Can I advertise a limited supply of a sale item?

Yes, as long as the advertisement clearly and adequately discloses that supply is limited and/or that the merchandise is available only at designated outlets. Without that disclosure, having too little stock to meet reasonably anticipated demand is one of the practices considered in deciding whether the offer was a bona fide effort to sell.

Does selling some of the advertised item protect me from a bait and switch charge?

Not by itself, because sales of the advertised merchandise do not preclude the existence of a bait and switch scheme. The examiner in Consolidated Sewing Machine Co. weighed a seller that sold only 36 advertised used Singers against 613 unadvertised higher-priced new machines in 21 months, and said that occasional sales do not exculpate a respondent if they are only a by-product of or an incidental occurrence in a general pattern of bait and switch selling.

Do I have to be caught disparaging the advertised product to be liable?

No, because a product shown to the customer can do the same work as words. Demonstrating a product that is defective, unusable or impractical for the purpose advertised is itself one of the practices considered in deciding whether an offer is bona fide. The examiner in Consolidated Sewing Machine Co. reasoned that the switch has been accomplished if the prospective purchaser is discouraged from purchasing the advertised machine by the design of the seller, whether through the appearance or condition of the machine or by words of disparagement.

Does telling customers the real terms before they sign fix the problem?

No, because the law is violated if the first contact is secured by deception, even though the true facts are later made known to the buyer. The examiner in Consolidated Sewing Machine Co. added that it is no defense that customers may be satisfied with the purchases they ultimately make.

Is it a defense that my competitors run the same kind of ads?

No. An unfair trade practice does not cease to be so because competitors engage in identical practices. The examiner in Consolidated Sewing Machine Co. said the same thing: it is no defense that competitors engage in the same practice or that the respondent must engage in it to stay in business.

Is a deeply discounted "loss leader" the same as a bait and switch?

No, as long as the offer is truthful and honored; the difference is whether the seller is trying to substitute another product. In one sewing machine decision the hearing examiner described a loss leader as a store advertising a product at a loss in the hope of getting the customer in to buy additional articles, and distinguished a scheme that involves an effort to substitute another product for the advertised product. An advisory opinion on a trade association guide found acceptable a provision that members will not use below-cost advertising as bait advertising, while allowing below-cost offers for a limited period in closeout sales, stock reduction sales, going out of business sales, or other special promotional offers, provided the offers are truthfully and non-deceptively made and the member fully performs.

Offer StructureLegal test

Bait and switch

Also known as "Bait advertising"

Berkeley Robinson, Managing Attorney at Robinson Law Firm PLLC

Author

Berkeley Robinson, Esq.

Managing Attorney, Robinson Law Firm PLLC

Berkeley has served as the go-to counsel for many scaling businesses in a transactional and litigation management capacity. Before becoming an attorney, Berkeley grew sales teams, ran online marketing campaigns, and did everything else an entrepreneur does—and still does today as the founder of two online businesses.

Definition

A bait and switch is an alluring but insincere offer to sell a product or service which the advertiser in truth does not intend or want to sell. Source: 16 C.F.R. § 238.0 The offer exists to switch consumers from buying the advertised merchandise so that the seller can sell something else, usually at a higher price or on a basis more advantageous to the advertiser. Source: 16 C.F.R. § 238.0

Key legal rules

A bait and switch starts as an offer, so the offer has to be a real one. These are the main rules, most of them drawn from the FTC's Guides Against Bait Advertising:

