Introduction To Comparative Advertising Laws
In the United States it has become common for businesses to tout the superiority of their products and services by comparing them with those of their competitors. This form of comparative advertising is permissible only if: (1) the overall impression left by the ad is true and substantiated; (2) the individual statements made in the ad are also true and substantiated; and (3) the statements do not indicate an endorsement by the competitor.
Advertising Laws Require The Net Impression of Comparative Ads To Be True and Accurate
In any comparative ad campaign, particular attention must be given to the net impression of the advertising and the specific substantiation used to justify the comparative claims. While every statement made in an advertisement might be literally true, it is the ad’s net impression on the average consumer that is ultimately important. If the net impression left on the "reasonable" consumer is false or misleading, liability for false advertising and unfair competition may result. Great care must therefore be taken to determine the overall net effect the ad will leave on the consumer, and to ensure that the net impression can be substantiated by surveys, statistics, facts, etc…, as in fact true.
Advertising Laws Require All Material Claims To Be Substantiated
While it may be rare for a comparative advertisement to deliberately make a false statement, it is not uncommon for advertisers to make unsubstantiated claims they believe to be true, which are in fact false or misleading. It is therefore important for those running comparative ad campaigns to substantiate all material claims before the ad is run. The substantiation itself (survey, statistics, etc... upon which the claim is based) should be carefully scrutinized for reliability. Are the survey results statistically significant? Were the consumers properly screened and questioned? Were the number of geographic markets and consumers surveyed sufficient to project the results throughout the advertiser's market? Were the tests independent and, where necessary, blind or double blind? Were clinical studies needed? These are only some of the questions that should be asked when reviewing this type of claim substantiation.
Do Not Leave The Impression of an Endorsement
Comparative ad campaigns by their very nature are replete with risks. Often overlooked is the risk that the ad campaign is misleading the public into believing a competitor has endorsed the product or service. When developing a comparative ad campaign you must ensure there is no likelihood that the average consumer would be confused into believing the advertiser selling the competing product or service also manufactures or provides the competing service.
Erercise Extreme Caution Before Making Disparaging Remarks
By their very nature, comparative ad campaigns make either explicit or implied disparaging remarks about the competitor’s product. For a disparaging remark to be legally actionable, it must be both untrue and believed by a reasonable person. Any person who intentionally or negligently makes untrue disparaging remarks about a competitor's product or service may be held legally accountable. Extreme caution must therefore be taken to ensure any disparaging remark is in fact true. However, it should be noted that if the disparaging statement is so outlandish as to be unbelievable, it is unlikely the owner whose product was disparaged will be able to prove any injury.
Unfair Competition Claims
In the United States a competitor, who believes himself to be the victim of a false comparative ad campaign, can being a lawsuit alleging unfair competition. If a competitor claims unfair competition based on false advertising, the competitor must show that the challenged claim is material, i.e., likely to influence a purchaser's decision. Where successful, the advertiser may be required to:
- stop running the ad;
- conduct a corrective advertising campaign;
- turn over all profits associated with the ad campaign to the claimant;
- pay any and all losses suffered by the claimant as a result of the ad, including: loss profit, damage to the claimant's reputation, and the claimant's attorneys fees and costs; and in some cases
- pay treble damages.
Given the potential for substantial damages for faulty comparative advertising campaigns, the greatest degree of care should be exercised with active involvement of counsel, statisticians, and market researchers. This is particularly true given changes to federal law that have expanded the remedies to include, in certain circumstances, the award of treble damages and the recovery of attorneys fees.