Authored by Julia Anne Matheson
FTC—the primary government agency responsible for regulating advertising in the United States—favors comparative advertising, because it "encourages product improvement and innovation and can lead to lower prices in the marketplace." The courts, however, will protect only comparative advertising that is not literally false or ambiguous and does not have the tendency to deceive the buying public.
Section 43(a) of the Lanham Act provides a federal cause of action for false or misleading advertising against "[a]ny person who . . . in commercial advertising or promotion, misrepresents the nature, characteristics, quality or geographic origin of his or another person's goods, services, or commercial activities." To prevail on a Section 43(a) false advertising claim, a plaintiff must demonstrate the misrepresentation is one of "fact," by showing the advertising is either literally false or misleading. If the ad is literally false—100% organically grown ingredients—a court will grant relief without evaluating the impact of these statements on the purchasing public. Courts presume literally false statements mislead consumers in their purchasing decisions. But when the advertisement is implicitly rather than explicitly false, a plaintiff must demonstrate by a consumer survey or otherwise, that the misleading statement is material—namely, that it influences consumers' purchasing decisions. Bald assertions of superiority (i.e., puffery) and general statements of opinion are not actionable under the Lanham Act on the rationale that no reasonable consumers are likely to reply to their detriment on such statements in making their purchasing decisions.
Taking on Comparative Ads
Companies dealing with unsubstantiated comparative advertising have various avenues of action available. A successful Lanham Act lawsuit offers big advantages. Where the stakes are high and every additional day or advertisement leads to a further quantifiable loss of sales, the federal courts offer the fastest avenue available for injunctive relief. The Lanham Act offers the possibility of monetary damages to compensate for consumer deception resulting in a loss of sales. The act also covers all forms of advertising, both national and local, as well as a wide range of promotional activities.
But false-advertising litigation can be expensive on multiple levels. The discovery process can be lengthy and time-consuming. In cases where an advertisement is misleading, but not literally false, the plaintiff will likely need to expend significant additional resources on a consumer survey. Thus, it is not surprising that more companies are relying on the alternate-dispute-resolution procedures available through the National Advertising Division (NAD), a self-regulatory panel for advertising disputes, and the National Advertising Review Board (NARB), NAD's reviewing arm.
An NAD review is far less complicated than Lanham Act litigation. Unlike the federal courts, lengthy briefing, discovery and testimony are neither required nor permitted. And the entire NAD proceeding normally takes no longer than 60 days. Forced corrective advertising is not an available remedy, nor are monetary damages; but, NAD decisions are consistently upheld on appeal, and advertisers that fail to comply with NAD's decisions face treacherous waters, as their matters are subsequently referred to the appropriate government agency, usually the FTC, for enforcement.
With companies fighting for their share of the nutrition market among a skeptical population and a down economy, aggressive comparative advertising, and subsequent advertising disputes, are inevitable. Being conscious of the blurry line between mere promotional flattery and actionable falsity, and equally knowledgeable about the type and avenues for possible relief may play an important role in future entrepreneurial success.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes and is not intended to constitute legal advice. This memorandum may be considered advertising under applicable state laws.