In order for a practice to be considered deceptive, there must be a representation, omission, or practice that misleads or is likely to mislead a consumer. Deception doesn't only occur when a consumer has actually been misled, it can also be found if there is a likelihood of misleading consumers. Representations can be express or implied claims or promises, and may be communicated in writing or orally. An omission can be deceptive when information necessary to prevent misleading a consumer is missing. Statements, representations, or omissions are evaluated in the context of the entire advertisement, transaction, or course of dealing, not in isolation.
2.1.2 The act or practice must be considered from the perspective of the reasonable consumer
To determine if a representation, omission or practice is misleading, the consumer's interpretation or reaction must be reasonable under the circumstances. This means assessing whether a reasonable member of the target audience would find the marketing material deceptive. When targeting specific audiences, such as the elderly or financially unsophisticated, the communication is evaluated from the perspective of a reasonable member of that group. If a representation has multiple meanings for reasonable consumers and one is misleading, it may be considered deceptive. Even if not a majority, a significant minority being misled can indicate deception. Written disclosures might not correct a misleading statement if they divert attention from important limitations or suggest that reading them is unnecessary. Similarly, oral disclosures or fine print often fail to counteract a misleading headline or prominent statement. Finally, a deceptive act or practice cannot be remedied by later truthful disclosures.
2.1.3 The representation, omission, or practice must be material
A representation, omission, or practice is considered material if it is likely to influence a consumer’s decision to purchase or use a product or service. Generally, information about the costs, benefits, or limitations of a product or service is deemed material. Express claims related to a product or service are presumed material. While an intent to deceive is not necessary to prove deception, an implied claim is presumed material if it is shown that the person making the claim intended for consumers to draw specific conclusions from the claim. Claims known to be false are also presumed material. If a seller knew, or should have known, that an ordinary consumer would need omitted information to evaluate the product or service, or that the claim was false, materiality will be presumed because the manufacturer intended the information or omission to have an effect.
Section 3 – Types of deceptive trade practices
Deceptive trade practices come in a variety of forms and there is no exhaustive list of practices that might be considered deceptive. Some of the most common types of deceptive trade practices are explored further below.
3.1 Deceptive marketing and advertising practices
Deceptive marketing and advertising practices are aimed at manipulating consumer behavior. They include practices such as misleading product descriptions, bait and switch tactics, false comparisons, and the misrepresentation of geographical origins. They also include practices like hidden fees, and a lack of transparency in influencer marketing.
3.1.1 Misleading product descriptions
One common deceptive trade practice involves manipulating the use of terms to depict products or services in a misleading manner without valid justification. For example, a product might be marketed as ‘organic’ or ‘natural’ even if it does not meet the required standards or hold certifications to justify using those terms. This manipulation can create an impression of quality or health or environmental benefits that are not genuine.
Some companies engage in deceptive marketing practices by falsifying the ingredients, attributes, or benefits of their products, or by making false claims about their quality, safety, or effectiveness. This can include exaggerating the benefits of a product, hiding potential risks or side effects, or making false claims about the presence or absence of certain ingredients. Falsifying the ingredients, attributes, or benefits of goods or services can be harmful to consumers, who may be misled into purchasing a product that does not meet their needs or expectations, or that may even be harmful to their health or well-being.
One form of this type of deceptive trade practice is greenwashing. Greenwashing refers to a business practice where companies promote inaccurate or overstated assertions, about the ecological advantages of their goods or services by using deceptive labels or marketing strategies to imply a higher level of environmental friendliness than is actually the case and may also suggest a solid dedication to sustainability or eco friendliness without offering tangible proof to support these allegations.
Example
A retailer falsely represented that its sheets, pillows, bath rugs, and towels advertised as made wholly or in part from bamboo were, in fact, made of rayon. The company described them with terms like ‘sustainable,’ ‘highly renewable,’ and ‘environmentally friendly.’ The company also advertised some of the products online with a ‘Cleaner Solutions’ seal that linked people to a ‘sustainability’ webpage describing initiatives suggesting that the company ‘care[s] about the planet.’ The company agreed to pay a $2.5 million civil penalty to the FTC to settle the claims. US v Kohl’s, Inc., No. 1:22-cv-00964 (D.D.C. 2022).
Providing misleading warranties or guarantees about a product can be deceptive. Businesses might provide promises of product excellence or performance that they never plan to uphold. When customers try to make use of warranties or guarantees, they might discover that the business declines to deal with their issues or honor its commitments.
3.1.2 Bait and switch
Misleading consumers to believe that a product is really that of another business, also known as ‘bait and switch,’ is a practice that can lead to consumer confusion and mistrust. This type of deception can also increase the likelihood of consumers purchasing a product that is not what they expected, which can result in negative consequences for both the consumer and the business.
3.1.3 False comparisons
False or incomplete comparisons are another form of deceptive trade practice. Comparisons to other products may be made without providing proof to back up statements of superiority over competitors’ goods. Advertisers may cherry pick features while glossing over any drawbacks or restrictions present in the product.
Example
A bakery attempted to appeal to customers trying to lose weight by advertising that its bread had ‘50% fewer calories per slice than our competitor’s bread.’ The bakery omitted the fact that its bread was largely the same as its competitor’s bread, but it was sliced 50 percent thinner.
