9 False Advertising Examples & What It Cost Brands

No one likes the feeling of being misled. In business, the cost of false advertising can mean multimillion-dollar lawsuits, regulatory fines, and brand reputations that never fully recover. False advertising happens when companies make claims that are untrue, deceptive, or not backed by evidence.

Don’t think brands get away with it. Across industries, there are high-profile examples of companies that faced costly consequences — Red Bull, Skechers, Volkswagen, and more. In this piece, we’ll look at six controversial false advertising cases and share what marketers and business leaders can take away to safeguard their brands.

What Is False Advertising?

False advertising is when a business makes a claim that isn’t true, leaves out important details, or can’t prove what it says. Regulators such as the Federal Trade Commission (FTC) in the U.S. and the Advertising Standards Authority (ASA) in the U.K. focus on whether an average customer would be misled. If the answer is yes, the ad can trigger fines or lawsuits. For companies, the bigger cost is often the loss of trust that follows.

Types of False Advertising

From fake discounts to mislabeled products, false advertising tends to repeat the same patterns. Here are the common types of false advertising:

False savings and bait-and-switch advertising

When brands promote shocking price cuts to lure customers, advertise a deal that no longer exists, or swap in lower-quality products to upsell. Some brands inflate prices only to mark them down later, creating a false sense of urgency.

Failure to disclose

Even true claims can become misleading when companies hide important details like hidden fees, side effects, or product limits. Regulators expect clear, visible disclosures so buyers can make informed decisions.

Flawed research and mislabeling

This involves advertising that’s based on flawed or limited research, or overstating information about the product. These practices are common in industries like food and nutrition, particularly dietary products. 

In many jurisdictions, competitors, customers, and watchdog groups can sue over false advertising, with consumer protection laws empowering buyers to challenge misleading claims.

Learn more about the cost of advertising: “How to Make An Advertising Budget [With Template]”

Puffery vs Deception

Not every bold statement in advertising counts as false. Puffery refers to obvious exaggeration, like calling a product “the best in the world,” that customers don’t take literally. Deception, on the other hand, involves specific claims — for example, “reduces costs by 30%” — that can and must be backed by evidence. 

A quick test for marketers: 

1. Can the claim be measured?
2. Would it matter to a customer’s decision?
3. Do you have proof to support it? 

If the answer to all three is yes, the claim must be substantiated.

The Real Cost of False Advertising

False advertising creates lasting financial and reputational damage that can outpace the short-term gains of a misleading claim. The impact usually shows up in four areas:

Financial Penalties

The most visible cost comes in the form of fines and settlements. Skechers paid $40 million in 2012 for unsupported fitness claims, and Volkswagen’s diesel emissions scandal ultimately cost more than $14 billion in the U.S. alone. Even smaller cases, like Lumosity’s $2 million settlement, show how quickly liability can add up.

Legal and Compliance Fees

Beyond settlements, companies face the expense of defending themselves. Investigations require lawyers, compliance experts, and sometimes new systems to meet regulatory standards. These costs rarely make headlines but can drain resources for months or years after the case closes.

Erosion of Trust

The less measurable — but often greater — cost is reputational. Once customers or partners feel deceived, rebuilding credibility is slow and uncertain. Studies show buyers are less likely to return to a brand tied to misleading claims, even long after penalties have been paid.

Lasting Business Impact

False advertising also creates risk with investors and regulators. ESG-focused funds, for example, are quick to flag greenwashing, which can affect access to capital. The long tail of a false claim isn’t just about the lawsuit — it’s about lost opportunities, damaged relationships, and a brand that now carries a warning label in the market.

High-Profile False Advertising Examples

The following cases were chosen for their visibility, financial impact, and regulatory importance. Each example shows how misleading claims — whether tied to pricing, health, or environmental performance — triggered lawsuits, fines, or settlements. Together, they highlight how quickly false advertising can damage both finances and reputation.

1. New Balance’s Calorie-Burning Sneaker Ads

Based in Boston, Massachusetts, New Balance is one of the largest names in athletic footwear. In 2011, the company faced a lawsuit over ads for its True Balance toning shoes, which claimed the sneakers could help with calorie burning and muscle activation. Researchers later concluded there was no reliable scientific evidence to support those benefits. The lawsuit originally sought more than $5 million in damages, but the case was resolved in a settlement of about $2.3 million.

2. Kellogg’s “Healthy” Cereals

The Kellogg Company, more famously known as Kellogg’s, is a Michigan-based food manufacturing company known for its Corn Flakes, Frosted Flakes, and Raisin Bran. The company was met with a class action lawsuit over cereals marketed as “heart healthy” and “lightly sweetened.” Kellogg’s denied wrongdoing, and no ruling was made in court, but the company agreed to a $13 million settlement benefiting customers who bought the labeled cereals.

