Bait and Switch - How fair is advertising?

Bait and Switch

By

Priya Prasad

Law, Ethics, and Corporate Governance LEG 500

Professor Anne Dewey-Balzhiser

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Executive Summary

This paper analyzes if the dealer should have kept his end of the bargain up, made sure that Betty got a fair trade for her vehicle and also provided her a vehicle as advertised in the newspaper since she made the effort to drive for 3 hours in the heat in a non air conditioned vehicle simply based on a conversation she had on the phone with Tony. Tony in my opinion was playing the Bait and Switch game (i.e.) lure customers in with an attractive ad and then trap them into buying other vehicles he has on the lot. Since this ad went to many consumers and not just Betty, it puts the onus back on Tony to hold his end of the bargain up.

Bait and Switch - How fair is advertising? 3 1. Betty drove three hours in one-hundred degree heat. Explain if this fact has any bearing on whether or not the dealer must perform in accordance with the published advertisement. Ads are not legally binding contracts, nor do ads meet the criteria of legally binding offers. Ads are considered invitations. The car dealership has no legal responsibility to perform in accordance with the advertisement. In order for the advertisement to be legally binding, the advertisement would have included a specific individual, to whom the ad was intended (the offeree), and would have stated legally binding terms. The advertisement did not include either required condition. The principle of promissory estoppel or detrimental reliance can also be argued in this case. Promissory estoppel specifically "serves as a consideration substitute in contract law that renders certain promises otherwise lacking in consideration binding and enforceable." (2011, Lawnix). In this case, Betty's reliance would be treated as independent and sufficient criteria for enforcing the promise made by the advertisement. The three main criteria are met for promissory estoppel, including 1) a promise reasonably expected, 2) action in justifiable reliance, and 3) injustice that can only be avoided by acting on the promise as the offeree intended the promise to state. However, the main point lies not in detrimental reliance, which can be seen as a secondary argument, but rather in the point that the law clearly states that an advertisement does not constitute a valid offer. The fact that Betty drove three hours to arrive at the dealership due to the invitation made by the ad has no effect on the aforementioned conditions. The dealer has no legal obligation to perform in accordance with the published advertisement.

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2. When Tony said over the phone three thousand dollars firm, explain whether or not he was making an offer that, if accepted, would bind the dealership in contract. Tony was making an offer to Betty that was legally binding to the auto dealership. An offer is an explicit agreement to enter into an arrangement as stated. An offer is legally binding, if it meets the following conditions: 1) promises the fulfillment of the contract as stated, without adding or removing conditions to the original agreement, 2) may revoke the agreement before it has been accepted by the other party. In this situation, Tony specifically stated to Betty that he would give her "threethousand dollars firm" for the pickup truck she was trading in. There was no other condition stipulated by Tony. No conditions existed that would include an inspection to test the condition of the vehicle, no question regarding the number of miles on the vehicle, or any other prerequisite for Betty to not claim the three thousand dollars "firm" for trading in her current vehicle. When taking into consideration the fact that Betty originally called the dealership to show interest in the advertisement that was placed, and then being made a valid offer of three-thousand dollars firm, Betty made the journey to the auto dealership, as any reasonable person in Betty's same position would have. Tony then decided to tell Betty that the three-thousand dollars for her vehicle was dependent on additional condition of having someone "take a look at it." Under the law, Tony cannot change the conditions of the original offer, which according to reasonable person standards has already been accepted by Betty. The dealership did make a legally binding offer that they must adhere.

Bait and Switch - How fair is advertising? 5 The additional stipulations in order for Betty to collect the guaranteed amount are not legal. 3. Explain whether or not advertized specials can be taken advantage of by employees of the advertiser. Generally, it is not allowable for employees to take advantage of employeradvertised specials. In this case, it is apparent based on the circumstances that the sole intent of the auto dealership was to run the advertisement to get customers in the door under what were more than likely false pretenses, according to the reasonable person standard. Tony advised Betty that Jim, who works in the auto dealership's service department, purchased the vehicle Betty was interested in purchasing at 6:00 am. Betty tells Tony that she believes the situation is not fair, and Tony directly replies, "And I agree with you." Tony then goes into a sales pitch with Betty, telling her that because of the circumstances, he will take $1,000 off the price of any vehicle in the lot. The admittance of Tony stating that the employee purchasing the truck is not fair gives credibility to the underlying motive, and the fact that this is a true bait-and-switch advertisement. It is apparent beyond reason that Tony purposely arranged with Jim to purchase the sole vehicle that was advertised, in an attempt to lure consumers into the dealership in order to encourage consumers to buy higher priced vehicles. It can be substantially proven even further, based on the hours the dealership is open to the public. It can be assumed (although not guaranteed without knowing) that the dealership did not open to the public at 6:00 am. It is possible the service department opened at such an early hour,

