When it comes to advertising many businesses routinely break the law and don’t even know it. There are federal and state statutes that regulate what you can and cannot say in your advertisements. Advertising has an impact in the way consumers view your product and your business, and what messages you convey are taken very seriously.
In California and most, if not all states, it is unlawful for any person, firm, corporation or association and any employee to advertise for the sale of real property, personal property, services, or to induce the public to enter into any type of obligation when the advertising is untrue or misleading, and also when the advertiser should have known it was untrue or misleading. It is also unlawful for to advertising with the intent to not sell the advertised real property, personal property, or services at the advertised prices.
A violation can result in a criminal violation of up to six months in jail and a fine up to $2,500 per violation or both. This is an addition to private claims from individuals hurt by the advertisement.
At one time anyone noticing deceptive advertising was permitted to bring a lawsuit, before any harm had occurred. In response big businesses initiated and promoted proposition 64 which passed and which changed the rules and now an actual harm is required and only the victim can bring a lawsuit.
For the violation of the law no actual knowledge of the wrongdoing is required. Not knowing that the misleading advertisement has been published is not a defense.
The advertising media has a defense that it acted in good faith and without knowledge of the advertisement’s false, deceptive or misleading character.
In determining liability the courts have held that something as simple as one to one oral communication that is misleading is sufficient to establish liability. Door to door sales, car salesman statements to potential buyer, phone conversations has been sufficient to constitute misleading advertising. Advertising has been deemed to mean almost any statement made in connection with the sale of a product or service. Private labels have also deemed to mean advertising.
The test to determine whether or not the advertisement is misleading is the reasonable consumer standard. Is the advertisement one that would mislead a reasonable consumer.
There is no clear guide as to whether an omission in the advertisement can lead to a violation. It has been held that failure to list material negative fact is a violation. In another case it was held that hotel was not required to disclose what it did with revenues received from a 17% charge added to room service bills. In another case it was not fraudulent for a mortgage lender to provide the borrower with a copy of the wholesale rate sheet.
A business entity is required to investigate its own advertising to prevent false advertising. Blind reliance on the representation made by others is not a defense.
In association of professionals working together the coworkers have a duty to insure everyone is licensed. In a medical practice where one of the coworkers was not licensed to practice medicine it was held the licensed doctors had violated the law, because they did not check the license status of a colleague.
In addition to these rules are many other rules of advertising.