Transcript Document

NABCA SYMPOSIUM
MARCH 10, 2009
U.S. ADVERTISING LAW OVERVIEW
Kenneth A. Plevan
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
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SOURCES OF ADVERTISING LAW
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FEDERAL TRADE COMMISSION
 In re Pfizer, 1972, the “prior substantiation” doctrine
 Advertiser must have a “reasonable” basis for all objective product claims
 And the advertiser must have the substantiation in advance, i.e., before
running the claims
 At the FTC, if the advertiser submits acceptable substantiation, but it was
generated after the fact (after the ad ran), in a formal proceeding it could
be ruled inadmissible
 What happened to the fundamental principles of American justice? (Right
to remain silent; presumed innocent until proven guilty)
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SOURCES OF ADVERTISING LAW
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OTHER TRUTH-IN-ADVERTISING “POLICE”
 State Attorneys General/local government enforcers
 NYC Department of Consumer Affairs, for example
 Generally apply the FTC’s substantiation principle, look to the
advertiser to produce acceptable substantiation
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SOURCES OF ADVERTISING
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OTHER TRUTH-IN-ADVERTISING “POLICE
 Competitors -- suing under Section 43(a) of the federal Lanham Act (the
trademark statute)
 Competitors usually sue for immediate injunctions, but there are a
few cases with sizeable damage verdicts
 Only competitors can sue for false advertising under Lanham Act -consumers cannot
 Burden to prove the advertising claim is false on the challenger
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
Examples of recent Lanham Act lawsuits involving beverage alcohol
products:
 Pernod Richard USA LLC v. Bacardi U.S.A. Inc., 505 F. Supp. 2d 245
(D. Del. 2007)
 Claims regarding the ownership of the mark “Havana Club”
 Millenium Import Co. v. Sidney Frank Importing Co., 2004 WL
1447915 (D. Minn. 2004)
 Belvedere Vodka/Grey Goose Vodka – taste test claims based on
report by the Beverage Testing Institute of Chicago
 SAB Miller v. Anheuser-Busch (E.D. Wisc. 2004)
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KING OF BEERS/QUEEN OF CARBS
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SOURCES OF ADVERTISING LAW
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OTHER TRUTH-IN-ADVERTISING “POLICE”
 National Council of Better Business Bureaus
 “National Advertising Division” (“NAD”) in New York City
 Alternative dispute resolution
 Network Clearance/Challenge Process
 “Who gave the network staffs the right to reject our ads?”
 Major networks have published rules/standards. Several of the
staffs take their responsibility very seriously
 Review and challenges (completely off the public record, as
compared to NAD proceeding)
 Network position on alcohol beverage advertising
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SOURCES OF ADVERTISING LAW
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OTHER TRUTH-IN-ADVERTISING “POLICE”
 Specialized Agencies
 TTB
 FDA (for prescription drugs)
 Your customer
 Suing in state court, as a representative of a class of all of your
customers in the state, or perhaps nationwide
 These are “plaintiffs’ bar” lawsuits; lawyers are the real plaintiffs
 Example of the NJ statute: provides for automatic recovery of
attorney’s fees and treble damages for successful plaintiffs
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BASIC PRINCIPLES
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THREE TYPES OF ADVERTISING CLAIMS
 A “level of proof” claim:
 “A recent clinical study proves that Aleve relieves muscular pain
better than aspirin”
 Objective product claim:
 “Campbell has more soups without MSG than Progresso has soups”
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BASIC PRINCIPLES
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THREE TYPES OF ADVERTISING CLAIMS
 Puffery -- always a favorite topic of marketing executives
 Classic definition of puffery: exaggeration, hyperbole, selflaudatory statements that consumers will not take seriously/will not
expect to be substantiated with objective proof
 In 1983, the FTC gave this as an example of puffery: “the sexiest
European -- when used to describe an automobile”
 Anecdotal definition – puffery is what we say; claims that need
support are what our competitors say
