internet business fraud
Is selling pictures of merchandise illegal if you imply that you are selling the actual merchandise?
<ol>
<li><p>Is it illegal if I take a picture of a piece of merchandise such as a new Xbox One, and sell the picture of that piece of merchandise?</p></li>
<li><p>Is it illegal if I advertise the picture of the piece of merchandise on a website where people are trying to buy the actual product?</p></li>
<li><p>Is it illegal if the name of the website where I sell the picture is completely unrelated to selling pictures and may imply that the buyer is getting a great deal?</p></li>
<li><p>Is it illegal to use pricing to make it seem like the picture of the product is the actual thing? For example, I could price a picture of an Xbox One the same as an actual Xbox One but offer 25% off.</p></li>
</ol>

<p>For example, someone goes to eBay looking for an Xbox One. When they click on the product they want to buy, they see an ad in the sidebar with an advertisement saying "Check out this picture of a BRAND NEW Xbox One! Save 25% if you order in the next 10 minutes!". They would click on the advertisement and be brought to an ecommerce website. In the description of the item it would clearly state "This is a picture of a brand new Xbox one with a 250GB hard drive." The buyer might then purchase the product possibly under the impression they are getting the actual item.</p>

<p>Is any of this illegal?</p>

<h2>All of this is illegal.</h2>
<p>You do not give a jurisdiction so I will use NSW, Australia as an example but many countries' laws have similar effect.</p>
<p>Australian Consumer Law prohibits <a href="https://www.accc.gov.au/publications/advertising-selling/advertising-and-selling-guide/avoid-misleading-or-deceptive-claims-or-conduct/misleading-or-deceptive-conduct" rel="nofollow noreferrer">misleading and deceptive conduct</a>:</p>
<blockquote>
<p>It is illegal for a business to engage in <strong>conduct</strong> that misleads or deceives or is <strong>likely to mislead or deceive</strong> consumers or other businesses.</p>
</blockquote>
<p>It doesn't matter that what you have said is strictly speaking factual - the way it has been said is likely to mislead or deceive.</p>
<p>However, what you are proposing goes further and IMO crosses the line into <a href="http://www.austlii.edu.au/au/legis/nsw/consol_act/ca190082/s192e.html" rel="nofollow noreferrer">fraud</a> (s192E of the <em>Crimes Act</em>):</p>
<blockquote>
<p><strong>192E Fraud</strong></p>
<p>(1) A person who, by any deception, dishonestly:</p>
<p>(b) obtains any financial advantage or causes any financial disadvantage, is guilty of the offence of fraud.</p>
<p>Maximum penalty: Imprisonment for 10 years.</p>
<p>(2) A person’s obtaining of property belonging to another may be dishonest even if the person is willing to pay for the property.</p>
</blockquote>
<p>In addition to the illegality, stealing other people's money is morally wrong by any reasonable standards of morality.</p>

<p>Yes, this is illegal, and, if your transaction is interstate, the Federal Trade Commission (FTC) will come after you. If your transaction is on the Internet, it's almost definitely interstate, even if you and the buyer are in the same state, particularly if you sell on eBay (even if you and the buyer are in the same state as eBay's headquarters) or a similar site. Notes:</p>
<ul>
<li>Quoting <a href="https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road" rel="nofollow noreferrer">https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road</a> (emphasis added)</li>
</ul>
<blockquote>
<p>The Federal Trade Commission Act allows the FTC to act in the interest
of all consumers to prevent <strong>deceptive</strong> and unfair acts or
practices. In interpreting Section 5 of the Act, the Commission has
determined that a representation, omission or practice is deceptive if
it is likely to:</p>
<ul>
<li><strong>mislead consumers</strong> and</li>
<li><strong>affect consumers' behavior or decisions</strong> about the product or service.</li>
</ul>
</blockquote>
<p>Note that you would be doing both.</p>
<ul>
<li>What if you add a disclaimer? Still illegal, quoting from the same page:</li>
</ul>
<blockquote>
