“LAW & ORDER” / “DRAGNET”-STYLE DISCLAIMER: The following story, though loosely based on real events, is fictional. Not only have names been changed to protect the innocent, but facts have been changed to fit my literary purposes.
Joe Brown and his Main Street Garage were synonymous. A highly skilled auto mechanic who had earned a coveted “Expert Technician” certification from the State Board of Mechanics, Joe had been in the industry for 30 years. Recently, however, he decided to dramatically reduce his workload. Although Joe would continue to work on a few cars per month, most repairs would now be performed by his son, Jake, who had only five years of experience and did not have the same certification. Further, Joe forbade Jake to operate the high-tech, computerized diagnostic equipment that he himself used.
Free of his daily constraints, Joe took greater interest in his role as managing shareholder of the closely held corporation that owned the business. In particular, he adopted a marketing strategy that would capitalize on his personal accomplishments and his fatherly persona. Inspired by Dave Thomas, the late founder of the Wendy’s® restaurant chain, Joe made himself the sole focus of both the garage’s website and its advertisement in a local magazine. The site and the ad each featured a large picture of Joe and the following captions:
- “A Mechanic with 30 Years’ Experience!”
- “Specially Certified by the State Board of Mechanics as an Expert Technician!”
- “State-of-the-Art Diagnostic Equipment!”
- “JOE BROWN WON’T SLOW DOWN!”
Joe was confident that he could justify each of the captions. A still-active mechanic in the business, he did have that experience, he had earned the certification, and he did operate state-of-the-art diagnostic equipment. The fourth caption, Joe believed, was no more than a catchy slogan.
Little did Joe realize that he might have unwittingly subjected his company and himself to liability for consumer protection violations under the Federal Trade Commission Act (the “FTC Act”) or a state law equivalent (a/k/a a “Little FTC Act” or “Consumer Protection Act”). Under these laws, the existence of good faith intentions are often irrelevant, the non-existence of consumers who were actually “harmed” is often irrelevant, and, in some cases, the existence of a corporate structure will do nothing to shield a company’s principal from personal liability.
The federal law empowers the FTC to bring different types of legal action against certain businesses that it contends have engaged in deceptive trade practices that cause or are likely to cause “substantial injury to consumers.” One type of action is an administrative proceeding in which the FTC seeks a “cease and desist” order against the business and can obtain penalties for violation of that order. The other type is an actual lawsuit in which the court can impose fines of up to $10,000 “per violation.”
The state “Little FTC Acts,” which are based on – and usually interpreted consistently with – the FTC Act, are typically more specific and detailed as to what exactly is prohibited. In addition to the many specific prohibitions, however, the state laws will often generally forbid the making of misleading statements or omissions that have the “capacity” or “tendency” to deceive consumers. These laws also tend to impose tougher consequences on violators. In addition to empowering a state agency to seek “cease and desist” orders and financial penalties against violators, these laws often allow an “injured” consumer to sue for damages – and, depending on the terms of the particular state’s Consumer Protection Act, maybe obtain (i) “punitive” damages, double damages, or triple damages; and/or (ii) reimbursement by the business for attorneys’ fees the he/she incurred in the lawsuit.
In the case of the Main Street Garage, one could argue that the ad “tends” to mislead consumers into believing that (i) Joe, whose picture dominates the marketing materials and “won’t slow down,” will personally work on their cars; (ii) the mechanic devoted to them personally has 30 years of experience and a special certification reserved for particularly competent mechanics; and (iii) they will benefit from the garage’s use of high-tech, state-of-the-art diagnostic equipment. In truth, Joe probably won’t work on their cars, the mechanic who will probably work on their car has only a few years of experience and lacks the certification, and the high-tech equipment probably will not be used. Although he might not have intended to deceive anyone with his ads, his inability to appreciate the difference between permissible “salesmanship” on the one hand and a possibly “deceptive trade practice” on the other could prove costly.
As a business owner, you aren’t necessarily qualified to make this distinction – but you should be conscious that it exists. If in doubt about your great new advertising concept, quickly run it by your business lawyer.