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. Source: 16 C.F.R. § 238.1
Even though the true facts are subsequently made known to the buyer, the law is violated if the first contact or interview is secured by deception. Source: 16 C.F.R. § 238.2
No act or practice should be engaged in by an advertiser to discourage the purchase of the advertised merchandise as part of a bait scheme to sell other merchandise, and refusing to show, demonstrate, or sell the product on the offered terms, or disparaging it by acts or words, are among the practices considered in deciding whether an advertisement is a bona fide offer. Source: 16 C.F.R. § 238.3
Failing to have available at all outlets listed in the advertisement a sufficient quantity of the advertised product to meet reasonably anticipated demands is also considered, unless the advertisement clearly and adequately discloses that supply is limited and/or the merchandise is available only at designated outlets. Source: 16 C.F.R. § 238.3
Showing or demonstrating a product which is defective, unusable or impractical for the purpose represented or implied in the advertisement is likewise considered in deciding whether the offer is bona fide. Source: 16 C.F.R. § 238.3
Use of a sales plan or method of compensation for salesmen, or penalizing salesmen, designed to prevent or discourage them from selling the advertised product is another practice considered. Source: 16 C.F.R. § 238.3
No practice should be pursued by an advertiser, in the event of sale of the advertised product, of “unselling” with the intent and purpose of selling other merchandise in its stead. Source: 16 C.F.R. § 238.4
Sales of the advertised merchandise do not preclude the existence of a bait and switch scheme. Source: 16 C.F.R. § 238.4
Where the seller shows a product that is defective, unusable, or impractical for the purpose represented in the advertisement, the law does not require evidence of an offer to buy coupled with a refusal to sell, as a hearing examiner reasoned in Consolidated Sewing Machine Co. Source: In re Consolidated Sewing Machine Co., et al., Initial Decision (F.T.C.)
When credit card rewards operators influence consumers' expectations about the value of rewards but later deflate the value of accrued rewards, they may have engaged in actions that resemble a traditional “bait-and-switch” scheme. Source: CFPB Circular 2024-07 (Dec. 18, 2024)

For the sake of space, this page lists only the primary rules related to this term that most businesses should follow. More may apply to your situation, and your unique facts affect how they apply.

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Why these rules exist

The FTC has determined that bait and switch practices are unfair or deceptive trade practices and are unlawful under Section 5(a)(1) of the Federal Trade Commission Act. Source: CFPB Circular 2024-07 (quoting FTC, Synopsis of Federal Trade Commission Decisions Concerning “Bait and Switch” Sales Practices (Sept. 23, 1975)) The offer works as a lead generator: the ad brings the consumer to the seller, and by the time the real terms come out the consumer is already in the sales funnel. That is why the FTC's bait advertising regulations treat the first contact as the point of violation and say the law is violated if that contact is secured by deception, even though the true facts are later made known to the buyer. Source: 16 C.F.R. § 238.2 In an initial decision, the hearing examiner applied the same reasoning to a lender's advertising, finding that explaining the loan terms at closing was immaterial because it did not cure the initial deception. Source: In re Consolidated Mortgage Co., et al., Initial Decision, 73 F.T.C. (1968)

Because the harm is done when people are drawn in, the Commission has said that schemes through which many persons are, or may be, induced to purchase merchandise other than that featured in advertisements are contrary to public policy and are, in themselves, an injury to the public. Source: In re Clean-Rite Vacuum Stores, Inc., et al. (F.T.C.)

Enforcement examples

In re Earl Scheib, Inc. (automobile paint jobs)

In re Earl Scheib, Inc., et al., Opinion of the Commission (May 24, 1963)

Earl Scheib's regular price for painting a car was $29.95, but it advertised for a limited time that it would paint "any car" in a "variety of colors" for $19.95. Source: In re Earl Scheib, Inc., et al., Opinion of the Commission (May 24, 1963) Salesmen then disparaged the cheaper job by telling customers it was a flat paint that did not contain silicones. Source: In re Earl Scheib, Inc., et al., Opinion of the Commission (May 24, 1963) The advertised variety of colors was thin as well: some outlets offered prospects only two colors, and no outlet offered more than ten. Source: In re Earl Scheib, Inc., et al., Opinion of the Commission (May 24, 1963)

Outcome. The Commission concluded that the primary purpose of the $19.95 advertising was to induce prospects to call at the shops so that an attempt could be made to switch them to the $29.95 job, and that this was a typical bait and switch scheme in violation of the FTC Act. Source: In re Earl Scheib, Inc., et al., Opinion of the Commission (May 24, 1963) Rather than only bar misstatements about colors, it ordered Earl Scheib to stop advertising a low-priced paint job to obtain leads for a more expensive one unless all material details of the low-priced job, including the colors and comparative quality of paints available, are clearly and conspicuously disclosed. Source: In re Earl Scheib, Inc., et al., Opinion of the Commission (May 24, 1963)

In re Midwest Sewing Center (used sewing machines)

