Advertising consists of the activity of attracting public attention to a business or organization, usually by means of mass communication such as paid announcements, print, broadcast, or electronic media. Advertising for businesses, especially small companies, can be essential to surviving in a highly competitive market. Furthermore, it can consist of a significant percentage of a company’s budget, so effective, not necessarily high quantity, advertising is important. Advertising is just part of a company’s overall marketing strategy, which includes everything from promotional programs, signage, specials and sales, as well as, word of mouth and location, with an overall goal of reaching the maximum amount of people with maximum impact. Due to the effectiveness and power of advertising, the FTC has enacted laws directly affecting the manner in which companies can advertise. “Under the Federal Trade Commission Act, advertising must be truthful and non-deceptive, advertisers must have evidence to back up their claims, and advertisements cannot be unfair” (Facts for Business). There are many types of advertisements, which make it difficult to regulate, but some include catalog, children’s, alcohol, contests, credit, and even weight loss or other health advertisements. Through the variety of advertisements, there are also many ways for advertisers to participate in deceptive advertising including those that are just outright untrue, over exaggerated, and the practice of bait and switch advertising.
Betty drove three hours in one-hundred degree heat. Explain if this fact has any bearing on whether or not the dealer must perform in accordance with the published advertisement. The manner in which the dealership advertised the truck for sale is an obvious act of deceptive and unfair advertising. The FTC actually addresses this type of advertising as Bait and switch advertising and offers specific guidelines to businesses to prevent participating in this type of deceptive advertising. According to the FTC, “it is illegal to advertise a product when the company has no intention of selling that item, but instead plans to sell a consumer something else, usually at a higher price” (Facts for Business). When evaluating the dealership’s behavior in this situation, it is obvious that this advertisement was meant to just bring customers through the door as evidenced by the change in tone of Tony when threatened with legal action. However, according to FTC guidelines related to advertising, the length of time or hardship a consumer experiences to take advantage of an advertised special does not increase or affect the liability of a business’ responsibility to perform in accordance with a published advertisement. Nonetheless, without the aggravated circumstances, the dealership still violated deceptive advertising laws.
When Tony said over the phone “three thousand dollars firm,” explain whether or not he was making an offer that, if accepted, would bind the dealership in contract Although there is old saying that “an oral contract isn’t worth the paper it’s written on”, this is generally not true, and if the terms of the contract can be proved or admitted by the other party, then oral contracts are just as enforceable and binding as one that is written. However, there are situations in which an oral contract is not legally binding for similar reasons, as they wouldn’t be in a written contract. If the agreement made constitutes illegal activity that violates any law then the contract is not binding. Additionally, the contract has to be specific to be considered binding such as agreeing upon a purchase price, the exact product one is intended to purchase, and an intended date of purchase. Furthermore, if both parties involved with agreement misunderstand the terms of the agreement, then this agreement would also lack legal binding. Lastly, with some contracts, oral agreements are not sufficient to be legally binding, such as real estate transactions, credit agreements, or employment with a duration of one year or longer. ("Legal advice: understanding," 2002) Considering the specifics and laws regarding oral contracts, it is apparent that Tony’s verbal offer of $3000 firm for the Betty’s truck is legally binding. The verbal agreement stated the specific model and perceived condition of the vehicle, as well as, a mutual understanding between both parties of the terms of the agreement. Tony did not state on the phone that the offer had any contingencies such as condition of the vehicle; therefore, the offer that Tony made is legally binding. Lastly, Tony admitted to making the offer, therefore making it not only binding but also enforceable in court.
Explain whether or not advertized specials can be taken advantage of by employees of the advertiser. Although the FTC does not directly address the issue of whether employees can take advantage of advertised specials, it does however state those advertisements must be fair. Additionally, a business has an ethical responsibility to determine the balance of rewarding employees and providing a fair opportunity for the general public to take advantage of advertised specials. In the case of the dealership, the dealership acted both unethically and unfair. For one, the dealership offered the only vehicle available at the advertised special to an employee before consumers had a reasonable opportunity to take advantage of the special. Furthermore, specials that are limited in scope such as a specific quantity on hand should not be offered to employees. However, if a special is readily available without limitations such as 15 percent off sales then it is reasonable and fair to offer this opportunity to employees. Following the requirement of advertisements to be fair, companies should provide the consumer an equal opportunity to take advantage of limited specials, prior to expanding the opportunity to employees.
Explain to what extent an advertisement binds the advertiser to the terms of the advertisement. On the surface, advertisements are generally considered “invitations to treat”, especially where a large quantity of the product exist, and consequently are considered non-binding contracts. As referenced in the decision of Patridge v. Crittenden, an offer can not be intended as an offer to the world, as this could result in a seller being required to sell more product than they have. Therefore, a person is not legally responsible to sell to every customer, nor are they required to sell at an advertised sale price to everyone. However, in the case of the dealership advertisement, the dealership advertised a specific truck for a specific price. Therefore, they are legally contracted to that offer for a consumer who accepts the offer, or they are in violation of the bait and switch laws contained within the FTC advertising regulations. (Burrows, 2007)
Explain to what extent an advertisement has to be true. According to the FTC, advertising laws require advertisements to not only be truthful, but also non-deceptive. If an advertisement is likely to mislead consumers into a purchase and the material that is unclear or misleading is a driving factor in a purchase, then the ad is likely considered deceptive. The FTC considers many variables when determining the truthfulness and deceptiveness of a particular advertisement. Most importantly, if a company makes a specific claim in the ad such as guaranteed weight loss, health benefits, or the performance of a product, then the company must provide or posses evidence to back up the claim. For example, if a company states “Two out of three doctors recommend ABC pain reliever”, then the ad “must be supported by a reliable survey to that effect” (Facts for Business). Regarding the determination of the deceptiveness of an ad, the FTC follows a series of steps following an inquiry to reach its determination. The first step involves looking at the ad from the view of a reasonable consumer, and evaluating the context of the ad including words, phrases, and pictures, to determine the conveyance to consumers. Under this variable, the fact that the dealership expressed the limited quantities in such an obscure way, the advertisement could be viewed as deceptive. Secondly, the FTC evaluates “both express and implied” claims within the ad to determine both what is literally stated as well as claims which are implied. Additionally the FTC evaluates the ad by looking at what the ad does not say. For example, if the company advertises a book collection, but does not tell consumers that collection will contain abridged versions. Lastly, the FTC requires advertisers to have proof backing op claims made within an advertisement prior to running, and will occasionally request this information if an inquiry or complaint is received. (Facts for Business)

References

Burrows, Andrew. (2007). Casebook on contract. Oxford, OX: Hart Publishing.

Facts for Business. (n.d.). Retrieved September 2, 2010, from Federal trade commission: http://www.ftc.gov/bcp/edu/pubs/business/adv/bus35.shtm

Legal advice: understanding oral contracts. (2002). Retrieved from http://www.essortment.com/career/oralcontractst_szjx.h