Tag Archive for 'false advertising'

FTC Puts The Brakes On Deceptive Online Acai Berry Advertisements

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Man, and just when I pumped all my money into those acai berries.  Now how am I supposed to lose those extra pounds before swimsuit season?

Just kidding, we all know the key to weight loss is and always has been magic.

In all seriousness though, if you haven’t heard the news already about the latest Federal Trade Commission crackdown, then you might be surprised to hear that the FTC has just succeeded in permanently shutting down those annoying acai berry pop-up ads you see online.  The ads usually were fashioned to look like official news reports and contained logos from well-known news organizations including ABC, FOX News, CNN and so forth – an example to your right.  The advertisement exalted the miracles of the acai berry as a natural weight loss solution.

And looking at the ads, it’s easy to see how people would be fooled into thinking the claims in them were pure truth rather than puffery.  That, of course, was also the FTC’s problem with them and about nine months ago the agency began putting their plan to stop these deceptive practices into action.  Fast forward nine months later and the FTC has entered into settlement agreements with six acai berry marketers to stop the sneaky ads and also to pay damages of $500,000 under a federal false advertising statute.

Personally I’m quite glad to see these acai berry advertisers go down.  In all honesty, even I was fooled the first time one of these ads popped up on my screen.  The illusion was all the more convincing in my case since at the time I was also browsing through a legitimate news site and assumed the ad was a special report.  Thus you can probably see why they were probably a bad thing.

Though, interestingly enough some in the blogosphere seem to be opposed to the FTC’s actions.  Their main beef seems to be that they think the FTC’s restrictions on the acai berry advertisers violate the First Amendment’s freedom of speech protection.  As we all know, the First Amendment does indeed grant anyone, even businesses, the right to say what they want.  Therefore, this sub-group of people (who probably also hold stock in acai berries) believe that by the FTC cracking down on how these advertisers present their information, it in fact infringes upon their First Amendment rights.

Wow, some people can be real whack-jobs, huh?  Fortunately though, none of the comments I’ve read so far have been crazy enough to argue that the ads aren’t in violation of federal false advertisement laws, because for the reason that, well, they clearly are.

Under current federal law, false advertising comes in two flavors: fraudulent content, which is when the statements made in an ad are false beyond mere marketing puffery, and deceptive practices, which is when the ads are presented in a way that will trick consumers into think it’s something else other than an advertisement.

The acai berry ads clearly fall into the latter category, and arguably also the first, but let’s not split hairs about whether or not acai berries can really help a person lose weight.  The acai berry ads were designed to look like news articles.  The ads had headlines and even author bylines, the formatting and fonts look like they were ripped straight out of CNN, not to mention all the legitimate news organization logos all over the place.  To any objective person the ads at first blush would seem like real news stories and not advertisements.  Therefore, they’re deceptive ads.

But back to the original question, did the FTC violate these advertiser’s first amendment rights?  Well, the answer is still no.  This will be a good lesson to any people out there who are thinking about launch ad campaigns similar to the acai berries.  That’s because while it’s true the First Amendment protect one’s freedom of speech, when that speech is commercial in nature, than the speech may be regulated if it is found to be false or deceptive.

See the beautiful circle here?  Because the acai berry advertisements are clearly deceptive under federal law, then the ads aren’t afforded First Amendment protection.  But let’s just say for argument sake that they aren’t deceptive.  Even in that circumstance the government still has a right to restrict commercial speech if the government can prove that the restriction would serve a substantial government interest, directly advance that interest, and the restriction itself isn’t beyond what’s necessary to advance that government interest.

Now I won’t bore you with a long dissertation of what is a “substantial government interest”, but suffice to say that if you’re running a business, an easier way to think about how you advertise is that you better not say anything fraudulent or deceptive because it’s pretty easy for the government to restrict commercial speech.

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Breaking News: Nutella is Not Health Food

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In case you’re one of the unfortunate souls who has never tasted or (gasp!) heard of Nutella, I’m going to give you a minute to go to the nearest grocery store, buy some, and taste it. Go ahead. I’ll be here when you get back.

