MGMT CH 11
JB Williams CO. v. FTC
"tired blood" affirmative disclosure
3 types of injuries to competitor
1) competitor may be injured when the false advertising attracts customers to the advertiser and away from the competitor 2) advertiser falsely represents that the goods are those of the competitor when in fact the goods are produced by another firm and are inferior then the competitor is injured through loss of sales as well as lost consumer goodwill 3) advertiser may harm its competitors by making false statements about the competitor
2 steps in analyzing deceptive quality claims
1) determine the claim (if any) is being made by the advertisement 2) claim must be shown as deceptive
what are the two tests that analyze unclear unfairness
1) substantial test with the large amount of harm a product causes 2) net benefit to customers/ or marketplace of practice
What are the remedies for unfair or deceptive advertising
1. common law *breach of contract: must have offer and acceptance; ad is an offer for an offer -ads are the buyer offering to buy the good from the seller at a specified price. the seller can refuse to sell the goods at the specified price -therefore, common law give little to no remedy 2. Torts- can recover for deceit/misrepresentation -when advertisers misrepresent the quality of goods and services -little value -consumer must prove (elements) -misrepresentation of material fact -knowledge by seller that info is false -seller's intent that consumer rely on the misrepresentation -damage to the consumer -if any element cannot be proved, no recovery -may simply have puffing -difficult for consumer to win based on tort -can be argued by defendant that the ad was just "puffery"
how long can the public or affected parties wait to challenge the consent decree
60 days
What agency regulates unfair and deceptive advertising?
FTC
Corrective advertising
FTC remedy that requires the affirmative disclosure by the defendant the the past advertising claims were misleading (Listerine case)
What is the basis of the disagreement among economies about the value of advertising? Why does this disagreement disappear when they analyze false advertising?
That they reduce competition and that they are tasteless and help produce essentially the same products
Where is protection from false statements concerning the advertisers own products found?
a federal statute called the Lanham Trademark Act
What are "unfair methods of competition"
affecting commerce by deception of products and prices
advertising
any communication that businesses offer customers in an effort to increase demand in their products
Common Law Tort of Decit
available when advertiser misrepresents the quality of goods and services ( has little value) to win: (all must be proven) 1)misrepresentation of info 2)knowledge by the seller that the info is false 3)sellers intent that consumer only relies on misrepresentation 4) consumer justified reliance on the misrepresentation 5) damage to con consumer
bait-and-switch scheme
bait: advertising a product at a very low price in attempt to lure customers into the store switch: advertiser refuses to sell advertised product and attempts to get customer to buy higher priced substitute item
how can sellers violate section 5 of the FTC act
by distort relative price comparisons, even in similar products
what is a driving force in american ecomony
consumption of goods and services
The difference between defenders and critics of advertising
critics have good faith in the consumer
What is the FTC in charge of
enforcement of the Clayton Antitrust Act of 1914 and the FTC act which prohibits "unfair methods of competition"
where is the consent decree published?
federal register
Magnuson-Moss Act
gave power to the FTC to regulate industry-wide behavior by formulating trade regulations rules
Structure of the Federal Trade Commission (FTC)
headed by 5 commissioners who are appointed by the president (approved by the senate) it is an independent agency with 1200 employee.
consent decree
how the defendant settles the dispute against their unfair practices
where are trade regulation rules used
in industries where consumers are very vulnerable to unfair acts
Consumer remedies for false advertising (common law and statutory)
is under very limited circumstances because ads are for the buyer not the seller (UCC)
What did the Wheeler-Lea Amendment Act do to the FTC act
it broadened to protection of consumers from "unfair or deceptive practices"
what happens is the defendant and the FTC cannot agree on a settlement?
it goes to trial and the ALJ orders a cease and desist order
Advantages of advertising
it offers real information about the characteristics of a good including the price
caveat emptor
let the buyer beware
What does the Lanham Trademark Act do?
makes any person connected to the false advertising liable and creates a private cause of action for any competitor to be injured caused by the misrepresentation
does the advertiser have to admit violations of the law
no
what did the federal trade commissions improvements act do
ordered the FTC to to focus on regulating deceptive or misleading advertising rather than truthful advertising that might be unfair
what is one of the most informative advertising practices
price
advisory opinion
request to see if if proposed amendment will meet FTC standards
affirmative disclosure order
requires advertiser to disclose all relevant information about a product, both positive and negative
why does the FTC require advertisers to have reasonable claim on a product
so that a reasonable person would see it the same way
What relationship, if any, is there between the FTC's advertising substantiation program and its corrective advertising remedy?
the main difference is that the corrective remedy is rare
What are the arguments against advertising?
they reduce competition, they are tasteless, produces goods that are fundamentally the same
Remedy (competitors) for false advertising against product
tort of disparagment
can the FTC regulate activities even if they are not fraud or misleading
yes