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BASIC PRINCIPLES
 Examples from cases (there are hundreds of such examples):
th
 Pizza Hut - Papa Johns Lanham Act lawsuit (5 Circuit): “Better
Ingredients, Better Pizza,” standing alone, was puffery (a
slogan), not an objective claim
 Except when used in a comparative ad comparing specific
ingredients, as in: “Papa John's uses filtered water, Pizza Hut
uses tap water, [tag line]: Better Ingredients, Better Pizza”
 New World Pasta case: (8th Circuit) “America’s Favorite Pasta”
was puffery
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HOW TO INTERPRET ADVERTISING
 Literal claims vs. implied claims
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BASIC PRINCIPLES
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RECENT ILLUSTRATIVE EXAMPLE
 Fraker v. KFC Corp. (Federal Court, San Diego, 4/30/07)
 Statements on KFC Website:
 “The good news is that all foods can fit into a balanced
eating plan. That includes tacos, pizza, chicken, seafood
and burgers”
 “You can enjoy ‘fast food’ as part of a sensible balanced
diet”
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 KEY ALLEGATION:
 KFC’s statements violate the Lanham Act as false
advertising, given the high levels of trans fats in KFC’s
products
 COURT’S HOLDING:
 Statements were non-actionable puffery: “No reasonable
consumer would rely upon the statements as specific
representations as to health, quality, or safety. The statements
simply lack the sort of definite positive assertions of fact
required to state a claim under any of the causes of action
alleged by Plaintiff”
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Time Warner Cable, Inc. v. DIRECTV, Inc. (2d Circuit, 2007)
Mr. Chekhov: Should we raise our shields, Captain?
Captain Kirk: At ease, Mr. Chekhov. Again with the shields. I
wish he’d just relax and enjoy the amazing picture clarity of the
DIRECTV HD we just hooked up
With what Starfleet just ponied up for this big screen TV, settling for
cable would be illogical
Mr. Spock: [Clearing throat]
Captain Kirk: What, I can’t use that line?
Announcer: For picture quality that beats cable, you’ve got to get
DIRECTV”
Announcer (Revised): “For an HD picture that can’t be beat, get
DIRECTV”
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 “IMPLIED” CLAIM AT ISSUE:
 “With what Starfleet just ponied up for this big screen TV, settling
for cable would be illogical”
 COURT’S HOLDING:
 Adopted “false by necessary implication” doctrine: “An
advertisement can be literally false even though it does not
explicitly make a false assertion, if the words or images, considered
in context, necessarily and unambiguously imply a false message”
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 INTERNET ADVERTISEMENT
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 KEY ALLEGATION:
 Side-by-side comparison was a total distortion
 COURT’S HOLDING:
 Advertisements were explicitly and literally false
 But because images were so grossly distorted and exaggerated, no
reasonable buyer would take them to be accurate depictions of Time
Warner’s service
 Thus, the comparison was non-actionable puffery
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Dr. Pepper Seven Up, Inc. (7 Up Plus with Calcium) (2006 NAD Decision)
 Express Claim: “With real fruit juice, 10% of our
daily calcium and only 10 calories in every 8 oz.
serving, it tastes so good you can feel it in your bones”
 Implied Claim (visual message): That the product
contains a significant amount of real fruit juice
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 NAD’S HOLDING:
 The amount of fruit juice was 5% apple juice
 The depiction of a wide variety of fruits was problematic because (i)
the only fruit juice present was apple juice, while the other fruits
were present only as a flavoring; and (ii) the large number of fruits
could be understood to mean the product contains more fruit juice
than 5%
 Since consumers could reasonably interpret commercials to mean
that the product contains a substantial amount of fruit juice,
references to “fruit juice” should clearly and conspicuously disclose
source and amount of juice
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INTERNET/WORD OF MOUTH
 WOMMA (Words of Mouth Marketing Association)
 Ethics Code
 American Marketing Association “Best Practices” for word of
mouth marketing
 Tribute or Parody Advertising
 Obligation to Police?
 Remedies
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YOU ARE READY TO RUN!!!
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