False Advertising

The New York statute General Business Law section 350 seeks to protect consumers from companies' false advertising of goods and services. Lawyer Robert Unger has used this law, namely in the context of a class action, to attack the misrepresentations a company would use in their advertising to lure consumers to purchase their product or service, for the consumer to discover only later that he/she was duped in the transaction. In the meantime, the consumer, having been induced into the purchase by relying on the advertising, may have gained little to no benefit from the service or product or worse, they are in a worse position than before purchase.

Successful prosecution under this false advertising statute should yield the award of attorney’s fees and costs of the lawsuit. GBL 350 is known as a “fee-shifting” statute: a consumer is entitled to have his/her attorney’s fees and costs paid for by the company perpetrating the false advertising. This is crucial when the actual damages due to the false advertising may be minor for the one loan consumer, making individual prosecution of the case economically infeasible.

Money damages from false advertising can be significant to the point of devastating. While we are all guaranteed freedom of speech from the US Constitution, that right does not excuse false and misleading commercial advertising. Freedom of speech is a constitutional guarantee, which includes commercial speech. Freedom of speech includes speech that many would consider in poor taste, offensive, and factually dubious. However, the law is clear that freedom of speech does not include the right to lie and distort in regards to commercial enterprise. The New York statute cited above is a mechanism to level the playing field: to provide as close to an honest marketplace as consumers can have.

Defendants in these lawsuits will often claim the defense that the advertising is an expression of opinion and not an expression of fact; that the ad was mere “puffery” and the consumer has to beware of language if he/she is viewing it and acting upon it reasonably. The issue of opinion v. fact can be determined by a judge or jury as trier of fact.

If a company has made misleading statements about price, quality, or purpose, and these claims induce a consumer to make a purchase they would not have otherwise made, this is false advertising that may entitle him/her to damages. False advertising includes misrepresentation of facts, misleading claims, deceptive labels, bait-and-switch schemes, aggressive sales tactics, and failure to disclose important information.

It is important for an advertiser to be honest, especially about facts that a consumer cannot reasonably verify. The normal consumer cannot verify what services are necessary to settle an IRS tax debt, what ingredients are in a medicinal product or what specific results can be gained from a stock or other investment. Customers have a reasonable right to trust advertising regarding product information.

If one merely looks at the graphic on this website’s homepage, a common example of deceptive advertising is the use and abuse of “fine print.” A contract may use fine print to capture standard and usual terms. However, sometimes a business will bury very important and unusual contractual terms in the fine print. While the offer may technically be “honest”, the reasonable person is not expected to examine fine print for unusual terms. Therefore, it is deceptive and may not be enforceable.

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