A company engages in false advertising when making false, misleading, or deceptive statements of fact to promote a product or service. False advertising comes in several forms, such as express statements, implied statements, and failure to disclose necessary information. To prevent companies from making false or misleading claims about their products or services, federal and state laws prohibit and impose serious consequences on such activities.
Comparative marketing is also a form of false advertising. This involves comparing a brand with competitor brand based on objectively measurable attributes, while specifically identifying the competitor brand with distinctive information. This is usually done as an attempt to show that the brand being advertised is better than the competitor’s brand.
On the other hand, negative but truthful statements and puffery are not actionable and do not constitute false advertising. Statements of puffery are exaggerated statements and cannot be proven to be true or false. For example, a company claiming to sell the best product “in the world” would be considered puffery, and therefore would not fall under the scope of false advertising.
While the Federal Trade Commission (FTC) prohibits false advertising, competitors cannot sue each other under the FTC Act or its regulations. However, competitors can sue each other under the Lanham Act (15 U.S.C. § 1125(a)), which protects companies and brands from false or misleading description of facts in association with their products or services.
To file a false advertising claim under the Lanham Act, the plaintiff must show, among other factors, that (1) the defendant’s ad contains a false statement of fact, (2) that the statement deceives or has a tendency to deceive and (3) that the statement is material. The court will analyze the advertisement at face value and in its full context to determine whether it constitutes false advertising.
Defendants may defend the false advertising claims by stating that the “false statements” were statements of opinion or puffery, which would render them nonactionable. Depending on the product or service, the Federal Food, Drug, and Cosmetics Act may preclude a lawsuit if it involves a claim that falls within the exclusive regulatory authority of the Food and Drug Administration.
The defendant may be responsible for a plaintiff’s monetary damages under the Lanham Act, including the plaintiff’s lost profits, damage to plaintiff’s goodwill, plaintiff’s costs to correct the damage from the false advertising, and in some cases, the defendant’s profits from the false advertising. The plaintiff may also be awarded attorney’s fees and/or treble (triple) damages, if it is determined that the false advertising was willful. Finally, the court may also issue an injunction ordering the defendant to cease their conduct.
It is important to protect your business against potential damage from misleading messages or deceitful marketing by competitors. However, the laws governing false advertising can be complicated, and it is essential to consult an experienced attorney.