Matter of Midwest Sewing Center, Opinion of the Commission (Dec. 3, 1964)

Midwest Sewing Center placed classified newspaper ads in Minnesota, Wisconsin and Illinois for a used Singer electric sewing machine on monthly payments. Source: Matter of Midwest Sewing Center, Docket 8602 (F.T.C. Dec. 3, 1964) A salesman visited each customer who responded, and in every instance he had an old Singer with him. Source: Matter of Midwest Sewing Center, Docket 8602 (F.T.C. Dec. 3, 1964)

Outcome. The Commission said the practice closely resembled the classic “bait and switch” technique but dismissed the charge, because the evidence did not establish that Midwest was not making a genuine effort to sell the old machines. Source: Matter of Midwest Sewing Center, Docket 8602 (F.T.C. Dec. 3, 1964) The salesmen had not disparaged the old machines, and they did not offer to demonstrate other machines until customers had voiced their displeasure. Source: Matter of Midwest Sewing Center, Docket 8602 (F.T.C. Dec. 3, 1964) The Commission added that the decision was not an approval of the practices described or a determination that such a practice can never violate Section 5. Source: Matter of Midwest Sewing Center, Docket 8602 (F.T.C. Dec. 3, 1964)

In re Consumers Products of America, Inc. (encyclopedias)

In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967)

Consumers Products of America sold a ten-volume World-Wide Encyclopedia at $9.95, and an affiliate sold the more expensive New Standard Encyclopedia. Source: In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967) Its ads were headlined with a “FREE!” Webster's Dictionary. Source: In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967) Instead of mailing the set, the company sent a salesman who received no commission or salary for selling or delivering the World-Wide Encyclopedia, and whose commission depended entirely on selling the expensive set. Source: In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967)

Outcome. The Commission found the bait and switch charge established by substantial evidence, relying in part on the finding that demonstrating a book which in itself discouraged persons from buying for the purpose advertised was enough to show the offer was not bona fide. Source: In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967) The Commission also required the respondents to deliver a copy of the order to all present and future salesmen and obtain a signed statement from each that they will refrain from the prohibited practices. Source: In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967)

In re Royal Construction Co., trading as Atlas Aluminum Co. (aluminum siding)

In re Royal Construction Company Trading as Atlas Aluminum Company et al., Complaint and Initial Decision

Royal Construction mailed circulars advertising its regular $569 aluminum siding at $229, $249 or $269. Source: In re Royal Construction Company Trading as Atlas Aluminum Company et al., Initial Decision (F.T.C.) The hearing examiner found that the company had no good faith interest in selling the advertised special: it had purchased only 4,400 square feet of the advertised siding during the relevant period and “simply did not have it to sell.” Source: In re Royal Construction Company Trading as Atlas Aluminum Company et al., Initial Decision (F.T.C.) Salesmen also disparaged the advertised siding, in one instance telling a customer who had already signed that it “wasn’t even fit for a barn.” Source: In re Royal Construction Company Trading as Atlas Aluminum Company et al., Initial Decision (F.T.C.)

Outcome. The hearing examiner called the company's practices “a classic case of bait and switch.” Source: In re Royal Construction Company Trading as Atlas Aluminum Company et al., Initial Decision (F.T.C.) He concluded that the record, including the respondents' own testimony and business records, supported the findings and that “[a]n order to cease and desist should issue.” Source: In re Atlas Aluminum Co. et al., Initial Decision (F.T.C.)

Simple Health corporate defendants (online health insurance sales)

United States District Court's Order Granting Motion for Preliminary Injunction, Findings of Fact

The court found that the scheme typically began when a consumer searching the internet for health coverage was directed to lead-generation websites. Source: Order Granting Motion for Preliminary Injunction, Findings of Fact (Simple Health defendants) Those websites were laden with false and misleading information designed to trick consumers into believing the defendants were selling ACA-qualified and/or comprehensive health insurance. Source: Order Granting Motion for Preliminary Injunction, Findings of Fact (Simple Health defendants) Only after the scripted sale and payment, in a verification process, were consumers told for the first time that they had bought a limited benefit plan that was not compliant with the ACA. Source: Order Granting Motion for Preliminary Injunction, Findings of Fact (Simple Health defendants)

