The title to your question asks about ‘prosecution for fraud,’ but the text goes on to ask a broader question about ‘legal ramifications.’ The details are very important when it comes to prosecuting fraud; there are very many different state and federal fraud offences. Although the essence of criminal fraud is deception for financial gain, deceptive advertising is more commonly addressed by consumer protection laws.
In the United States, federal consumer protection laws are enforced by the Federal Trade Commission’s Bureau of Consumer Protection. The FTC’s page on Health Claims identifies a long list of companies that have been charged with or penalised for deceptively advertising health products. For example, right now the most recent announcement on that page reads:
The FTC charged Telomerase Activation Sciences, Inc. and Noel Patton (collectively, TA Sciences) with lacking the scientific evidence to support claims that their capsules, powders, and creams could provide a broad range of anti-aging and other health benefits.
The FTC’s Advertising FAQs provide some further information about how the FTC views fine print disclaimers:
When the disclosure of qualifying information is necessary to prevent an ad from being deceptive, the information should be presented clearly and conspicuously so that consumers can actually notice and understand it. 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 a disclaimer that is easily missed on a website are not likely to be effective. Nor can advertisers use fine print to contradict other statements in an ad or to clear up misimpressions that the ad would leave otherwise. For example, if an ad for a diet product claims "Lose 10 pounds in one week without dieting," the fine-print statement "Diet and exercise required" is insufficient to remedy the deceptive claim in the ad.
American consumers can complain directly to the FTC about deceptive trade practices. However, the Advertising FAQs also explain that the FTC does not have the resources to pursue every case:
How does the FTC decide what cases to bring?
The FTC weighs several factors, including:
- FTC jurisdiction. Although the FTC has jurisdiction over ads for most products and services, Congress has given other government agencies the authority to investigate advertising by airlines, banks, insurance companies, common carriers, and companies that sell securities and commodities.
- The geographic scope of the advertising campaign. The FTC concentrates on national advertising and usually refers local matters to state, county, or city agencies.
- The extent to which an ad represents a pattern of deception, rather than an individual dispute between a consumer and a business or a dispute between two competitors ...
- The amount of injury – to consumers' health, safety, or wallets – that could result if consumers rely on the deceptive claim. The FTC concentrates on cases that could affect consumers' health or safety (for example, deceptive health claims for foods or over-the-counter drugs) or cases that result in widespread economic injury.
