The FEDERAL TRADE COMMISSION (FTC), the largest federal agency that handles consumer complaints, regulates unfair or deceptive trade practices. Even local trade practices deemed unfair or deceptive may fall within the jurisdiction of FTC laws and regulations when they have an adverse effect on interstate commerce.

In addition, every state has enacted consumer protection statutes, which are modeled after the Federal Trade Commission Act (15 U.S.C.A. § 45(a)(1)). These acts allow state attorneys, along with general and private consumers, to commence lawsuits over false or deceptive advertisements, or other unfair and injurious consumer practices. Many of the state statutes explicitly provide that courts turn to the federal act and interpretations of the FTC for guidance in construing state laws.

The FTC standard for unfair consumer acts or practices has changed with time. In 1964, the agency instituted criteria for determining unfairness when it enacted its cigarette advertising and labeling rule. A practice was deemed unfair when it (1) offended public policy as defined by statutes, COMMON LAW, or otherwise; (2) was immoral, unethical, oppressive, or unscrupulous; and (3) substantially injured consumers. The FTC changed the standard in 1980. Now, substantial injury of consumers is the most heavily weighed element, and it alone may constitute an unfair practice. Such an unfair practice is illegal pursuant to the Federal Trade Commission Act unless the consumer injury is outweighed by benefits to consumers or competition, or consumers could not reasonably have avoided such injury. The FTC may still consider the public policy criterion, but only in determining whether substantial injury exists. Finally, the FTC no longer considers whether conduct was immoral, unethical, oppressive, or unscrupulous.

The FTC has also developed, over time, its definition of deceptive acts or practices. Historically, an act was deceptive if it had the tendency or capacity to deceive, and the FTC considered the act's effect on the ignorant or credulous consumer. A formal policy statement made by the FTC in 1988 changed this definition: currently, a practice is deceptive if it will likely mislead a consumer, acting reasonably under the circumstances, to that consumer's detriment.

FALSE ADVERTISING is often the cause of consumer complaints. At common law, a consumer had the right to bring an action against a false advertiser for FRAUD, upon proving that the advertiser made false representations about the product, that these representations were made with the advertiser's knowledge of or negligent failure to discover the falsehoods, and that the consumer relied on the false advertisement and was harmed as a result. In 1911, an advertising trade journal called Printer's Ink proposed model legislation criminalizing false advertisements. Forty-four states enacted statutes based on this model statute. However, because of the difficulty in proving BEYOND A REASONABLE DOUBT an advertiser's dishonesty, prosecutors seldom use these criminal laws. More frequently, the state attorneys general or the FTC regulates false advertising. For example, the FTC can issue a cease and desist order, forcing a manufacturer to stop advertising, or compelling the advertiser to make corrections or disclosures informing the public of the misrepresentations.

Federal legislation and statutes in every state in the United States prohibit the use of unfair or deceptive trade practices and unfair competition in business.

Applicability of Deceptive Trade Practices Statutes

According to FTC, deceptive trade practices statutes do not govern all situations where one party has deceived another party. Most states limit the scope of these statutes to commercial transactions involving a consumer purchasing or leasing goods or services for personal, household, or family purposes. A consumer is commonly defined as a person who will use a good or a service for personal, family, or household purposes.

Consumer Transactions

Under the Uniform Deceptive Trade Practices Act, the following actions constitute a deceptive trade practice:

•    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 qualities that they do not have or that a person has a sponsor-ship, 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 particular standard, quality, or grade, or that goods are of particular style or model, if they are of another
•    Disparages the goods, services, or business of another by false or misleading misrepresentation of fact
•    Advertises goods or services with intent not to sell them as advertised
•    Advertises goods or services with intent not to supply reasonably expected public demand, unless advertisement discloses a limitation of quantity
•    Makes false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions
•    Engages in any other conduct which similarly creates the likelihood of confusion or of misunderstanding

Most states include similar items in their lists of deceptive trade practices violations, even if those states have not adopted the uniform act. In addition, the FTC and many states prohibit other unfair practices, including the following:

•   Unfair provisions in contracts of adhesion
•    Coercive or high-pressure tactics in sales and collection efforts
•    Illegal conduct
•    Taking advantage of bargaining power of vulnerable groups
•    Taking advantage of emergency situations
•    Unconscionable activities, including outrageous and offensive conduct by a business in the sale of goods or services

Other Practices Deemed Deceptive or Unfair

Debt Collection

The Federal Fair Debt Collection Practices Act and state debt collection statutes govern most abuses by debt collectors in debt collection activities. Deceptive trade practices statutes may provide remedies in situations that are not covered by these debt collection statutes. For example, most debt collection statutes do not cover some forms of debt collection, such as foreclosures, repossessions, and evictions, but a deceptive trade practices statute may apply. Moreover, deceptive trade practices statutes may also permit a consumer to bring a cause of action against a creditor for debt collection practices of an independent agency hired by the creditor. Several cases have dealt with issues regarding misrepresentations made by debt collectors or deceptive agreements proposed by debt collectors.

Breach of Warranties

A business is guilty of this act if a it employs deceptive practices with respect to the advertisement or negotiation of a warranty.

Insurance

Most states have enacted legislation regarding deceptive practices of insurance companies, including those practices related to the sale of policies and the payment of claims.

Pyramid Schemes and Similar Practices

Several states prohibit certain illegal business schemes through deceptive trace practices statutes. One such scheme is a "pyramid scheme," where investors make money by recruiting others to join and invest in a company rather than selling a product as claimed by the company. Other schemes include deceptive employment opportunity claims and misleading or deceptive game or contest promotions. Some states do not specifically include these schemes in the statute, but courts in those states may have applied provisions of the relevant deceptive trade practices statute in cases involving these schemes.

Source: http://www.enotes.com/everyday-law-encyclopedia/deceptive-trade-practices