Outcome. By the time the receiver filed his first interim report, approximately $3,186,655.48 had been frozen from the corporate defendants' accounts under the temporary restraining order. Source: Order Granting Motion for Preliminary Injunction, Findings of Fact (Simple Health defendants)

CFPB v. PGX Holdings, Inc. (credit repair marketing)

Bureau of Consumer Financial Protection v. PGX Holdings, Inc., Amended Complaint; Stipulated Final Judgment and Order

The Bureau's amended complaint alleges that one of Progrexion's most productive marketing affiliates falsely advertised that it “guarantee[d] ANYONE a 0-3.5% Down Home Loan no matter how bad their Credit is when we start!” and that the affiliate did not provide any loans at all. Source: Bureau of Consumer Financial Protection v. PGX Holdings, Inc., Amended Complaint According to the complaint, interested consumers were told they had to sign up with Lexington Law to participate in the non-existent loan program, and Progrexion paid the affiliate for each resulting credit repair sale despite knowing it engaged in deceptive practices. Source: Bureau of Consumer Financial Protection v. PGX Holdings, Inc., Amended Complaint

Outcome. The case ended in a stipulated final judgment in which the defendants neither admitted nor denied the allegations of the amended complaint, except as stated in the order. Source: Bureau of Consumer Financial Protection v. PGX Holdings, Inc., Stipulated Final Judgment and Order The order bars the defendants for ten years from participating in telemarketing of credit repair services or selling credit repair services that are advertised, marketed, promoted, or sold through telemarketing. Source: Bureau of Consumer Financial Protection v. PGX Holdings, Inc., Stipulated Final Judgment and Order

Exposure

The enforcement record shows the loss as injunctive: cease-and-desist orders, naming of individual owners, and in recent matters multi-year conduct bans. In Clean-Rite Vacuum Stores, the Commission's order directed the respondents to stop representing that merchandise is offered for sale when the offer is not a bona fide offer to sell it. Source: In re Clean-Rite Vacuum Stores, Inc., et al., Order (F.T.C.) The same order also barred any sales plan involving false, deceptive or misleading advertising statements designed to obtain leads or prospects for the sale of other or different merchandise. Source: In re Clean-Rite Vacuum Stores, Inc., et al., Order (F.T.C.) The remedy in CFPB v. PGX Holdings was longer in duration: a stipulated final judgment imposed a ten-year ban on participating in telemarketing of credit repair services. Source: Bureau of Consumer Financial Protection v. PGX Holdings, Inc., Stipulated Final Judgment and Order

Owners can be bound personally. In Lifetime, Inc., the Commission held that to make its order fully effective it was essential that the two individual owners be included in the prohibition. Source: In re Lifetime, Inc., et al., Opinion of the Commission (F.T.C.) In a separate sewing machine matter the Commission explained why: leaving individuals out would be too easy to evade, because they could open up shop under a new name and continue the same misleading activity. Source: F.T.C. Reasons for Decision (sewing machines advertised as repossessed) Orders can also reach the sales floor. In Consumers Products of America the Commission required the respondents to give the order to all present and future salesmen and obtain their signed agreement to refrain from the prohibited practices. Source: In re Consumers Products of America, Inc., et al., Opinion of the Commission (Sept. 7, 1967)

Responsibility is not limited to the company that runs the ad. The CFPB has emphasized that covered persons that operate credit card rewards programs may be liable for an unfair or deceptive act or practice even when the material devaluation of rewards could arguably be attributed to the actions of a third party. Source: CFPB Circular 2024-07 (Dec. 18, 2024) A complaint against A. C. Weber & Co. made a similar point about a distributor and its dealers. It alleged that a sewing machine distributor's dealer promotion plan, which told dealers to use a limited-quantity “leader” machine to step customers up, placed in the dealers' hands the means to represent a bona fide offer at the advertised price. Source: In re A. C. Weber & Co., Inc., et al., Complaint (F.T.C.)

FAQs

1.16 CFR 238.0. 16 C.F.R. § 238.0
2.16 CFR 238.0. 16 C.F.R. § 238.0
3.16 CFR 238.1. 16 C.F.R. § 238.1