False advertising or deceptive advertising is the use of false or misleading statements in advertising. As advertising has the potential to persuade people into commercial transactions that they might otherwise avoid, many governments around the world use regulations to control false, deceptive or misleading advertising. Truth in labeling refers to essentially the same concept, that customers have the right to know what they are buying, and that all necessary information should be on the label.
Pricing-based methods
Hidden fees and surcharges
Service providers often tack on fees and surcharges that are not disclosed to the customer in the advertised price. One of the most common is for activation of services such as mobile phones, but is also common in broadband and telephony. Other fees are taken from gift cards and bank accounts. In most cases, the fees are hidden in fine print, though in a few cases they are so confused and obfuscated by ambiguous terminology that they are essentially undisclosed.
This may also occur with the bait-and-switch tactic. BellSouth, for example, often advertised DSL service at low prices and with no installation charges, but in many of the same areas offered only FITL/FTTC service, which requires installation of separate Ethernet wiring into the home at significant cost.
Cable and telephone customers in the U.S. are often hit with a "regulatory cost recovery fee" (among other names), which sounds like it is mandated by the government, but which is actually the provider charging the customer for having to abide by the law. These are allegedly for local number portability and the Universal Service Fund, however consumer advocates allege that, because these fees are totally unregulated and are often well above what the companies are required to contribute, these fees are simply being used to skim extra profit from subscribers.
Mail-order companies often hit customers with "shipping and handling" charges not included in the stated price, and only show at the very end of a TV commercial. Often, this fine print is only on the screen for a fleeting instant, literally to the point where a viewer needs to record the commercial, go back and watch it, and pause it at the right second in order to be physically able to read it all.
Credit card processing companies often use a "monthly vs. annual" fee distinction to mislead customers about total recurring costs. For example, SecurePay advertises a $16 monthly maintenance fee but does not advertise their annual $150 "PCI compliance fee" which is directly taken from the customer's checking account only once a year, after the second year (after a relationship is built and the customer has invested in web scripting). The hidden fee effectively makes customers pay twice what they thought they would be paying on recurring charges.
Rebates
Main article: rebate (marketing)Rebates were originally intended to pass savings directly from the manufacturer to the consumer. However in the U.S. they have become probably the biggest way to trick shoppers into paying more than the advertised price. Stores advertise a "sale" price and note only in the fine print that it is not the price at which it is actually sold for, but instead an "after rebate" price, which also fails to include sales tax. Many rebate fulfillment companies have been accused of intentionally reneging on obligations to return money to the customers.
Inflated price comparison
In comparing a sale price to a "regular" price for the same product, advertisers can inflate the "regular" price in order to create the impression that the sale price is very low. The intent is obviously to mislead consumers into thinking that they are saving money by purchasing the "on-sale" item or service by advertising a large-percentage "discount". Some clothing stores in particular have essentially every item on "sale", and some grocery stores advertise "savings" over their "regular" prices for those using loyalty cards (which allow the stores to track their purchases).
Another common problem is the comparison to old prices on technology, such as computer memory, hard drives, memory cards, USB drives, and other items which tend to fall in price quickly.
In the United Kingdom, under the Sale of Goods Act, any item in a sale must have been sold at the non-sale price for at least 28 consecutive days. Many companies sidestep this requirement by selling items at very high prices in a single store (often in expensive parts of London) for 28 days, before selling the items at the "sale" price in their other stores.
Perpetual "sales"
Another closely-related trick is the "sale" which becomes more or less permanent, though the actual price or percent off may fluctuate, or even briefly go back to the inflated regular price. In the U.S. this is often seen in craft and home décor stores such as Michaels and Jo-Ann, and to a lesser extent Hobby Lobby and Garden Ridge. Because these stores carry a high proportion of seasonal merchandise (Christmas, Halloween, summer, etc.), those products are constantly on "sale" from the time it is all stocked on the sales floor until the time it is all gone at closeout. This defies the definition of a sale event.
"Selected items"
Some stores, especially discount stores like variety stores, use the disclaimer that "selected items" are on sale. However, the items actually "selected" may be arbitrary.
Psychological pricing
Main article: psychological pricingPsychological pricing "lowers" the price of item, usually by one cent (or local equivalent), to fool customers into thinking the price is somehow "less" than the price point the seller has set. This works because people tend to pay attention only to the most significant digit in the price.
Another similar trick is to hide the cents in small print. Gas stations in the U.S. almost always tack-on nearly an extra cent per gallon, by advertising as $2.85 (two dollars and eighty five and nine-tenths cents), for example. This is also done by other retailers, such as $199.99 for an item that is, for all intents and purposes, 200 dollars.
Cost-plus pricing
Some U.S. stores advertise one price on the signs for each item throughout the store, but add the small print "plus 10% at register" at the bottom. This makes real-price comparisons more difficult. In addition, the "cost" to which the 10% is added is not the real wholesale cost as it implies, but also shipping and overhead, thus making it more like "cost plus more costs plus 10%". This is common at some lesser grocery stores such as Food Depot, which end up being nearly the price of regular stores, and often more compared to the other stores' sale prices.
Buy x , get y free
This type of false advertising concludes that more is better. By increasing the price of a firecracker, for example, to five times its original marginal profit-based price, a 5-for-1 "special" sale is offered while still keeping the same profit line.
In other cases the free product is of lower quality than the originally-purchased item, or its value a greatly overstated.
Often, buy-one-get-one "deals" are simply an excuse to use the word "FREE" in advertising. The item may simply be "50% off" or "half price", or the shopper may actually be forced to buy at least two, or even in multiples of two. Because the shopper must buy something first, the "free" item is not truly gratis .
On the same note, usually, the cheapest item in the bundle is the one that is "free." For example, at a DVD store that is having a "buy one, get one free" sale, if you purchase one DVD worth $14.99 and another DVD worth $9.99, then the store will mandate the second DVD is the one that you get for free (if there is a tie for cheapest, then it doesn't matter which one is free). Of course, in the merchants' defense, they have been stating this term more clearly. For example, Pizza Hut, when having a deal, advertise something such as "Buy a one-topping large pizza at menu price and get another pizza of equal or lesser value for $0.99."
Some websites use the opposite tactic: a certain service or software is advertised as being free of charge when in truth only registered members are eligible for using the service or downloading the software - and registration isn't free. Sometimes this is taken even further: registration itself is advertised as having a "free trial" or "free tour" which truly means that the consumer's credential information must be entered so that they automatically start charging money after the trial period is over and automatically upgrading the expired trial account to a paying account instead of simply deleting it.
Bait and switch
Main article: bait and switchA bait-and-switch is an offer of a service or product at a very low price (often a loss leader), with little or no intention to sell said service or product as advertised. If available at all, this low price is accomplished by lowering standards on the advertised product, such as guarantees, credit terms, or quality, thereby making it undesirable.
Another method is to offer a "limited quantity" deal, with only a few of the advertised product per store. Once the consumer is in the store, sales personnel will try to coax him or her to purchase a different and more expensive product. This is more common, as it is often legal if there is a disclosure of
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