3.1.4 Misrepresentation of geographic origin
Some companies engage in deceptive trade practices by misrepresenting the geographical origin of their products, claiming they are made in a certain country or region when in fact they are manufactured elsewhere. This can be done to take advantage of the perceived quality, prestige, or reputation associated with a particular region or country, and can be harmful to consumers who may be misled into paying a premium for a product that is not what it claims to be. Additionally, misrepresenting the geographical origin of goods or services can also violate laws and regulations related to labeling and advertising, leading to legal consequences for the offending company.
Note that misrepresentations of geographic origin must be explicit to be regarded as deceptive. For example, a seller of ice cream that brands its product with a name that includes umlauts but that is not an actual word or name in any language, is not engaged in a deceptive practice because it does not identify a purported geographical origin.
Companies can engage in deceptive trade practices by misleading consumers with ‘Made in the USA’ claims when their products contain substantial foreign components or are primarily manufactured outside the country.
Example
A plaintiff brought an action for deceptive trade practices against a manufacturer that sold a line of shoes that prominently featured claims that the shoes were ‘Made in the USA’ – despite the fact that the shoes' foreign composition meant they did not meet the ‘all or virtually all’ standard used by the FTC to merit such a label. The ’all or virtually all’ standard requires that for a product to be labeled as ’Made in the USA,’ all significant parts and processing must be of US origin. This means that the product should contain no – or negligible – foreign content. The Court rejected the defendant’s motion to dismiss the plaintiffs’ complaint. Cristostomo v New Balance Athletics, Inc., 647 F. Supp. 3d 1 (D. Mass. 2022). On May 10, 2024, the parties stipulated to dismissal with prejudice of the plaintiffs’ complaint.
3.1.5 Withholding information
Withholding information is a deceptive trade practice where businesses fail to disclose potential risks associated with a product or service, leading consumers to make uninformed decisions. This tactic includes omitting crucial details that could sway a buyer’s choice, like vital safety alerts or potential side effects.
Example
A plaintiff sued a home security company that failed to disclose vulnerabilities in its system that allowed a technician to access home security cameras without authorization. The plaintiff’s complaint stated a cause of action for deceptive trade practices. Doty v ADT LLC, 594 F. Supp. 3d 1319 (S.D. Fla. 2022). The case was ultimately settled in 2022.
3.1.6 Hidden fees and charges
Concealed charges and extra fees are business practices in which companies do not fully reveal the added expenses related to a product or service, from the start. They typically hide these charges until the end of a transaction process, which can surprise customers and make it difficult for them to make informed choices. Deceptive methods might be employed to obscure or confuse the comprehension of the price tag and keep consumers in the dark about what they are paying for.
Example
A plaintiff who alleged that a seller raised the prices for its products under the guise of a ‘supply chain surcharge,’ thereby causing her to pay more for the defendant's products than she should have, made a plausible claim showing that she suffered an economic injury as a result of the defendant's deceptive conduct. The Court denied the defendant’s motion to dismiss the complaint. Dunham v Sherwin-Williams Co., 636 F. Supp. 3d 308 (N.D.N.Y. 2022). The parties stipulated to dismissal of the case on October 31, 2023.
3.1.7 Endorsements and sponsorships
Endorsements and sponsorships can be a form of deceptive trade practice when transparency is lacking. Not revealing paid endorsements or sponsorships in social media posts or marketing efforts can deceive consumers into thinking that the promotion is a personal viewpoint. Furthermore, using methods to present a paid advertisement as an authentic endorsement only adds to the deceptive nature of the endorsement.
Example
Professional models who sued three clubs claiming that the defendants misappropriated and intentionally altered images of the plaintiffs to make it appear that the plaintiffs worked at, endorsed, or were otherwise associated with the defendants, stated a cause of action for false endorsement. Lopez v Conchetta, Inc., No. 23-5030 (E.D. Pa. May 21, 2024). As of April 24, 2025, the case is still pending.
3.1.8 Influencer and social media marketing
Many marketing campaigns focus on media platforms where influencers have a strong impact on shaping how consumers behave and what trends they follow. These influencers use their presence to endorse various products and services while also creating a community and bonding with their followers. A business that relies on influencers in its marketing needs to ensure that influencers are not making claims in their promotions that may cause serious repercussions for the brands they endorse.
For further information, see Quick View: Legal risks associated with business social media use.
3.2 Other deceptive trade practices
3.2.1 Robocalls and robotexts
Unauthorized robocalls and robotext messages are considered deceptive business practices when they occur without the recipient’s explicit permission. This encompasses automated phone calls and text messages sent to individuals who have not granted consent for communications, often disregarding ‘do not call’ registries or rules regarding unsolicited contact. Robocalls and robotexts are regarded as deceptive because they are often associated with fraudulent practices. These actions become misleading when they include promotions or falsify the identity of the sender, leading recipients to unwittingly interact with fraudulent activities or scams.
Additional resources
Related Lexology Pro content
How-to guides:
How to draft an affiliate marketing agreement
Avoiding false or misleading advertising
Liability for fake reviews
Issues surrounding online advertising
Checklists:
Drafting an affiliate marketing agreement
Using product endorsements
Online advertising directed to children
Mitigating risks related to deceptive trade practices
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