3. Airborne’s Herbal Health Formula

Airborne is a supplement launched in 1999 and was marketed as a herbal formula for boosting the immune system. The former marketers were accused by the Federal Trade Commission (FTC) and the Center for Science in the Public Interest (CSPI) of making unproven claims. A class action lawsuit was filed against the former owners of the company for alleged false advertising, and was settled for $23.3 million. The product didn’t disappear, but the marketing changed. Today it’s sold as a vitamin blend — a far cry from the “miracle cold buster” image that built its name.

4. Dannon’s Activia Yogurt

Dannon promoted Activia and DanActive as yogurts that helped regulate digestion and strengthen immunity. Regulators determined the company didn’t have the research to back those claims. In 2010, Dannon settled for $45 million, one of the largest penalties of its kind in the food sector. Even widely trusted household brands can lose credibility when marketing gets ahead of the science.

5. Hyundai & Kia Fuel-Economy Exaggeration

Hyundai and Kia were cited for overstating horsepower and fuel economy ratings in several car models. In some cases, the gap was as much as six miles per gallon. The companies paid more than $100 million in penalties and gave extended warranties to customers. They also forfeited greenhouse gas credits worth over $200 million. The settlement showed how performance claims, even small ones, can carry massive costs when they mislead buyers.

6. Volkswagen’s Diesel Emissions Scandal

Volkswagen, a German motor vehicle manufacturer, once advertised environmentally friendly diesel cars. Unlike simpler product mislabeling cases, Volkswagen’s deception was systemic. In its campaigns, Volkswagen showcased low levels of pollutants in its cars, but in 2016, the FTC found that the company was cheating emission tests. Volkswagen agreed to two settlements — one with the United States and the State of California and another with the FTC. The automaker ultimately agreed to spend around $14.7 billion in settlement fees and zero-emission initiatives. After all of that, the company made an effort to take accountability and acknowledge that they’ve broken their customers’ trust. Since then, they’ve changed management and worked to earn the trust of their public back. 

7. Red Bull’s “Gives You Wings” Lawsuit

Red Bull’s famous line “Gives You Wings” ended up in court after a U.S. consumer, Benjamin Careathers, filed a lawsuit in 2013. He argued that while no one expected to sprout wings, the slogan implied more energy and better performance than a cup of coffee, which wasn’t true. Legal papers noted that one 8.4-ounce can of Red Bull has about the same caffeine as coffee, around 80 milligrams. A judge agreed that the ads were misleading rather than harmless puffery. In 2014, Red Bull settled for about $13 million, offering $10 cash or $15 worth of product to anyone in the U.S. who bought a can between 2002 and 2014, with no proof of purchase required. The company denied wrongdoing but said it wanted to avoid the cost and distraction of further litigation.

8. Skechers Shape-Ups & Celebrity Endorsements

In 2012, Skechers paid $40 million to settle FTC charges that it misled consumers about its Shape-ups and other toning shoes. Ads claimed the shoes would help people lose weight and tone muscles, backed by celebrity spots with Kim Kardashian and Brooke Burke. The FTC found the studies Skechers used were unreliable and not truly independent. Refunds were offered to buyers of Shape-ups, Resistance Runners, Toners, and Tone-ups, making the case one of the most visible crackdowns on health-related shoe marketing.

9. Lumosity’s Brain-Training Claims

In 2016, Lumos Labs, the company behind the Lumosity “brain training” program, agreed to pay $2 million to settle FTC charges that it misled consumers. Ads promised that playing Lumosity’s online and mobile games for just a few minutes a day could sharpen performance at work and school and even protect against memory loss, dementia, and Alzheimer’s disease. The FTC found no scientific support for these claims and said Lumosity had also used solicited testimonials without proper disclosure. Under the settlement, the company was required to notify subscribers of the action and make it easier to cancel auto-renewals.

Claims-Substantiation Workflow & Pre-Launch Audit Checklist

Marketers are expected to prove that their ads are truthful before they run, not after a complaint is filed. A good claims-substantiation workflow starts with a simple question: can we back this up? Any performance, health, or cost-savings claim should be supported by evidence that would hold up under regulatory review. For many industries, that means published research, independent testing, or reliable third-party data.

Health or scientific claims face a higher bar. Regulators such as the FTC require “competent and reliable scientific evidence,” which often means well-designed clinical studies with enough participants to demonstrate real effects. Relying on one small study or cherry-picked data rarely meets the standard. If an ad references medical or technical outcomes, marketing teams should confirm the evidence matches what the copy promises.

Disclosure rules are another key step. Important conditions — from hidden fees to side effects — must be clear, prominent, and easy to understand. Fine print or buried disclaimers won’t protect a brand if customers feel misled. During review, teams should ask whether a reasonable customer would understand the full context of the claim without digging.

A pre-launch audit can help reduce risk. The process should include: 

1. Listing every factual claim in an ad
2. Linking each one to supporting evidence
3. Confirming disclosures are clear
4. Reviewing any endorsements or testimonials for accuracy and proper disclosure
5. Escalating high-risk claims for legal or compliance review

Documenting each step builds a record that shows the company took reasonable care — a valuable safeguard if the campaign is ever challenged.

