Bait and Switch: Definition, How Strategy Works, and Tips to Avoid

What Is Bait and Switch?

Bait and switch is a morally suspect sales tactic that lures customers in with specific claims about the quality or low prices on items that turn out to be unavailable in order to upsell them on a similar, pricier item.

It is considered a form of retail sales fraud, though it takes place in other contexts. While many countries have laws against using bait and switch tactics, not all occurrences constitute fraud.

Understanding Bait and Switch

The "bait" in a bait and switch can be an advertised physical product or service that has a notably attractive price or terms. It can also take the form of a teaser interest rate, in the case of a mortgage, loan, or investment product. Once a customer comes into the store or office to inquire about the advertised price or rate, the advertiser will attempt to sell the customer a more expensive product, which constitutes the "switch."

Bait-and-switch tactics, as a form of false advertising, may be subject to lawsuits in many countries, including the U.S., England, and Canada. However, no matter how aggressive the advertiser is in attempting to upsell a potential customer to a more expensive product if they can sell the advertised teaser product, there is no course of action for the consumer.

It is perfectly legal in the U.S. for a business to advertise a teaser item that is stocked in a limited amount (a loss leader, for example) as long as they also advertise that a limited number are available and offer a rain check if the item sells out.

Bait and Switch Tactics

While relatively uncommon, the bait-and-switch tactic has gained notoriety in the mortgage market as a potentially unscrupulous marketing tactic meant to drive business. In a mortgage bait and switch, an agent or company will post exceedingly low mortgage rates, knowing full well that the vast majority of applicants will be unable to qualify for these teaser rates. Once customers begin to come into the office to inquire about the low rate, the agent will proceed to offer them the higher rates they are more likely to qualify for, thus earning a greater commission.

A similar strategy is seen in auto purchase financing, in which buyers are lured by the possibility of a car loan with a rate as low as 0%. In reality, very few people (if any) will qualify for such a rate.

Bait-and-switch-like tactics are common in other endeavors, as well.

• In real estate, some unscrupulous brokers may advertise a great property at a too-good-to-be-true price to attract potential buyers. Once they are on board, the property in question is no longer available.
• In a study by the Society for Conservation Biology, it has been found that about 40% of fish sold as one species (and priced that way) is another type of fish.
• Hotels offer low teaser rates to attract guests who are later hit with hidden resort fees or other unexpected, minimally disclosed fees.
• Headhunters may post attractive yet fake jobs in an attempt to collect resumes.

 How to Notice and Avoid Bait and Switch Scams

Bait and switch scams can be difficult to notice in advance, but there are some ways to minimize becoming a victim. First, if something looks or sounds to good to be true it is a red flag. An image of a brand new car for sale or a luxury apartment for rent but with rock-bottom prices attached are probably misleading. If a seller comments that a product is in limited supply or out of stock, it can be another warning that you aren't going to get what's being offered. Confusing fine print or other terms and conditions can also be a sign of trouble.

In general, if a seller is reluctant or unwilling to disclose information if you ask (e.g., to send more pictures of the product, specifications, details, etc.) it could be because they do not actually have that product around. Thus, one way to avoid a bait and switch is to ask for more information and more photographs (if online). Also, be sure to get an offer of the deal in writing so that you can prove that you thought you were getting one thing and not the other. Always read the terms and conditions and fine print to see if anything strikes you as misleading.

How to Prove a Bait and Switch

Bait and switch tactics are often considered to be a type of fraud, and therefore is illegal. Bait and switch scams can fall under a number of violations, from breach of contract to false advertising. A “bait and switch” is also a potential violation of the Consumer Fraud and Deceptive Business Practices Act or Section 5 of the FTC Act. Ultimately, the U.S. Federal Trade Commission (“FTC”) is responsible for monitoring and enforcing laws that protect consumers from false advertising and fraudulent acts like bait and switch tactics. However, sellers can also minimize their exposure to such accusations by putting a legal disclaimer on their marketing materials.

Proving a bait and switch case in court can be difficult, and therefore it is often best to be vigilant as a consumer. For instance, to prosecute a false advertising claim, there are five criteria that must be met under Section 43 of the Lanham Act:

• The plaintiff must show that the defendant made false or misleading statements about a service or product;
• That the defendant engaged in actual deception or at least intended to deceive the majority of targeted consumers;
• The deception itself is substantial enough that it is more than likely that it will influence a consumer to purchase the service or product;
• The advertised service or product being offered are items that are sold in interstate commerce; and
• A probability that the defendant’s conduct will likely result in harm to the plaintiff.