Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Defining False Advertising

Author: Donald M. Pepe

Date: September 16, 2014

Key Contacts

Back

False advertising continues to be a problem in our society despite a myriad of laws against it. The primary reason for the difficulty rests with the inventive methods advertisers use to skirt the law. A number of methods produce the same results as false advertising, but either avoid violating the letter of the law or do so in a way that is largely unenforceable.

Defining False Advertising

A variety of federal and state laws seek to prevent false advertising.

Section 43(a) of the Lanham Act gives perhaps the most thorough guidance in a federal context. In order to prove a case of false advertising, the plaintiff must prove the following five elements:

  1. The defendant made false or misleading statements as to products;
  2. Either actual deception or a tendency to deceive a substantial portion of the intended audience occurred;
  3. The deception was material, meaning that it was likely to influence purchasing decisions;
  4. The goods that were advertised traveled in interstate commerce; and
  5. Likelihood of injury to the plaintiff.

Pricing-based Deceptions

One of the many methods advertisers employ that can result in accusations of false advertising is pricing-based deceptions, of which there are several distinct species.

  • “Liquidation” – There are a number of cases in which products sold at so called “liquidation sales” have turned out to be as expensive or more expensive than the same products would have otherwise been. By marking up the price “before” the sale and then “discounting”, advertisers are able to suggest serious savings. An added difficulty in liquidation sale cases rests on the improbability of collecting judgments where the guilty retailer is often out of business by the time a judgment is obtained.
  • Hidden fees – Service providers who attach fees that are not disclosed to the customer can also face false advertising charges. Adding charges on a bill in a way that might not be noticed or disputed is nevertheless an extremely common practice.
  • Misusing “free” – Any American reader will be familiar with a “buy one, get one free” sale, of BOGO.       Many consider this to be an example of false advertising because the second item isn’t actually “free,” it is included in the cost of the first.

Neiman Marcus

An interesting false advertising claim based on allegedly deceptive pricing was recently brought against high-end retailer Neiman Marcus Group in a class action lawsuit. The case presents a prime example of the difficulties encountered in precisely defining actionable false advertising under the law. Even if Neiman Marcus is ultimately vindicated under the letter of the law, such advertising methods, which clearly have the ability to deceive, raise moral issues worthy of King Solomon.

 The Neiman Marcus Group owns a chain of stores called Last Call, which boast in advertising the sale of off-season or excess clothing for discounts. The recent class action suit alleges that Last Call sold clothing that never appeared in a normal Neiman Marcus store, but still used a “compared to” strategy on the tag to contrast the discounted price with the putative full retail price. There is evidence that clothing sales at the outlet rose faster than the industry average, which lends some credence to the case, but it is possible that the case will fail because the customers who bought the clothing did so freely, assuming the piece of clothing acquired was worth the bottom line price on the tag, negating any real injury to the class. How the court comes down will set a precedent that will clarify this area of law going forward.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
Why Compliance Monitoring Matters for NY and NJ Businesses post image

Why Compliance Monitoring Matters for NY and NJ Businesses

Compliance programs are no longer judged by how they look on paper, but by how they function in the real world. Compliance monitoring is the ongoing process of reviewing, testing, and evaluating whether policies, procedures, and controls are being followed—and whether they are actually working. What Is Compliance Monitoring? In today’s heightened regulatory environment, compliance […]

Author: Dan Brecher

Link to post with title - "Why Compliance Monitoring Matters for NY and NJ Businesses"
When Are New Jersey Business Owners Personally Liable for Corporate Debt? post image

When Are New Jersey Business Owners Personally Liable for Corporate Debt?

New Jersey personal guaranty liability is a critical issue for business owners who regularly sign contracts on behalf of their companies. A recent New Jersey Supreme Court decision provides valuable guidance on when a business owner can be held personally responsible for a company’s debt. Under the Court’s decision in Extech Building Materials, Inc. v. […]

Author: Charles H. Friedrich

Link to post with title - "When Are New Jersey Business Owners Personally Liable for Corporate Debt?"
Commercial Real Estate Trends to Watch in 2026 post image

Commercial Real Estate Trends to Watch in 2026

Commercial real estate trends in 2026 are being shaped by shifting economic conditions, technological innovation, and evolving tenant demands. As the market adjusts to changing interest rates, capital flows, and workplace models, investors, owners, tenants, and developers must understand how these trends are influencing opportunities and risk in the year ahead. Overall Outlook for Commercial […]

Author: Michael J. Willner

Link to post with title - "Commercial Real Estate Trends to Watch in 2026"
One Big Beautiful Bill: New Tip Income Tax Rules Employers & Workers Need to Know post image

One Big Beautiful Bill: New Tip Income Tax Rules Employers & Workers Need to Know

Part 2 – Tips Excluded from Income Certain employees and independent contractors may be eligible to deduct tips from their income for tax years 2025 through 2028 under provisions included in the One Big Beautiful Bill. The deduction is capped at $25,000 per year and begins to phase out at $150,000 of modified adjusted gross […]

Author: Scott H. Novak

Link to post with title - "One Big Beautiful Bill: New Tip Income Tax Rules Employers & Workers Need to Know"
One Big Beautiful Bill: New Overtime Tax Rules Employers and Employees Need to Know post image

One Big Beautiful Bill: New Overtime Tax Rules Employers and Employees Need to Know

Part 1 – Overtime Pay and Income Tax Treatment Overview This Firm Insights post summarizes one provision of the “One Big Beautiful Bill” related to the tax treatment of overtime compensation and related employer wage reporting obligations. Overtime Pay and Employee Tax Treatment The Fair Labor Standards Act (FLSA) generally requires that overtime be paid […]

Author: Scott H. Novak

Link to post with title - "One Big Beautiful Bill: New Overtime Tax Rules Employers and Employees Need to Know"
New York’s FAIR Business Practices Act: What the New Consumer Protection Measure Means for Your Business post image

New York’s FAIR Business Practices Act: What the New Consumer Protection Measure Means for Your Business

In 2025, New York enacted one of the most consequential updates to its consumer protection framework in decades. The Fostering Affordability and Integrity through Reasonable Business Practices Act (FAIR Act) significantly expands the scope and strength of New York’s long-standing consumer protection statute, General Business Law § 349, and alters the compliance landscape for New York […]

Author: Dan Brecher

Link to post with title - "New York’s FAIR Business Practices Act: What the New Consumer Protection Measure Means for Your Business"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!