False advertising is part of a larger category: false, misleading and deceptive advertising. In its Policy Statement on Deception, the United States Federal Trade Commission (FTC) defines a false ad as "misleading in a material respect." In other words, the product is advertised in a way that is untrue, fraudulent and contrary to fact. An example would be selling talcum powder, or even baking soda, as baking powder, or, more egregiously but also more easily detected, a car that can turn into an airplane.
In the United States, as in most developed countries, there is an implied contract between seller and buyer. In the words of the FTC's Statement on Deception, "When a product is sold, there is an implied representation that the product is fit for the purposes for which it is sold." This means that if the manufacturer advertises a product as baking powder, it must be baking powder, not talcum powder or even one of baking powder's active ingredients, baking soda. Meat must actually be meat and eggs, eggs. Generally, this implied contract is also enforced in most developed countries.
In developing countries, inert and even harmful substances are advertised, sold, bought and consumed as food and drugs, sometimes with deadly consequences. China's problem with the false advertising of these fake and sometimes poisonous products, is so extreme that that Zheng Xiaoyu, director of the State Food and Drug Administration, was executed for corruption.
According to its Policy Statement, the U.S. Federal Trade Commission has a standard for false advertising, particularly false advertising of food, cosmetics and drugs. There are four parts to this standard:
1. The advertisement must be "misleading in a material respect," for example, advertising cosmetics as not having been tested on animals, when they were.
2. "There must be a representation, omission or practice that is likely to mislead the consumer." Ads indicating that if you drink a certain type of beer, you will be athletic or date a supermodel, or if you drive a certain type of vehicle, women half your age and very attractive will find you interesting, are, generally misleading.
3. Is the consumer a reasonable person? Using the specific example of Danish pastries, the FTC found that describing a pastry baked in America as a "Danish" was not deceptive because only very naive people believed that "Danish" meant the pastry had, in fact, been baked in Denmark.
4. "The representation, omission, or practice must be a ‘material' one." This is defined as: Does the deception affect the consumer's behavior, specifically his or her purchasing behavior?
By these standards, most advertising is not illegal, despite the fact that as Komal Nagar wrote with extreme understatement: "The use of deception in advertising is widespread. Deceptive advertising has been frequently used by firms." Advertisers need only to make certain that their product is what it is advertised as being --deodorant, for example, or soap, and avoid making specific claims that are not backed up by data. "New and improved" is acceptable. "If taken as directed, you will lose 10 pounds in 10 days" is not, unless the company has studies confirming that claim.
In fact, one of the key practices of deceptive advertising is to make a claim that is true on the surface. Many consumers are familiar with the offer of a free trial subscription for magazines, books or music, or samples of various goods. However, the consumer is not given the sample free up front but must provide financial data, such as a credit card, up front, and the consumer must cancel the subscription or sample after the trial period, which can often be a lengthy and difficult process.
Prescription drug advertisements are well-known for making fairly simple claims up front, and then, in very small print, listing many side effects, some extremely serious. As Carol Rados observed in her article, "Truth in Advertising: Rx Drug Ads Come of Age," "There has been a great deal of discussion about the brief summary that accompanies DTC [Direct to Consumer] print ads. The typical brief summary is not brief and uses technical language. This is because it reprints all of the risk information from the physician labeling. People have complained that the brief summary cannot be understood by consumers." Finally, credit card and mortgage companies often hide punitive fees, rates and conditions in pages of tiny print that are never meant to be read and are often written in obscure language.
None of these ads are false, in the literal sense of the word. Whether they are honest and ethical is an open question.