FALSE ADVERTISEMENTS: SELLERS BEWARE!

*Published in CNN, Vol. 3, No. 10, October 2005, pp. 57-58

Become fairer within a week, buy 2 get 1 free, Sale- clothes below factory rates and get credit card absolutely free. Open a newspaper, switch on the television, surf the net or just walk in street- all of them are flooded with these types of advertisements, which assertively highlight the distinct and salient features of innumerable goods and services. They look so appealing and so genuine that there is hardly any scope for not believing what they articulate. All rosy but legitimate expectations and dreams go down like World Trade Center in no time when consumers find the goods or services drained of any asserted quality or facility. Hence, the question arises as to the fate of the hapless consumers.

FORMS OF FALSE ADVERTISEMENTS

1. Provocative / Enraging/ Sentimental Advertisements

Now a days, these types of advertisements are latest tools in the armory of sellers. They publish an advertisement, which strike directly at the heart of the society. They thrust upon you two options- either you buy their product or blame yourself for life. The latest example is of the advertisement which got published on the front page of HT City on September 20, 2005. It read- “Tomorrow if your daughter get raped who is to be blamed- Rapist or You?” Many persons, especially women, vehemently objected to this advertisement released by a manufacturer of a product meant to safeguard the females from molesters, which seemed to be holding liable the parents equally to the offender. And the advertiser had to revert it after a hot discussion on NDTV on September 21, 2005.


2. End of season/ Going out of business sales

These advertisements are seen in all seasons. The customers are made to believe that the company is either going into liquidation or is switching to another business. However, neither is true. The sole intention is to magnetize the crowd and allure them to buy in bulk.

3. False comparison

Sometimes manufacturers compare their product’s price and quality with an unnamed standard product generally available in the market. By inflating the price or lowering the quality of the latter, the impression is conveyed that their products are cheaper and better.

4. False geographical indications

Some products, generally the eatables or luxuries, are recognized and bought on the basis of their geographical origin. An example of false advertisement may be of selling a particular tea as ‘Assam Tea’ to get benefited by its perceived value though the same was grown in some different region.

5. Buy two get one free

This type of schemes is advertised to interest a customer in buying more goods than he immediately requires. However, the seller already keeps the price of his product increased to draw the same profit line.

6. Bait and switch

Sometimes, goods are advertised at very low prices, with no intention to sell them. Or after making available a very limited quantity, they are withdrawn. But the customers, under the impression of the advertisement, keep coming to the retail shops where they are steered towards substitute goods which are either higher priced or of inferior quality.

7. Palming off

Palming off takes place when an impression is created by the advertiser that its goods or services are those that are furnished by a well-recognized competitor. For example, a coffee vending machine is designed and painted similar to Nescafe machine.

8. Statutory safeguards

False advertisement is an act of calculatingly misleading a prospective customer about a product or service by reporting fake or misrepresenting facts or figures in advertising or other promotional campaigns. In some countries advertising practices are regulated by a government authority, in others the advertising industry is self-regulated and professional associations combat false advertising. In U.S. there are two statutes to curb the menace of false and misleading advertising – the Federal Trade Commission (FTC) Act and the Lanham Act. Under the FTC Act the term ‘false advertisement’ covers not only untrue and ‘true but misleading’ advertisements but those advertisements also which make representations that the advertiser has no reasonable basis to believe even if the representations turn out to be true. For example, a tyre company advertises that its tyres’ life is twice of any other competitors’ tyres. The advertiser would have committed the offence of false advertising if it had no reasonable basis to believe the truth of this claim, such as through comparative tests, even if it turned out to be true. However, the FTC Act can be enforced by the Federal Trade Commission only. The general public can seek protection under the Lanham Act by proving the following: (1) the advertiser released false advertisement; (2) that advertisement actually deceived or could have deceived the public; (3) the deception was material; (4) the falsely advertised product was sold in interstate commerce; and (5) the consumer was injured because of such deception.

