A trap for the unwary — the law on false and misleading advertising

Business

A trap for the unwary — the law on false and misleading advertising

Legal Notes

WITH LITROW HICKSON

Wednesday, September 23, 2020

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Some years ago, the Fair Trading Commission (FTC) reported that complaints relating to misleading advertising were among the top complaints received by the commission.

Misleading advertising takes multiple forms. Common examples include warranties (that are not really warranties), bargains (that are not really bargains) and sales above the advertised price of goods.

COVID-19 has highlighted some aspects of false and misleading advertising and has necessitated the formation of a COVID-19 Steering Committee by the Caricom Competition Commission, which was established to ensure consumer welfare during the pandemic.

As a member of the Steering Committee, the FTC's mandate is to encourage businesses and consumers to report misleading advertising and excessive pricing.

False or misleading advertising is a legal wrong which may result in criminal and civil liability.

False or misleading advertising is governed by section 37 of the Fair Competition Act, (the Act) which provides that “(1) a person shall not, in the pursuance of trade and for the purpose of promoting, directly or indirectly, the supply or use of goods or services or for the purpose of promoting, directly or indirectly, any business interest, by any means (a) make a representation to the public that is false or misleading or is likely to be misleading in a material respect;…”

The section also prohibits other forms of false or misleading representations expressed in statements, warranties and guarantees. Materially misleading representations of the price of goods and services are also prohibited.

While the section does not create criminal liability, the Act proscribes the conduct and imposes civil liability with a penalty.

WHAT ARE REPRESENTATIONS

Perhaps the most notable feature of the section is that it refers to making a “representation” rather than simply advertising.

By doing so, it covers any form of communication, whether oral or written, and for wider purposes.

The Act defines “advertisement” to mean any form of communication made to the public for the purpose of promoting the supply of goods and services but does not use the word in the section.

This signifies that the word “representation” is intended to be wider in scope. For example, a pro forma invoice outlining details of the state or quality of goods to be supplied will contain a representation to the individual to whom the invoice is tendered. Likewise, brochures, pamphlets and posters have also been held to constitute representations.

It also follows that, for the purposes of section 37, a representation need not be made to the public at large but encompasses something conveyed to even a single individual.

IT IS A STRICT LIABILITY MATTER

The section imposes strict liability. Therefore, a person who satisfies the elements of the section is liable regardless of the reason for the false or misleading representation.

The section is not concerned with the intent of the person making the representation.

This issue, formerly the subject of much legal debate, may now be considered resolved. The Court of Appeal has ruled that the section imposes strict liability on any person who makes false or misleading representations in the manner set out in the section. The court has in the past rejected the argument that a car dealership should escape liability because it honestly believed that the car was made in the year 2007 as was represented to the customer. Although the dealer said he relied exclusively on data provided by third parties from whom he had acquired the vehicle, the court determined that the dealer's honest belief was irrelevant to the issue of liability.

That case is but one example of a complaint made to the Fair Trading Commission (FTC) resulting in the FTC filing a claim against the relevant entity. There have been claims involving artistes advertised for an event who did not perform, and real estate developers representing to prospective purchasers in brochures and pamphlets that there would be certain amenities in a development only to fail to deliver on those representations. These cases demonstrate the wide and varied nature of false or misleading representations.

PENALTIES AND REMEDIES

A person who falsely advertises is exposed to civil liability in the form of a penalty under the Act. The penalty for individuals is up to one million dollars. It can go up to five million dollars in the case of corporations.

The Act also provides for civil remedies in the form of damages. Private claims to recover damages must, however, be brought within three years from the time when the misleading representation causing loss was made.

Litrow Hickson is an associate in the Litigation Department at Myers, Fletcher & Gordon. He may be contacted at litrow.hickson@mfg.com.jm. This article is for general information purposes only and does not constitute legal advice.


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