Bait and Switch - How fair is advertising? 6 but not likely that the dealership sales department was staffed and ready to begin taking customers at 6:00 am. Under the circumstances stated, and due to the fact that there was one single vehicle as advertised in an advertisement that went out to more than just Betty, Jim should have not been permitted to take advantage of the offer. Jim taking advantage of the offer was merely a ploy for the bait-and-switch advertisement. 4. Explain to what extent an advertisement binds the advertiser to the terms of the advertisement. From all facts given in this case, it is apparent that Tony's intent was to sell autos in his dealership with bait-and-switch advertising. According to Section 238 of the Code of Federal Regulations as established by the Federal Trade Commission, bait advertising "is an alluring but insincere offer to sell a product or service 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 merchandise of the type so advertised." (2011, Federal Trade Commission). Tony also was in violation of Section 238.1 of the CFR, which stipulates that "no advertisement containing an offer to sell a product should be published when the offer is not a bona fide effort to sell the advertised product." (2011, Federal Trade Commission). Section 238.3 was also violated, which stipulates that an advertiser cannot "discourage the purchase of the advertised merchandise as a part of a bait scheme to sell other merchandise." (2011, Federal Trade Commission).

Bait and Switch - How fair is advertising? 7 Tony is in direct violation of at least three separate sections of the Code of Federal Regulations. The auto dealership is bound to the advertisement, of offering the vehicle advertised or an equal substitute to patrons. According to the FTC, stores should disclose that quantities are limited when advertising a product that the company does not normally stock, to reduce the risk of deception. Tony showed Betty that the advertisement did state "Just one at this price." Betty advised Tony that the print was so small it would have taken a microscope to read the print. There was no reasonable statement of quantities being limited. In certain states (California and several others), require merchants to either plainly state that quantities are limited (in readable print) or have enough of the advertised product on-hand, to meet customer demand. The auto dealership has an obligation to provide goods at the price and in the form (model) stated in the advertisement. If they cannot do so, a comparable model at the same exact price must be substituted. 5. Explain to what extent an advertisement has to be true. The main objective of a merchant is to get customers in the door. Based on the information contained in the ad, Betty called the dealership and Tony entered into an oral contract with Betty to give her "three-thousand dollars firm" for her used vehicle. When Betty arrived, the situation changed. Tony never intended to give Betty the threethousand dollars guaranteed, on the vehicle, which is a direct breach of contract. Each of the conditions stated show the sole intent of Tony to get customers in the door, but not to make good on either 1) the deal or product as advertised, or 2) the promised trade-in amount.

Bait and Switch - How fair is advertising? 8 Tony then offers Betty a higher priced vehicle. When she resists to look at the other vehicles and demands to be shown a vehicle at the advertised price, Tony makes a further offer of taking $1,000 off of the price of any vehicle on the lot. Both of these conditions also show that Tony never intended to carry through with the advertisement as published. According to the Federal Trade Commission's Act of truth-in-lending, advertising must by law, meet the following criteria: 1) advertising must be truthful and non-deceptive, 2) advertisers must have evidence to back up their claims, and 3) advertisements cannot be unfair. (2001, Bureau of Consumer Protection.) We have thus established that the dealership is in direct violation, and must remedy their advertisement to be in accordance with truth-in-lending requirements.

Bait and Switch - How fair is advertising? 9 References Bureau of Consumer Protection Business Center. (2001). Advertising FAQ's: A Guide for Small Business. Retrieved from http://business.ftc.gov/documents/bus35-advertisingfaqs-guide-small-business

Federal Trade Commission. (2011). Guides Against Bait Advertising. 16 CFR Part 238. Retrieved from http://www.ftc.gov/bcp/guides/baitads-gd.htm#0

Lawnix. (2011). Promissory Estoppel and Detrimental Reliance. Retrieved from http://www.lawnix.com/cases/promissory-estoppel.html

Laws.com. (2010). Contract Law - Offers. Retrieved from http://contractlaw.laws.com/contract-law/offers