<p>Disclaimers and disclosures must be clear and conspicuous. That is,
consumers must be able to notice, read or hear, and understand the
information. Still, a <strong>disclaimer or disclosure alone usually is not
enough to remedy a false or deceptive claim.</strong></p>
</blockquote>
<ul>
<li>And if it's (a picture of) an XBOX, maybe kids will buy it, another quote from the same page (emphasis in original):</li>
</ul>
<blockquote>
<p><strong>Advertising directed to children</strong> raises special issues. That's because
children may have greater difficulty evaluating advertising claims and
understanding the nature of the information you provide. Sellers
should take special care not to misrepresent a product or its
performance when advertising to children. The Children's Advertising
Review Unit (CARU) of the Council of Better Business Bureaus has
published specific guidelines for children's advertising that you may
find helpful.</p>
</blockquote>
<ul>
<li>Even if you don't sell a thing, the FTC will tell you to stop that advertising (quoting from same page, emphasis added):</li>
</ul>
<blockquote>
<p>The FTC periodically joins with other law enforcement agencies to
monitor the Internet for  potentially false or deceptive online
advertising claims.</p>
<p>If your advertisements don't comply with the law, you could face
enforcement actions or civil lawsuits. For advertisers under the FTC's
jurisdiction, that could mean:</p>
<ul>
<li><p>orders to cease and desist, with <strong>fines up to $16,000 per violation</strong> should they occur.</p>
</li>
<li><p>injunctions by federal district courts. Violations of some Commission &gt; rules also could result in <strong>civil penalties of up to $16,000
per violation</strong>. Violations of court orders could result in civil or
criminal contempt proceedings.</p>
</li>
<li><p><strong>in some instances, refunds</strong> to consumers for actual damages in
civil lawsuits.</p>
</li>
</ul>
</blockquote>
<p>Note that having to give refunds would be the least of your concerns.</p>
<ul>
<li>Some relevant quotes from <a href="https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business" rel="nofollow noreferrer">https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business</a> -- first, the FTC looks at the ad &quot;as a whole&quot;, not based the strict wording of the ad:</li>
</ul>
<blockquote>
<p>The FTC looks at the ad from the point of view of the &quot;reasonable
consumer&quot; - the typical person looking at the ad. Rather than focusing
on certain words, the FTC looks at the ad in context - words, phrases,
and pictures - to determine what it conveys to consumers.</p>
</blockquote>
<ul>
<li>This example is probably most relevant to you (emphasis added):</li>
</ul>
<blockquote>
<p><strong>The FTC looks at what the ad does not say</strong> - that is, if the <strong>failure to
include information leaves consumers with a misimpression</strong> [sic] about the
product. For example, if a company advertised a collection of books,
the ad would be deceptive if it did not disclose that consumers
actually would receive abridged versions of the books.</p>
</blockquote>
<ul>
<li>Other penalties (from same page, emphasis added):</li>
</ul>
<blockquote>
<p>Civil penalties, consumer redress and other monetary remedies. Civil
<strong>penalties range from thousands of dollars to millions of dollars</strong>,
depending on the nature of the violation. Sometimes advertisers have
been ordered to give full or partial refunds to all consumers who
bought the product.</p>
<p>Corrective advertising, disclosures and other informational remedies.
<strong>Advertisers have been required to take out new ads to correct the
misinformation conveyed in the original ad, notify purchasers about
deceptive claims in ads</strong>, include specific disclosures in future ads,
or provide other information to consumers.</p>
</blockquote>
<ul>
<li>And more about those pesky under 18s who might be buying your stuff:</li>
</ul>
<blockquote>
<p>What standards does the FTC apply when evaluating claims in ads aimed
at children?</p>
<p>The FTC pays <strong>particular attention to ads aimed at children because
children may be more vulnerable to certain kinds of deception.