Our constitution bestows the fundamental right of freedom of speech and expression which protects all forms of communication, including advertising. However, no right is absolute and unfettered. Adoption of unfair method or deceptive practice for the purpose of promoting the sale, use or supply of any goods or service is taken by horns by the Consumer Protection Act, 1986, enacted specially and exclusively to protect the consumers. The Act holds the practice of making any oral, written or visible statement, which falsely represents that the goods or services are of a particular standard, quality, quantity, grade, composition, style or model as ‘unfair trade practice’.

Concept of Unfair Trade Practice

When a problem arises as to whether a particular act can be condemned as unfair trade practice or not, the key to the solution would be to examine whether it contains a false statement and is misleading and further which is the effect of such a representation made by the manufacturer on the common man? Does it lead a reasonable person in the position of the buyer to a wrong conclusion? The issue cannot be resolved by merely examining whether the representation is correct or incorrect in the literal sense. A representation containing a statement apparently correct in the technical sense may have the effect of misleading the buyer by using the tricky language. Similarly a statement, which may be inaccurate in the technical literal sense can convey the truth and sometimes more effectively than a literally correct statement. It is, therefore, necessary to examine whether the representation, complaint of, contains the element of misleading the buyer. Does a reasonable man on reading the advertisement form a belief different from what the truth is? The position will have to be viewed with objectivity, in an impersonal manner.

False Advertisements- Judicial Precedents

In Optonica Kalyani Sharp India Ltd. v. Gopal Lakhotia, III (2003) CPJ 435, the grievance of the complainant was that the opposite party had widely advertised that Optonica Colour T.V. was the product of a joint venture of Sharp Corporation, a Japanese concern, and was having in-built stabilizer system. As such, voltage fluctuation was no problem, and that no separate voltage stabilizer was required. Relying on the advertisement, the complainant purchased the T.V. and started using it without a stabilizer. However, the T.V. was burnt. In appeal, the Andhra Pradesh State Consumer Disputes Redressal Commission, Hyderabad, elaborating on the provisions provided in the Consumer Protection Act, 1986, held that the advertiser must prove the truth of its advertisements or representations. It is also not material whether the facts have been falsely represented by the advertiser in good faith. The Commission found that there was defect in the goods sold by the appellant (Optonica Kalyani Sharp India Ltd.) attracting the provisions of the Consumer Protection Act and it had adopted an unfair trade practice within the meaning and expression used in the Consumer Protection Act and the complainant was entitled for relief under Section 14(1) of the Consumer Protection Act.

The Hon’ble Commission also further directed that the unfair trade practice of advertising as “Voltage fluctuations no problem” would be discontinued forthwith and not be repeated.

In Dr. B. Ashok Kumar v. Kamma Narasimha Swamy, I (2004) CPJ 55, the appellant-opposite party had displayed a board in the premises of his nursing home stating that the Elephantiasis (Bodakalu) leg would look like a normal leg after the surgery, though he knew it couldn’t be made to look normal after surgery. The respondent-complainant allured by this advertisement approached the appellant-opposite party who gave him an oral assurance too. He joined the nursing home and was operated upon by a surgeon. Even after the operation there was no improvement. The complainant was advised to go to Bombay for further treatment, if he wanted the disease to be cured. The Andhra Pradesh State Consumer Disputes Redressal Commission, Hyderabad, upholding the decision of the District Forum observed that the opposite party misled the complainant that his leg would become like any other normal leg after the operation. Had such a notice not been displayed at the Nursing home of the opposite party, the complainant would not have ventured to undergo the surgery. Therefore, such a false advertisement amounts to Unfair Trade Practice.

