California False Advertising Law Business & Professions Code §17500

Element 1: Business Advertising

An advertisement is any statement concerning the offer of real or personal property or services that is publicly disseminated in any newspaper or other publication, or by any advertising device, or by public outcry or proclamation, or in any other manner. (Cal. Bus. & Prof. Code, § 17500.)

Business & Professions Code section 17500 does not apply to political election campaigning. (O’Connor v. Superior Court (1986) 177 Cal.App.3d 1013.) “Courts should not and, practically speaking, cannot be in the business of determining the fairness and unfairness of statements made in a political campaign.” (Id. at 1019 [campaign consulting firm did not commit false advertising by inaccurately attributing quotes and endorsements to people who never made the quotes or authorized the endorsements].)

The statute extends to oral statements. (People v. Dollar Rent-A-Car Systems, Inc. (1989) 211 Cal.App.3d 119, 128 [car rental agency committed false advertising when its employees inaccurately told customers that the optional “collision damage waiver” was a form of insurance].)

Element 2: Advertising Untrue/False or Misleading

The proper standard to determine whether a claim is misleading is the reasonable consumer test. (Lavie v. Procter & Gamble Co. (2003) 105 Cal.App.4th 496.) Recent cases have held that consumer surveys are not required to prove deception. (Brockey v. Moore (2003) 107 Cal.App.4th 86, 99.) The court may dismiss the matter if it determines that no reasonable consumer would have been misled by the alleged misrepresentation. (Haskell v. Time, Inc. (E.D.Cal. 1994) 857 F.Supp. 1392, 1399.)

A statement is false or misleading when members of the public are likely to be deceived. Chern v. Bank of America (1976) 15 Cal.3d 866, 876.) “Allegations of actual deception, reasonable reliance, and damage are unnecessary.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 210.) False or misleading advertising is to be evaluated from the vantage of a reasonable consumer. (Freeman v. Time, Inc. (9th Cir. 1995) 68 F.3d 285, 289.)

Examples

The absence of likelihood of confusion between Sears’ “Bagzilla” trash bags and plaintiff’s gigantic green, lizard-like Godzilla monster character precluded an assertion that the use of “Bagzilla” was misleading. (Toho Co. v. Sears, Roebuck & Co. (9th Cir. 1981) 645 F.2d 788, 794.)

No reasonable addressee could believe that he or she was already a winner of a magazine sweepstakes even though mailers sent to millions of people stated that the addressee was “already a winner.” (Freeman v. Time, Inc. (9th Cir. 1995) 68 F.3d 285, 290.)

The defendant’s advertisements for its movie based on Grimm’s fairy tales by the Brothers Grimm were misleading because they contained the same catch phrase as the plaintiff’s previous advertisements for a film based on the lives and works of the Grimm brothers. Metro-Goldwyn-Mayer, Inc. v. Lee (1963) 212 Cal.App.2d 23.)

It was not “deceptive” for a cemetery operating under the name “Westminster Memorial Park” and a separately owned mortuary operating under the name “Westminster Memorial Park Mortuary” to advertise jointly under the name “Westminster Memorial Park.” Although the businesses were separately owned and licensed, they operated at Westminster Memorial Park. A person of ordinary intelligence would infer that both mortuary and cemetery services were available at the same location, not that the mortuary was doing cemetery business or that the cemetery was doing mortuary business. (State Board of Funeral Directors & Embalmers v. Mortuary in Westminster Memorial Park (1969) 271 Cal.App.2d 638, 642.)

Element 3: Known or Should Have Known

Business & Professions Code section 17500 prohibits negligent as well as intentional dissemination of misleading advertising. (People v. Forest E. Olson, Inc. (1982) 137 Cal.App.3d 137.)

Example

A real estate company committed false advertising by printing inaccurate sales data in a newspaper advertisement. The company had made no effort to verify the data, even though sources of verification were within the company. (People v. Forest E. Olson, Inc. (1982) 137 Cal.App.3d 137, 140-41 [section 17500 imposes a duty of investigation that is particularly applicable where both the information relied upon and the sources of verification are within the corporation disseminating the misleading advertising].)

Statute of Limitations for False Advertising

The California false advertising law has a three-year statute of limitations for statutory liability claims probably applies. (See Cal. Civ. Proc. Code, § 338, subd. (a). The statute of limitations on an unfair competition false advertising action under Business & Professions Code section 17200 is four years after the action accrues. (Cal. Bus. & Prof. Code, § 17208.)

Remedies

Jail. Misdemeanor. Fine.

A violation of Section 17500 is a misdemeanor, punishable by fine or imprisonment. (Cal. Bus. & Prof. Code, § 17500.) False advertising can lead to up to six months in jail for each violation of the law against deceptive advertising. (Ibid.)

Injunctive Relief

The First Amendment does not prohibit injunction against false and misleading commercial advertising. (Cal. Bus. & Prof. Code, § 17535; see also People v. Superior Court (Olson) (1979) 96 Cal.App.3d 181.)

Fine For Each Violation

A court may impose civil penalty of $2,500 for each violation of §17200 and §17500, for a total penalty of $5,000 for each unlawful act. (Cal. Bus. & Prof. Code, § 17500; People v. Dollar Rent-A-Car Systems, Inc. (1989) 211 Cal.App.3d 119. In the context of newspaper advertisement, the term “each violation” is to be determined in light of all pertinent factors, including the kind of misrepresentations or deceptions, whether they were intentionally made or the result of negligence, the circulation of the newspaper, the nature and extent of the public injury, and the size and wealth of the advertising enterprise. (People v. Superior Court (Olson) (1979) 96 Cal.App.3d 181, 198.)

Restitution

A court may order restitution if such remedy is necessary to prevent use or employment of the unfair practice. (Cal. Bus. & Prof. Code, § 17535.)

Civil Penalties for Intentional Violation of Injunction

Civil penalties are available for intentional violation of injunction. (Cal. Bus. & Prof. Code, § 17535.5). The remedies or penalties provided by the false advertising law are cumulative to each other and to the remedies or penalties under any other California law. (Cal. Bus. & Prof. Code, § 17534.5.) The penalties under Business & Professions Code section 17500 et seq. are civil in nature, and do not expose a defendant to criminal sanctions against which he or she is protected by the constitutional privilege against self-incrimination. (People v. Superior Court of Los Angeles County (1974) 12 Cal.3d 421, 433.)