Consumer Protections Can Ensnare Boston Small Businesses

New entrepreneurs often display a passion and enthusiasm that is commendable. They believe in their product or service, they’re eager to thrive and they dive head-first into marketing. neonsigns.jpg

While advertisement is an important aspect of launching any firm, our Boston small business lawyers urge all new company owners to consult with their legal team on a strategy. Advertising practices are regulated by both federal and state laws, and Massachusetts has some of the strongest consumer protection statutes on the books.

Sales practices that are deemed deceptive or unfair are addressed by the Federal Trade Commission, as well as the Massachusetts Attorney General. Per the Federal Trade Commission Act, advertising has to be truthful and fair and advertisers have to back up their claims.

A marketing claim is considered deceptive if it’s likely to mislead reasonably-acting consumers. and it’s central to the consumer’s decision to buy or use the product. It’s considered unfair if it causes or is likely to cause injury to the consumer that the buyer isn’t able to reasonably avoid and is not outweighed by the benefit to the consumer.

In order to back up an advertising claim, the company will need to have some evidence to support the claim prior to running the ad. The kind of evidence necessary will depend on the claim being made. For example, if your ad says 2 out of 3 doctors recommend a certain pain reliever, you will need to have some kind of survey or other reliable evidence that this is true.

Testimonies from satisfied customers and offers of money-back guarantees aren’t enough to shield companies from a deceptive practices claim.

Other examples of marketing practices under state law that would be considered deceptive:

  • Charging customers higher prices than what is advertised;
  • Failure to clearly post a refund and return policy;
  • Failure to meet a warranty guarantee;
  • “Bait and switch” ads that showcase one item, but in fact, discourage sale of that product in favor of another higher-priced item on less favorable terms.

A recent example of a business that was badly burned by its allegedly deceptive and unfair marketing claims was a recent settlement in Connecticut. There, the FTC, the state’s attorney general and the state’s consumer protection commissioner slammed a couple’s three weight loss businesses with a $33 million judgment.

Among the alleged deceptive practices in this case:

  • Display of fake news websites and testimonials in an effort to market the product;
  • Failing to provide refunds;
  • Offering “free” trials to consumers, but then using their payment information to charge consumers anyway.

The state attorney general reported some 1,300 consumer complaints from across the country against the couple’s three firms, which operated under eight various names.

The couple is reportedly unable to pay the full $33 million, so their company assets will be liquidated and certain properties sold. The proceeds from that will go toward satisfying the settlement. It’s expected to result in about $7 million. Additionally, the settlement includes additional sanctions that will make it tough for any of the companies to stay operational.

The standards for advertising will be based largely upon the industry in which your firm operates and the type of product or service you’re selling. To avoid a potentially costly action from the government, seek advice first from an experienced small business lawyer in Boston.

The Brown Law Firm, LLC, has offices in Belmont and Boston. For a free and confidential consultation, call 617-489-0817 or contact us online.

Additional Resources:
A Basic Guide To The Massachusetts Consumer Protection Law, Massachusetts General Laws Chapter 93A
Guilford couple ordered to pay $32.72M in business lawsuit settlement, Jan. 7, 2014, By Luther Turmelle, New Haven Register
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