***

Delicious, isn’t it? Now, I understand that some people don’t like Nutella. They suffer from an unfortunate condition that psychiatrists refer to as “being wrong.” I can only imagine that it was one of those wrong people who brought this lawsuit (also reported here – requires registration, and here).

I’ll get serious now. A lawsuit, filed in a federal court in San Diego, alleges that the maker of Nutella engaged in false advertising, because it allegedly suggested that its product is a nutritious, balanced breakfast for children. Now, as delicious as Nutella is, I don’t think anybody would mistake it for a weight loss product. It is approximately 70% saturated fat and sugar, by weight. It’s definitely something to be enjoyed in moderation.

Looking at the label on a Nutella container, I don’t see anything implying that the stuff is diet food. Nonetheless, the lawsuit alleges that the named plaintiff in this class action bought the product after seeing a commercial that depicted mothers serving it to their children for breakfast, and declaring it to be healthy and nutritious.

She claims to have been “shocked” (SHOCKED!) when she found out that Nutella is not particularly healthy. I guess seeing the creamy chocolate goodness when she opened the jar didn’t clue her in.

This blog recently discussed a story concerning Taco Bell, and a lawsuit claiming that they shouldn’t call their taco filling “beef” because it’s allegedly less than 50% beef by weight. Now, if that turns out to be true, a case can be made that calling the product “beef” or “meat” without any qualifiers might be slightly misleading.

But simply showing people eating your product (the intended use of the product), as the offending Nutella commercials do, doesn’t seem like it could be in any way construed as a nutritional claim. If they had made commercials saying Nutella will help you lose weight, cure baldness, treat cancer, or that it can be molded into a working artificial heart, there might be a case for false advertising.

So, this individual case looks like it’s probably not going to go anywhere.

One silly case shouldn’t give the impression that false advertising isn’t a real thing that can cause real harm, however. As with any form of fraud, false advertising can cost its victims huge amounts of money, and can sometimes endanger their health, especially when a worthless or dangerous product is advertised as a medication or dietary supplement. Any statement in advertisement which is false, deceptive, or misleading can be grounds for a false advertising claim. It doesn’t matter if the victim was actually harmed, nor does it matter if the falsehood was deliberate.

This is a very strict standard – even a false claim that was included in an advertisement unintentionally, and causes nobody any harm, is illegal. And, generally, I think rules like this exist for a very good reason. If some advertisers were left to their own devices, it’s certain that they would mislead consumers. And if falsehoods that don’t directly harm the consumer, or which are accidental, aren’t illegal, some unscrupulous advertisers would be constantly pushing the envelope.

An absolute blanket prohibition for any and all false statements of fact in advertisements (leaving room for subjective statements of opinion, and “sales puffing”), encourages advertisers to scrupulously vet every factual claim made in an advertisement, since even accidental falsehoods are actionable.

This should, in theory, greatly reduce the number of instances of false advertising in the first place, making valid lawsuits for false advertising fairly rare.

On another note, the plaintiff in this case apparently declined to take advantage of another hard-won consumer protection: nutrition and ingredient labels on food. Look at every single packaged food product sold in stores. Notice the ingredient and nutrition information printed somewhere on the label? Do you think the makers of fried pork rinds put accurate nutritional information on their packages out of the kindness of their hearts? I didn’t think so. The FDA mandates that certain nutritional information be placed on the labels of packaged food. Nutella is presumably no exception. While compliance with labeling laws is no excuse for false advertising (if it did actually occur in this case), it does case some suspicion on the mother’s claim that she was “shocked” to learn that Nutella wasn’t healthy.

On the other hand, if Nutella did produce an advertisement suggesting that it had health benefits, or even indirectly suggesting that it wasn’t mostly sugar and fat, this plaintiff might have a case. And while I agree that litigation is probably the best way to redress serious violations of one’s legal rights, it should not be the first option you think of when you have a problem.

