¶ … against Jane claiming to be Hispanic-American in her ads. The main argument against Jane claiming to be Hispanic-American in her ads is that it is dishonest. Neither she nor most of her employees are Hispanic, and it appears that the ad would violate the concept of truth in advertising and expose her to liability. Likewise, at first blush, it seems as if there are no good arguments for Jane claiming to be Hispanic-American in her ads. However, Jane needs to increase sales to keep the business afloat. Hispanic-American customers may be more willing to buy products from a Hispanic-owned business. The issue becomes whether the fact that Jane is (or, rather, is not) Hispanic is a material fact. If Jane was running a Mexican restaurant, her ethnicity might be critical. However, unless there is something culturally significant about the clothing that depends on Jane's ethnicity, it seems unlikely that her ethnicity is really a material fact. However, just because she would not necessarily be exposing herself to liability does not mean it is a good business decision to mislead her customers and potential customers.

2 Explain how the Federal Trade Commission addresses this issue, and evaluate the effectiveness of their rules or measures.

According to the Federal Trade Commission Act, advertising must be truthful and non-deceptive, advertisers must have the evidence to back up their claims, and advertisers cannot be unfair. Advertisements are deception if they are likely to mislead a reasonable consumer and are material to the consumer's decision to buy or use the product. If the FTC thinks an ad is deceptive, it looks at the ad from the point-of-view of the reasonable consumer, looks at express and implied claims, looks at what...

The FTC brings cases generally based on a pattern of deception and the degree of injury, so it usually focuses on health or safety issues. Possible remedies include cease and desist orders, civil penalties, and/or corrective advertising (FTC, 2001).
3 Explain the guidelines according to http://www.ftc.gov/bcp/menus/business/adv.shtm for small business advertising or e-commerce.

This link redirected to http://business.ftc.gov/advertising-and-marketing. That site provided that, "Under the law, claims in advertisements must be truthful, cannot be deceptive or unfair, and must be evidence-based. If you need to disclose information to prevent an ad from being deceptive, disclosures must be clear and conspicuous. For some specialized products or services, additional rules may apply. If you're advertising products or services as "free," offering rebates, or using other marketing methods, make sure you're up on the law" (FTC, unk.). Furthermore, the FTC holds both sellers and marketers to rules about advertisements. Not only is fraudulent behavior, but so are unfair adverting practices, which are those that cause or are likely to cause injuries that are: substantial, not outweighed by other benefits, and not reasonably avoidable (FTC, 2000).

4 Hypothesize about the risks Jane takes in making false claims in her ads.

If Jane makes false claims in her ads, she faces the possibility of being investigated and punished by the FTC. However, in order to be punished, deception in an ad has to material. Jane's ethnicity may or may not be considered material in the context of clothing sales. Therefore,…