Federal law prohibits business owners from engaging in business practices that are deceptive or unfair to either consumers or competitors.
The Federal Trade Commission outlines the legal standards for determining whether an act or practice is deceptive, unfair or both.
If a company does something that represents itself or its products to the consumer in a way that is misleading, that is an example of a deceptive practice. It need not necessarily be something the company does that misleads the consumer; it could be an omission that could leave the consumer with a false impression.
The FTC has to consider the circumstances to determine whether it is reasonable for the consumer to come to the wrong conclusion based on the misleading representation that the company presents. The practice also needs to be material, meaning that if a consumer receives a false impression about the company but does not come to harm as a result, the company might not face penalties for it.
Deceptive practices are only against consumers, while unfair practices could harm either consumers or competitors. An unfair business act or practice is one that is likely to cause harm to consumers or competitors without any countervailing benefits and is difficult to reasonably avoid.
“Injury” refers to the legal sense of the word. It could refer to physical injury but could also apply in a larger sense to economic harm.
Unfair practices and deceptive practices are not mutually exclusive. An unfair practice could also be deceptive, and vice versa. Companies should take steps to avoid either intentionally or unintentionally adopting practices that are unfair or deceptive.