Comparative advertising, an art of war!

By: Dilawar Ali Fazal

Comparative advertising is a hard-biting and attention-grabbing way of saying that we are better than our competitors. It’s a marketing strategy frequently used by competing companies to increase their sales and have a greater market share by advertising and comparing their products with similar competing products. The Federal Trade Commission (FTC) defines comparative advertising as “advertising that compares alternative brands on objectively measurable attributes or price, and identifies the alternative brand by name, illustration or other distinctive information.”

Types of comparative advertising claims

There are two types of comparative advertising claims: superiority claims and parity claims. Superiority claims explicitly or implicitly assert that the product advertised is better than that of competitors. Whereas, parity claims assert that the advertiser’s product is at least as good as the competitor’s product.

These comparative claims are usually based on two types of data: facts and research results. Facts are basically factual statements. For example, an airline company may claim that it has more flights to New York than its competitors. This is a factual statement which can be verified or refuted with certainty. Research results, on the other hand, are the outcomes of a scientific procedure, like a pharmaceutical company claiming its digestive pills can make people “feel better faster.” This is a research result claim and the truth or falsity of the assertion depends on the research method used.

Federal law governing comparative advertising

The issue of comparative advertising became common after trademark legislation made it easier to sue competitors for advertising attacks. According to the Trademark Law Revision Act of 1988, anyone is vulnerable to a civil action that “misrepresents the nature, characteristics, qualities, or geographical origin of his or her or another person’s goods, services, or commercial activities.” However, comparative advertising is legal as long as it is truthful and it is not false or deceptive. In court, the advertiser is under no obligation to prove the claim to be true, instead the competitor has to prove it is false.

The Lanham Act is the exclusive federal law that governs litigation between competitors over comparative advertising. Competitors can bring a claim for false and misleading advertising under Section 43(a) of the Lanham Act, but a competitor bringing a claim has to prove:

  1. The advertisement contains a false or misleading statement of fact about a product or service;
  2. Such statement either deceived, or had the capacity to deceive a substantial segment of potential consumers;
  3. The deception is material because it is likely to influence the consumer’s purchasing decision;
  4. The product is in interstate commerce; and
  5. The plaintiff has been or is likely to be injured because of the statement

For these reasons, companies sue each other, claiming that the competitor has distorted or invented the facts and have misled the consumers. Every year, companies spend millions of dollars in countering false advertising lawsuits, which not only causes monetary damage but also causes significant damage to the reputation and goodwill of their businesses.

Therefore, every comparative advertiser should be ready to go to court. Once your competitor files the lawsuit, little can be done to stop the process. However, there are ways to counter false advertising claims.

How to avoid false comparative advertising campaigns?

By following the correct guidelines of comparative advertising, companies can save themselves from a lot of trouble and can avoid monetary damages. The most obvious rule is to never make a false or misleading claim. Although, everyone wants a broad, strong claim against false comparative advertising, companies have to resist the temptation to remove the qualifiers. Therefore, it is advisable to not overstep data and to never make an unqualified claim based on qualified results. Companies also need to understand that pictures count too, and false pictures can get their ad enjoined, just as false words can.

Similarly, advertisers should remember that while making an ad, truth in comparative advertising is not enough; it must also be clear. Even a claim that is literally true may be enjoined under federal law if it is found to be misleading or has a tendency to mislead. Hence, companies should not use the truth to mislead the customers; even a mildly misleading claim may be enjoined.

Moreover, it is a common practice that companies tend to cherry-pick the research results which favor their brand. Courts have clearly held that companies should neither ‘only’ furnish the favorable results, nor should they contradict the research results. Sometimes an advertiser constructs a claim that belies its own research results because such advertisers tend to contradict the facts of their research and cherry-pick the favorable results.

Challenging a comparative advertising claim

Companies can challenge a competitor’s comparative advertising campaign in many ways; one such way is to run a response advertisement. Companies can also communicate with their competitors directly, usually by sending a demand letter. A demand letter states the legal argument against the truth of the claim and demands the advertiser to modify or discontinue the claim to avoid further action being taken against them.

If the advertisement is in dispute, companies can also submit a take-down request to the media outlet displaying the ad. However, take-down requests will only be complied with if a well-constructed argument shows that the competitor’s advertisement contains false or misleading claims.

Challengers can also press the FTC or relevant state officials to use their statutory authority to investigate and end an offending comparative ad. Whether the regulatory body will actually proceed will depend on the strength of challenger’s claim. In addition, an aggrieved party can bring a proceeding before the National Advertising Division (NAD).

NAD however does not examine deception, violation of law, or unfair advertising practice, rather it evaluates the express and implied messages communicated in the advertisement, and determines whether the advertiser has given a reasonable basis to support those messages. If none of the above remedies are successful, then a challenger may bring a claim under the Lanham Act on the basis discussed above.

Conclusion

Every comparative advertiser should be ready to go to court and must realize the cost of going to battle under federal law, because the litigation and research required in defending a comparative ad claim can be painfully expensive and wasteful. There are multiple other options which can be pursed but if a company decides to run a comparative ad, such as ensuring their data matches their claim and they are not misleading the consumers.


*This post was authored on April 1, 2019 and has been reprinted with Dilawar’s permission. The original post can be found here.

Currently, Dilawar is enrolled at Penn State Dickinson Law as an international student in the LL.M program. Dilawar was born and raised in Pakistan. He received his first law degree in Pakistan, from Lahore University of Management and Sciences (LUMS). Dilawar’s experience includes working in prominent corporate law firms in Pakistan.

 

Sources:

https://www.flabusinesslaw.com/litigation/is-your-competitor-making-false-comparative-advertising-claims/

https://hbr.org/1989/05/us-vs-them-the-minefield-of-comparative-ads

American Brands, Inc. v. R.J. Reynolds Tobacco Company, 413 F. Supp. 1210

Procter & Gamble Company v. Chesebrough-Pond’s, Inc., 588 F. Supp. 1082

https://www.lexology.com/library/detail.aspx?g=6e3cb612-571b-49af-8d03-e26c5ce93871

https://gowlingwlg.com/en/insights-resources/articles/2018/the-risks-of-comparative-advertising/

Author: Prof Prince

Professor Samantha Prince is an Associate Professor of Lawyering Skills and Entrepreneurship at Penn State Dickinson Law. She has a Master of Laws in Taxation from Georgetown University Law Center, and was a partner in a regional law firm where she handled transactional matters that ranged from an initial public offering to regular representation of a publicly-traded company. Most of her clients were small to medium sized businesses and entrepreneurs, including start-ups. An expert in entrepreneurship law, she established the Penn State Dickinson Law entrepreneurship program, is an advisor for the Entrepreneurship Law Certificate that is available to students, and is the founder and moderator of the Inside Entrepreneurship Law blog.