In Dr. Mohanarao Maruthirao Charge v. M/s. Sipani Automobiles Ltd., II (1992) CPJ 613, the Karnataka State Consumer Disputes Redressal Commission, Banglore held:

“It is clear that the Respondent did give an advertisement which was published in the Deccan Herald and other magazines stating that the engine manufactured by M/s. V.S.T. Tillers and Tractors, Banglore, with joint Collaboration of Mitsubishi, Japan will be fitted to the Montana diesel car. It is also substantiated by the complainant that the car that was supplied by the respondent to the complainant was not fitted with Mitsubishi engine as stated in the advertisement. The averments in the complainant show that the complainant on seeing the advertisement in the said papers was induced to purchase the said car. Under the circumstances, we are of the view that the respondent had adopted “Unfair Trade Practice” by supplying the car which was not fitted with Mitsubishi engine but was fitted with ‘jaya’ Engine manufactured in Coimbatore and in consequence of which the complainant suffered loss. Hence, the Complainant is entitled for refund of the cost price of the car”

Similarly, in the case of Durga Electronics v. Consumer & Human Rights Forums & Anr., III (2002) CPJ 318 (NC), an advertisement was published in the Punjab Kesari, (Jalandhar Edition) which clearly showed that a free Akai 14” CTV would be given to any purchaser in either of the schemes, AK-2167 or AK-2107. Allured by that advertisement, the complainant purchased Akai’s 21” CTV Model 2107 but he was not given an Akai’s 14” CTV free. The petitioner submitted that the said TV was given free under a different scheme where the consumer had purchased Akai’s 21” CTV Model 2107 and not the one purchased by the complainant. However, dismissing the revision petition filed by the Respondent, the National Consumer Disputes Redressal Commission, New Delhi, held:

“In view of the advertisement being appeared in leading newspaper, petitioner could not deny the fact that offer of free 14” CTV applies to both the schemes.”

In M.P. Housing Board v. Ashok Chandra Varshney & Ors., 2003 (1) CPR 207 (NC), the petitioner argued that it was true that in the advertisement there was a clause to limit the cost escalation to 10% of the quoted price but it was not there in the letter of allotment, hence not binding on him. However, the National Commission rejected the contentions of the petitioner and opined as follows:

“We see on perusal of scheme that it did contain a provision “There is a possibility of 10% escalation in the abovesaid price” i.e. Rs. 3 lakh. Any variation, at the time of allotment, can be easily termed as “Unfair Trade Practice” done arbitrarily and is set aside. The parties are bound by the terms. We see in this case that Petitioner is trying to wriggle out of it to the detriment of the complainant which cannot be sustained.”

In Sterling Computers Ltd. v. Soundaraja Mills Ltd., I (2003) CPJ 242 (NC), the petitioner respondent was selling computers. It put in an advertisement in the “The Hindu” to the following effects: “DELIVERY WITHIN 9 DAYS OR YOUR SYSTEM DELIVERED ABSOLUTELY FREE”. The respondent-complainant placed order on 23-3-1993 for the computer. Petitioner effected the delivery on 3-4-1993. Relying on the advertisement aforesaid, respondent demanded that he should be given free computer because it was not delivered to him within nine days of his placing the order. Petitioner’s stand was that delivery was to be free of charge and not that computer was to be given free. The National Commission observed that it was not the respondent was not utilizing that computer. Computer was not like a pizza which could be given free of cost, if it was not delivered to the customer within a particular time. The Commission did not think that the said advertisement gave any indication to the consumer that if he did not get delivery of the computer, he would get the same free of cost. The Commission agreed with the submission of the petitioner that it was only the delivery charges which were to be refunded.

Summing up
Thus, substantial falsity is on the one hand necessary and on the other adequate, to establish a misrepresentation. However, where the entire representation is a faithful picture or transcript of the essential facts, no falsity is established, even though there may have been any number of inaccuracies in unimportant details. Conversely, if the most punctilious and scrupulous accuracy in immaterial minutiae will not render the representation true.

Advertisement is almost indispensable for the survival and expansion of commerce but when a seller or service provider advertises its things or services to be of a particular standard or quality to make the mind of the prospective consumers to buy them, he is bound to fulfill the legitimate expectations of the consumers, which arose due to his representations. Otherwise, his use of the modern spicy sales promotional strategies may perk up the bottom line of his business, but he may get into hot ‘legal waters’.

© Praveen Kumar Jain

Advocate, Delhi High Court