What Are Unfair Trade Practices?

Historically, a buyer was responsible for understanding what he or she was buying and under what terms. Known as "cavet emptor," a Latin term meaning "let the buyer beware," this perspective allowed sellers to use any tactics available to convince a potential buyer to purchase their goods or services. Eventually, jurisdictions around the world began to enact legislation aimed at protecting consumers by declaring many practices to be unfair trade practices. Jurisdictions will differ with regard to what they consider to be unfair trade practices; however, most focus on practices that are intended to mislead or deceive consumers.

A number of countries around the world have enacted national legislation aimed at preventing sellers of goods or services to use deceptive, fraudulent, or confusing tactics to convince consumers to purchase their goods or services. Examples of countries and their corresponding legislation include: Barbados — The Consumer Protection Act; Australia — Trade Practices Act of 1974; and the European Union — Consumer Protection for Unfair Trading Regulations. Within the United States, individual states have enacted legislation that address issues related to unfair trade practices.

Most legislation directed at unfair trade practices makes it illegal to intentionally deceive or lie to consumers, or to use fraudulent or confusing advertising in an attempt to sell goods or services. More specifically, laws often prohibit advertising that is likely to confuse or outright deceive consumer regarding the origins, manufacturer, or sponsorship of a good. For example, an advertisement that insinuates that a product has been endorsed by a reputable person or organization, when, in fact, it has not, may be a violation of an unfair trade practices law.

Other common provision in legislation aimed at preventing unfair trade practices include prohibitions against claiming that a good contains ingredients which it does not contain, or that a product is new, when it is used. Laws also frequently prevent the advertisement of one good when the seller plans to actually sell another good to the consumer. Claims of the possibility of winning a prize for purchasing a good or service may also be prohibited, unless the seller actually follows through with awarding the prizes advertised.

Laws enacted to combat unfair trade practices may also address the manner in which a seller may contact consumers in an attempt to sell goods or services. Some laws prohibit telemarketing by sellers, or limit the time or manner in which telemarketing may be used as a sales tool. Door-to-door sales may also be regulated in unfair trade practices legislation. With both telemarketing and door-to-door sales, most laws require the seller to identify who he or she is and the purpose of the call or visit immediately upon contact with the consumer.