Cellular phone advertisers in Southern California recently received a written warning from legal authorities there about the alleged use of deceptive sales practices, such as large-print misleading statements and bait-and-switch tactics.
“Our goal is to ensure industrywide understanding of the relevant false advertising and unfair business practice statutes and to obtain maximum compliance with those laws,” states a document by Herschel Elkins, senior assistant attorney general in the consumer law section of the California Attorney General’s office, and Thomas Papageorge, head deputy of the consumer protection division of the Los Angeles District Attorney’s office.
The L.A.-based Cellular Agents Trade Association claims it made the original grievances that spurred the investigation.
“We had been complaining to the California Public Utilities Commission and they sought clarification (from state attorneys),” said CATA spokesman Richard Hansen. CATA first voiced objections in 1991, and the state did some investigation at that time, Hansen said.
“Finally in June we just stormed the DA’s office with 50 agents. We had TV cameras there, rolling,” Hansen said. The report was released later that month and a letter outlining the findings of the offices and reiterating state law was sent to cellular retail stores.
“This letter serves as notice that our offices intend to take appropriate law enforcement action against those businesses whose advertisements, statements and sales practices are not brought into compliance with state law,” the authorities said.
Unfair and deceptive business practices can result in civil and/or criminal charges, according to the report. The investigators found that some cellular phone ads used deceptive format and content.
“These ads typically feature a cellular phone picture accompanied by a large bold-print statement that the phone is available for `free’ or for an extraordinarily low price. Some versions of this format mark the alluring low price or the free statement with an asterisk; many do not,” the report states.
Sales terms must be conspicuous even if an asterisk is used, the attorneys said. Typically, a fine-print statement can be found at the bottom of the ad-separated from the original claim by a substantial distance-outlining specific terms such the requirement of a two- or three-year cellular airtime contract, the amount of minimum monthly purchases required, or various activation or termination fees required.
L.A. consumers may commute from a substantial distance to respond to an ad, only to find the advertised price only can be obtained if other conditions are included, the authorities said.
Bait-and-switch advertising is unlawful in California, and also allegedly has been employed in cellular advertising, the state concluded. Bait advertising lures the customer to the seller by offering a product that the advertiser really doesn’t intend to sell, then the seller will try to switch the consumer to another product by discouraging purchase of the first item or convincing the consumer to buy a phone or purchase plan with a higher profit margin.
“The consumer who wishes to buy a telephone but not a service plan is subject to this bait-and-switch tactic, including, but not limited to, a refusal to sell the advertised product by itself or a refusal to sell at any but a higher and often exorbitant price,” the state said.
The attorneys also attacked misuse of the term “free,” and said that failing to disclose material facts in a conspicuous manner could give rise to “deception by omission.”