Negative Effects of False Advertising

by Shelley Frost

False advertising is misleading with claims that aren't substantiated by evidence. The Federal Trade Commission sets standards for advertising to reduce exposure to misleading or unfair advertisements. An advertiser who knowingly makes false claims or otherwise falsifies advertising faces financial and legal repercussions, in addition to losing loyalty from previous customers.


If a marketing campaign is suspected of being false advertising, the FTC may investigate further to determine if the company violates any laws. The FTC reviews the content of the ad from the standpoint of a consumer to determine if the actual or implied claims constitute falsification. The FTC also evaluates information that is left out, such as failing to report side effects of a new medication.

Cease-and-Desist Orders

In some cases, the company may receive a cease-and-desist order to stop the falsified advertisement from running. The advertisements must be brought up to FTC standards before they are allowed to run again. This may include correcting any false information and adding in the information omitted from the advertisements. In addition, the company may have to include additional disclaimers in future advertisements or let anyone who purchased the item that the company used deceptive practices.

Financial Loss

False advertising ends up costing the company a significant amount of money if caught. If the ads are pulled, the company loses out on the money it spent to develop those ads. The company is sometimes charged a fine for both current false advertising and any future incidents of deceptive advertising. If the company is sued, additional expenses come in the form of legal fees and money that must be paid to consumers who filed the suit.

Broken Trust

A company that engages in false advertising gives the impression that it isn't a trustworthy business. Both existing and new customers may feel betrayed and are more likely to go somewhere else for the same products or services. The lost loyalty from existing customers cuts into business. The company may also get a bad reputation as a deceptive organization, which means decreased business in the future.

About the Author


Photo Credits

  • Thinkstock/Comstock/Getty Images
Suggest an Article Correction