Advertising directed to children is evaluated from a child's point of
view, not an adult's.</strong> The FTC also works with the Children's
Advertising Review Unit (link is external) (CARU) of the Council of
Better Business Bureaus. CARU is a private, self-regulatory group
affiliated with the BBB that publishes self-regulatory guides for
children's advertising.</p>
</blockquote>
<ul>
<li>And some more on that page that would apply directly to you (emphasis added):</li>
</ul>
<blockquote>
<p>How prominent does a disclaimer or disclosure have to be in other
kinds of ads?</p>
<p>When the disclosure of qualifying information is necessary to prevent
an ad from being deceptive, the <strong>information should be presented
clearly and conspicuously so that consumers can actually notice and
understand it</strong>. A fine-print disclosure at the bottom of a print ad, a
disclaimer buried in a body of text unrelated to the claim being
qualified, a brief video superscript in a television ad, or <strong>a
disclaimer that is easily missed on a website are not likely to be
effective</strong>. <strong>Nor can advertisers use fine print to contradict other
statements in an ad or to clear up misimpressions [sic] that the ad would
leave otherwise</strong>. For example, if an ad for a diet product claims &quot;Lose
10 pounds in one week without dieting,&quot; the fine-print statement &quot;Diet
and exercise required&quot; is insufficient to remedy the deceptive claim
in the ad. To ensure that disclosures are effective, <strong>advertisers
should use clear and unambiguous language</strong>, <strong>place any qualifying
information close to the claim being qualified, and avoid using small
type or any distracting elements that could undercut the disclosure</strong>.
Although there is no hard-and-fast rule about the size of type in a
print ad or the length of time a disclosure must appear on TV, the FTC
often has taken action when a disclaimer or disclosure is too small,
flashes across the screen too quickly, is buried in other information,
or is otherwise hard for consumers to understand. Most importantly, <strong>if
you are concerned that a disclaimer or disclosure may be necessary to
clarify a claim, evaluate your ad copy and substantiation carefully to
ensure that you are not misleading consumers</strong>.</p>
<p>What about disclaimers and disclosures online?</p>
<p>Regardless of whether you advertise on TV or radio, in print ads,
through direct mail or online, the law is the same: <strong>disclaimers and
disclosures must be &quot;clear and conspicuous.&quot;</strong> <a href="https://www.ftc.gov/system/files/documents/plain-language/bus41-dot-com-disclosures-information-about-online-advertising.pdf" rel="nofollow noreferrer">Dot Com Disclosures</a>
offers special guidance for online advertisers regarding 'Net specific
issues such as banner ads, pop-up windows, scrolling, hyperlinks, etc.</p>
</blockquote>
<p>(do read the linked PDF, it's quite useful; virtually the entire document is about &quot;Clear and Conspicuous Disclosures in Online Advertisements&quot;, the issue you asking about).</p>
<ul>
<li><p>If you're hoping to sell only to foreigners to avoid the law, read <a href="https://www.ftc.gov/tips-advice/business-center/guidance/electronic-commerce-selling-internationally-guide-businesses" rel="nofollow noreferrer">https://www.ftc.gov/tips-advice/business-center/guidance/electronic-commerce-selling-internationally-guide-businesses</a> (I suppose you could try selling to one of the countries that isn't a signatory to the agreement). Be especially careful if selling to Canadians: the United States and Canada work together closely on consumer fraud issues.</p>
</li>
<li><p>You may also want to read <a href="https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf" rel="nofollow noreferrer">https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf</a> (the FTC's official policy on what constitutes deception).</p>
</li>
<li><p>Although it doesn't apply to you directly, <a href="https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses" rel="nofollow noreferrer">https://www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses</a> explains how seriously the FTC takes the concept of deception.</p>
</li>
<li><p>Of course, the FTC only touches on possible criminal penalties; material fraud is also a crime, though you are most likely to receive a cease-and-desist notice (especially if no one has bought from you yet), be required to make refunds (if someone has bought from you), pay civil penalties (if your site/ad becomes popular enough and you've defrauded many people... OR if the FTC decides to make an example out of you), and unlikely face criminal charges (UNLESS the FBI decides to make an example out of you).</p>
</li>
</ul>
<p>The basic thread here: the FTC doesn't look at the fine print or disclaimers or exact wording when determining if something is deceptive: they look at it the way a normal consumer would. And, since your <strong>intent</strong> is to deceive people, they will likely see that and treat it as deception.</p>
