Four Steps to Avoid Deceptive Trade Practices Claims

Two high profile legal matters have been in the news involving allegations of alarm companies’ unfair and deceptive practices. What are these cases about? And what can you learn from them to protect your business from such claims? Read on to find out.The first matter is a class-action lawsuit against an alarm company alleging that it deceptively advertised its alarm systems as having the most advanced and innovative technology, when allegedly “the wireless signals are unencrypted and unauthenticated, and can easily be intercepted and interfered with by unauthorized third parties.”

In the second matter, an alarm company settled with a state agency for $375,000 over allegations that it: Misinformed consumers by inflating the quoted value of equipment and services; advertised specific savings off consumers’ utility bills, but could not substantiate the savings claimed; A\advertised the home security system would save up to 20% on homeowner’s insurance costs, but was unable to substantiate those savings; misinformed or failed to provide full terms and conditions on cancellation, relocation and auto-renewal policies; and advertised that consumers who “call now” could receive certain free or discounted services or products, when, in fact, the offer was not time-limited.

The alleged deceptions in these two matters are very different—but both involve allegations that the alarm company violated deceptive trade practices laws.

What are deceptive trade practices laws?

 Deceptive trade practices laws vary state-to-state, but generally prohibit a company from representing that goods or services they are selling have uses, benefits, qualities, approval or sponsorship that they do not have, or are of particular standard, quality, grade, style or model, if they are of another. The laws also typically prohibit any other conduct that creates the likelihood of confusion or misunderstanding. Violations can be enforced by a state agency, or by the aggrieved consumer. The penalty for violations can be very steep: some allow the person suing to recover their attorney’s fees and triple damages.

What are the best practices for avoiding deceptive trade practices claims?

  1. Review your marketing materials: Ensure that they are truthful and don’t go beyond mere puffery. Puffery is making claims such as “we’re the best!”—it’s subjective and no reasonable person would take it as an undeniable fact. On the other hand, making objective claims that are untrue or unverifiable goes too far—like advertising specific savings in energy or on homeowner’s insurance that can’t be backed up.
  2. Review your contract: Make sure that it adequately warn customers of the limitations of the alarm system, including that it could be compromised through unauthorized access (i.e., hacking).

Also, make sure it has an Integration Clause, ensuring that the contract represents the full and final agreement, so your customer arguably cannot claim they relied on promises that are not in the contract. The Integration Clause should say something like this:

Entire Agreement. Customer agrees and understands that the Agreement and any attachments thereto, are the entire Agreement and replace all other understandings or agreements related to the system and/or services provided hereunder.

  1. Don’t lie to your customers (Duh!): Ensure your advertising and sales pitches are truthful and complete. This includes:
  • Don’t claim affiliations you don’t have. For example, don’t claim you work for a competitor to get into a competitor’s customer’s home and sign them up for new service. This happens, people!
  • Don’t misrepresent the contract terms, such as the term, automatic renewals, and early termination fees.
  • Don’t make promises you can’t keep about the alarm response. You cannot claim that a customer’s house will never be burglarized, or that the fire department will respond within 5 minutes.
  1. Take all complaints regarding your sales practices very seriously. Whether it’s from a consumer or state agency: listen, cooperate, and do what you can to make it right.


© Wendy Carlisle, Carlisle Law Firm 2017