Avoiding Misleading Conduct when selling your business

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All businesses, regardless of their size and type of service or product, are legally required to be accurate and truthful in their advertising practices, no exceptions. When a business is not truthful in their advertising practices, sanctions can be imparted against the business and its owners. Therefore, the question becomes; what is considered misleading and/or false advertising? There are several areas where a business can make a mistake and fall short of making an accurate and truthful representation about their products or services or incentives offered to customers. Businesses are not allowed to engage in any of the following practices;

Misleading or False Advertising Practices

  •  False Representations

A business cannot make a statement, or create an intent, about their products or services that are misleading or false. The more common mistake in this category is to make a statement that is slightly or mildly misleading. This can range from a statement about the actual final cost of an item to the nature of the warranty the business provides for the service or item.

  • “Free” Items

Sometimes it can be tempting for a business to indicate that an item or services is “free” of charge. This will most definitely bring a customer into your place of business with expectations that they will be getting something for free, literally. However, when a business offers an item or a service for “free” but then adds additional hidden charges in the contract or actual sale, this can be considered misleading and false advertising which is prohibited. If you have an item that is going to be given away for “free” but there are taxes or other charges that will be levied against the item, which will generate the customer having to make some form of a payment to walk out of the store with the product or service, you must indicate so in a reasonably prominent manner in the advertisement.

  • Comments and Reviews

All businesses like to use the comments and reviews from previous customers to help show that their product or service is one that a consumer should feel comfortable purchasing and trusting. However, when doing so a business cannot isolate the good and eliminate the negative comments in their use of customer reviews. To do so creates a false and misleading form of advertising that can cause legal repercussions for the business.

  • Sales/Insufficient Supplies

While it can be tempting to create a sale around a specific item to bring customers into your place of business and then attempt to upsell them to a more expensive item, this can lead to serious issues of misrepresentation and false advertising. This form or advertising is commonly referred to as a “bait and switch” and it is prohibited. If your business is offering an item at a discounted rate, you are responsible for having a reasonable supply of the item advertised.

Omissions and Blaming the Customer

  • Omitting Information

As a business owner you are not permitted to simply leave out pertinent information during the course of a sale or entering into a contract. If you are aware of facts or details about a product or service that should be imparted to the customer, and you leave those details or facts out of the discussion or the contract, this is considered false and misleading advertising.

  • Blaming the Customer

A business owner cannot use the excuse for leaving out important information, that the “customer did not ask.” The customer is not expected to have the same depth of knowledge and understanding about the product or service, as the business. Therefore, the business owner remains responsible for disclosing all relevant information about the product or the service, regardless of what the customer may or may not have asked about.

Words and Intentions

  • Words

In all forms of advertising the words a business uses to represent their products or services matter. Therefore, when choosing the word content of your advertisements be sure that the wording is clear and can only be taken one way that is consistent with what you are offering

  • Intent

As an advertiser your intent must be clear. You cannot advertise a product or a service in one manner, leading the customer to believe something specific, but later claim that your intent was different. The use of your words must match your intentions.

Consequence of False or Misleading Advertising

  • Fines and Penalties

Regardless of what an advertisement might have intended about a product or a service might have appeared to be, false and misleading advertising about either can lead to penalties and fines being levied against a business and its owner. These fines can be as high as $500,000.00 per offense. Therefore, it is imperative that as a business owner and seller of products or provider of services, that you ensure your advertising is accurate and truthful.

In the event that you find yourself in need of assistance, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.



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