ESG and Greenwashing Pitfalls

Greenwashing is when a company overstates its environmental record or makes claims that can’t be backed up. Regulators have moved these statements out of the realm of harmless slogans and into the category of measurable ad claims. That means if a business calls something “eco-friendly” or says it is on a path to “net zero,” it needs to show how those statements are true.

Recent cases show how this plays out. In the U.K., the ASA banned HSBC ads that promoted billions in green financing but left out the bank’s larger fossil fuel portfolio. Ryanair was also cited after calling itself Europe’s “lowest emissions airline” without enough data to prove the comparison. In the U.S., the FTC has said its Green Guides require proof before terms like “biodegradable” or “recyclable” can be used, and the agency is preparing updates that could tighten those standards even further.

How to Avoid Greenwashing

For marketers: don’t make ESG claims unless you can produce the evidence. Independent audits, verified data, or recognized certifications can support credibility, but vague terms and aspirational promises will not. If the limits aren’t explained, the claim is likely to be treated as misleading. The cost isn’t only a fine — it’s the loss of trust from customers and investors who are already skeptical.

Jurisdictional Enforcement Overview

Advertising rules vary across markets, but most regulators apply the same test: would a reasonable consumer be misled? Here’s how oversight works in the key jurisdictions marketers encounter most often.

United States

The Federal Trade Commission is the main agency that enforces advertising law. It looks at whether ads are “unfair or deceptive” under the FTC Act. The National Advertising Division, run by the Better Business Bureau, reviews national ads through self-regulation. State attorneys general often bring their own cases under consumer protection laws. The Department of Justice or the Environmental Protection Agency may also be involved when claims touch competition or the environment.

United Kingdom

The Advertising Standards Authority and the Committee of Advertising Practice oversee advertising across broadcast and digital media. Their Green Claims Code sets specific expectations for how environmental benefits are described. The system is self-regulatory but has teeth, since non-compliance can trigger reputational damage and referral to statutory regulators.

European Union

The EU enforces advertising rules through directives such as the Unfair Commercial Practices Directive and the forthcoming Green Claims Directive. National regulators are responsible for enforcement within member states. For companies marketing across Europe, that means one directive but multiple enforcers, which raises the stakes for consistency.

Other Jurisdictions

Canada’s Competition Bureau and Australia’s ACCC have taken active roles in policing health and environmental advertising. Both agencies share the same principle as the U.S., U.K., and EU: claims must be accurate, backed by evidence, and not likely to mislead the average consumer.

Preventing False Advertising: Best Practices

The simplest way to avoid false advertising is to pause and review claims carefully before release. Every statement — whether about price, performance, or sustainability — should be linked to proof that can stand up to regulator or competitor scrutiny. That proof might be third-party research, audited data, or clear internal documentation. Transparency is just as important. If there are limits or conditions, spell them out. Fine print buried in footnotes rarely holds up when customers feel misled.

Best practice also means treating compliance as an ongoing process, not a one-time check. Build regular reviews into campaign planning, and revisit older claims to make sure they still match current standards. Train teams to recognize when a claim needs legal or compliance review, and keep records of how decisions were made. Verification, transparency, and steady review create a paper trail that protects the brand and reinforces credibility with audiences who are quick to spot exaggeration. Team up with the best advertising agency on Clutch to get the best results. 

Frequently Asked Questions

What is the difference between puffery and deceptive advertising?

Puffery is an obvious exaggeration, like saying a product is “the best in the world,” while deceptive advertising involves measurable claims that need evidence. For a deeper breakdown and a simple checklist, see the “Puffery vs. Deception” section above.

How can I substantiate my advertising claims?

Link every claim to credible proof. That can include independent research, audited data, or third-party certifications. Disclosures should be clear and prominent, especially if conditions or limits apply.

What are common penalties for false advertising?

Penalties range from multimillion-dollar settlements and civil fines to legal costs and reputational loss. Cases like Volkswagen’s $14.7 billion diesel settlement and Skechers’ $40 million FTC settlement show how financial and brand impact go hand in hand.

How do I conduct a pre-launch ad audit?

Follow the checklist outlined earlier: identify each claim, link it to supporting evidence, confirm disclosures, review endorsements, and escalate high-risk content for compliance review. Documenting the process creates a record if questions arise later.

Which authorities enforce advertising standards globally?

The Federal Trade Commission and state attorneys general lead enforcement in the U.S., supported by the National Advertising Division. In the U.K., the Advertising Standards Authority and Committee of Advertising Practice set the rules. The EU enforces through directives like the Unfair Commercial Practices Directive, while Canada’s Competition Bureau and Australia’s ACCC oversee national standards.

About the Author

Elaine Margrethe Alcantara Content Writer at Clutch

Elaine Margrethe is a part of Clutch’s global team of writers. She is responsible for writing blogs, supporting blog processes, and content creation efforts.

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