What Are Unfair and Deceptive Practices?

Within the United States, both federal and state laws prohibit unfair and deceptive practices by those engaged in business and commerce. While the precise definition of unfair and deceptive practices can be very lengthy and full of legalese, it generally boils down to exactly what it sounds like — business practices that take advantage of, or attempt to deceive, consumers. Common examples of practices by a business that may be considered unfair and deceptive practices include: false or misleading advertising; deceptive pricing; advertising prizes that are not actually awarded; claiming a sponsorship or affiliation that does not exist; and failing to identify the purpose of a telemarketing call.

In the United States, federal law prohibits unfair and deceptive practices through the Federal Trade Commission. In addition to the federal laws that regulate the conduct of a business, most states have also passed legislation which addresses unfair and deceptive practices. As with many areas of the law in the United States, the states may enact laws that provide additional protections to consumers, but not less than what the federal law provides.

Under federal law, and most state laws, advertising that is considered false, misleading, or deceptive is a violation of the law. Advertisers, for example, cannot make claims that they know to be untrue. Advertisers may also not be allowed to claim sponsorship or endorsement of a product that they do not actually have. In addition, sales tactics where one product is advertised but the seller really only has a different product available for sale may also be considered an unfair and deceptive practice.

Pricing is another area where unfair and deceptive practices may be found. Bank loans, for example, must clearly state how much is being loaned, at what interest rate, and with what fees are being paid by the consumer. Advertisements that state a sale price which, in reality, does not apply to the product available, may also be illegal.

Advertising the opportunity to win a prize is acceptable, as long as the prize will actually be awarded. In addition, the seller of a product must usually be clear about what the odds are of winning and what the true purpose of the advertising is in order to avoid a violation of the law. Along the same lines, many state laws restrict telemarketers or door-to-door salespeople. Often, a telemarketer must immediately identify himself or herself and let the consumer know what the purpose is for the call or face claims that unfair and deceptive practices are being used.