Guides Against Bait Advertising
16 CFR Part 238 · Guides · in the Code of Federal Regulations 1968-1995 (27 annual editions)
Scanned CFR pages, OCR text may contain errors; the linked Library of Congress PDF is the authority. Not legal advice; not affiliated with the FTC. These rules and guides are historical: most were rescinded or replaced, so do not assume any is in force.
Latest edition: Library of Congress, 1995 CFR · Earliest edition: 1968 CFR
Text (1995 edition, OCR)
Federal Trade Commission connection with the solicitation of accounts for collection are numerous. Listed below are a few specific examples of representations which have been prohibited by the Commis- sion because they were false or deceptive: 1. That the industry member’s organiza- tion is separated into functional divisions, such as credit reporting, analytical, tracing, and collecting. 2. That the industry member employs local representatives, regional investigators, and lawyers on his personnel staff in various States and throughout the world. 3. That collection fees are less than what the industry member actually charges. 4. That no charges will be made for ac- counts unless they are collected. 5. That the industry member makes per- sonal calis on debtors to collect accounts. 6. That the industry member will furnish credit reports to parties who assign accounts to him for collection. (Guide 6] PART 238—GUIDES AGAINST BAIT ADVERTISING Sec. 238.0 Bait advertising defined. 238.1 Bait advertisement. 238.2 Initial offer. 238.3 Discouragement of purchase of adver- tised merchandise. 238.4 Switch after sale. AUTHORITY: Secs. 5, 6, 38 Stat. 719, as amended, 721; 15 U.S.C. 45, 46. : SOURCE: 32 FR 15540, Nov. 8, 1967, unless otherwise noted. §238.0 Bait advertising defined.) Bait advertising is an alluring but in- sincere offer to sell a product or serv- ice which the advertiser in truth does not intend or want to sell. Its purpose is to switch consumers from buying the advertised merchandise, in order to sell something else, usually at a higher price or on a basis more advantageous to the advertiser. The primary aim of a bait advertisement is to obtain leads as to persons interested in buying mer- chandise of the type so advertised. §238.1 Bait advertisement. No advertisement containing an offer to sell a product should be published 1For the purpose of this part “advertising” includes any form of public notice however disseminated or utilized. 31 § 238.3 when the offer is not a bona fide effort to sell the advertised product. [Guide 1] $238.2 Initial offer. (a) No statement or illustration should be used in any advertisement which creates a false impression of the grade, quality, make, value, currency of model, size, color, usability, or ori- gin of the product offered, or which may otherwise misrepresent the prod- uct in such a manner that later, on dis- closure of the true facts, the purchaser may be switched from the advertised product to another. (b) Even though the true facts are subsequently made known to the buyer, the law is violated if the first contact or interview is secured by de- ception. [Guide 2] § 238.3 Discouragement of purchase of advertised merchandise. No act or practice should be engaged in by an advertiser to discourage the purchase of the advertised merchandise as part of a bait scheme to sell o#her merchandise. Among acts or practices which will be considered in determin- ing if an advertisement is a bona fide offer are: (a) The refusal to show, demonstrate, or sell the product offered in accord- ance with the terms of the offer, (b) The disparagement by acts or words of the advertised product or the disparagement of the guarantee, credit terms, availability of service, repairs or parts, or in any other respect, in connection with it, (c) The failure to have available at all outlets listed in the advertisement a sufficient quantity of the advertised product to meet reasonably anticipated demands, unless the advertisement clearly and adequately discloses that supply is limited and/or the merchan- dise is available only at designated outlets, (d) The refusal] to take orders for the advertised merchandise to be delivered within a reasonable period of time, (e) The showing or demonstrating of a product which is defective, unusable or impractical for the purpose rep- resented or implied in the advertise- ment, (f) Use of a sales plan or method of compensation for salesmen or penaliz- § 238.4 ing salesmen, designed to prevent or discourage them from selling the ad- vertised product. (Guide 3] $238.4 Switch after sale. No practice should be pursued by an advertiser, in the event of sale of the advertised product, of ‘‘unselling”’ with the intent and purpose of selling other merchandise in its stead. Among acts or practices which wil] be considered in determining if the initial sale was in good faith, and not a strategem to sell other merchandise, are: (a) Accepting a deposit for the adver- tised product, then switching the pur- chaser to a higher-priced product, (b) Failure to make delivery of the advertised product within a reasonable time or to make a refund, (c) Disparagement by acts or words of the advertised product, or the dispar- agement of the guarantee, credit terms, availability of service, repairs, or in any other respect, in connection with it, (d) The delivery of the advertised product which is defective, unusable or impractical for the purpose represented or implied in the advertisement. [Guide 4) NOTE: Sales of advertised merchandise. Sales of the advertised merchandise do not pre- clude the existence of a bait and switch scheme. It has been determined that, on oc- casions, this is a mere incidental byproduct of the fundamental plan and is intended to provide an aura of legitimacy to the overall operation. PART 239—GUIDES FOR THE AD- VERTISING OF WARRANTIES AND GUARANTEES Sec. 239.1 Purpose and scope of the guides. 239.2 Disclosures in warranty or guarantee advertising. 239.3 “Satisfaction Guarantees” and similar representations in advertising; disclosure in advertising that mentions ‘satisfac- tion guarantees” or similar representa- tions. 239.4 “Lifetime” tions. 239.5 Performance of warranties or guaran- * tees. AUTHORITY: Secs. 5, 6, 38 Stat. 719 as amended, 721; 15 U.S.C. 45, 46. and similar representa- 32 16 CFR Ch. I (1-1-95 Edition) SouRcE: 50 FR 18470, May 1, 1985, unless otherwise noted. §239.1 Purpose and scope of the guides. The Guides for the Advertising of Warranties and Guarantees are in- tended to help advertisers avoid unfair or deceptive practices in the advertis- ing of warranties or guarantees. The Guides are based upon Commission cases, and reflect changes in cir- cumstances brought about by the Mag- nuson-Moss Warranty Act (15 U.S.C. 2301 et seg.) and the FTC Rules promul- gated pursuant to the Act (16 CFR Parts 701 and 702). The Guides do not purport to anticipate all possible un- fair or deceptive acts or practices in the advertising of warranties or guar- antees and the Guides should not be in- terpreted to limit the Commission’s authority to proceed against such acts or practices under section 5 of the Fed- eral Trade Commission Act. The Com- mission may bring an action under sec- tion 5 against any advertiser who mis- represents the product or service of- fered, who misrepresents the terms or conditions of the warranty offered, or who employs other deceptive or unfair means. Section 239.2 of the Guides applies only to advertisements for written warranties on consumer products, as “written warranty” and ‘consumer product”’ are defined in the Magnuson- Moss Warranty Act, 15 U.S.C. 2301, that are covered by the Rule on Pre-Sale Availability or Written Warranty Terms, 16 CFR Part 702. The other sec- tions of the Guides apply to the adver- tising of any warranty or guarantee. : (50 FR 18470, May 1, 1985; 50 FR 20899, May 21, 1985] §239.2 Disclosures in warranty or guarantee advertising. (a) If an advertisement mentions a warranty or guarantee that is offered on the advertised product, the adver- tisement should disclose, with such clarity and prominence as will be no- ticed and understood by prospective purchasers, that prior to sale, at the place where the product is sold, pro- spective purchasers can see the written