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Who is Harmed By Taco Bell’s Alleged False Advertising?

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Wow, I’ve eaten some bad things in the past, but this most recent (alleged) revelation about Taco Bell has got to take the cake for (alleged) worst food product to eat.

If you haven’t been watching of the news, surfing the internet, or reading the newspapers, then you may be comatose or some kind of spelling bee champion because this story is all over the place.

A couple of weeks ago, a California woman filed a lawsuit against the taco fast food giant accusing Taco Bell of not actually including beef in their beef tacos, burrito, chalupas, and whatever the heck else passes for Mexican food over there, but rather “taco meat filling.”

What is taco meat filling you ask?  Well if you’re to believe the plaintiff’s complaint, it’s a combination of “water, isolated oat product, wheat oats, soy lecithin, maltodrextrin, anti-dusting agent, autolyzed yeast extract, modified corn starch, sodium phosphate,” and other long mad scientist-sounding words.  Oh and beef, too.  I forgot to mention that amongst all the other stuff the plaintiff alleges is in Taco Bell’s beef, there’s also some beef in there.  How silly of me.

This, believe it or not friends, is exactly the heart of plaintiff’s beef (ba da bum) with Taco Bell.  She accuse the company of only putting a little above 20 percent beef in there beef products and argues that the company shouldn’t be allowed to call their meat filling beef because it’s a fraudulent statement.

Now as you can imagine, Taco Bell hasn’t taken kindly to these accusation.  However, rather than try to take the high road on this and handle the case discretely, apparently the marketing geniuses over there have decided to come out with guns-a-blazing and attack the lawsuit head-on with a full out media blitz.  The company has taken out hilarious full page ads in newspapers proclaiming their product’s beefiness.  And to further ensure that their message is heard by more than the four people left in the country who are still reading newspapers, Taco Bell also released an equally cringe-inducing and sure-to-go-viral YouTube video where Taco Bell President Greg Creed expounds upon the authenticity of the company’s beef.

The reason this public relation blitz is an odd and bad move on Taco Bell’s part is that by fighting the plaintiff’s lawsuit so vehemently and publicly, the company ensures that the lawsuit becomes more well-known than it would’ve been if they had just shut up, filed an answer, and released the usual public admonishment denouncing the lawsuit.  Instead, the lawsuit now has traction and is currently creating a logging jam on the internet.  It was also a bad move because for many people, fighting the lawsuit so adamantly can often create the impression that the lawsuit may actually have some validity behind.

Now to be fair, Taco Bell’s very vocal response was probably due to a fear that a smaller answer would’ve led to a drop in sales.  The company probably also didn’t want to watch their taco brand go the way of their fried chicken brand and forever fall into the realm of (alleged) urban legend.  I can see it now, three-breasted 50 lbs chickens clucking along peacefully next to 18-foot tall cattle.

But seriously though myths aside, this is one lawsuit where despite the growing public outcry against Taco Bell, I’m finding it hard to find any basis that would give this lawsuit any reason to continue existing, other than money of course.

You see the problem with this lawsuit (and lawsuits of this kind in general) is that the only real claim of harm lies in false advertising.  Specifically in this case, it’s that the plaintiff and all Taco Bell consumers who went to Taco Bell and bought beef tacos believed that the filling contained 100 percent beef.

Let’s assume for a moment that the plaintiff’s claim is completely true.  What would be the harm other than the deceit?  The beef itself isn’t poisonous or causing any harm to anyone who eats it, aside from probably being really unhealthy for you.  Sure, the product doesn’t contain 100 percent beef, but short of some new discovery about the beef filling’s contents, under FDA guidelines Taco Bell would still be in compliance.

The harm is in the fact that the plaintiff says Taco Bell shouldn’t call their product beef because it’s not all beef.  But take a moment and go to your pantry or refrigerator and pull out anything from it and look at the ingredients.  Chances are that your cereal, macaroni and cheese, canned vegetables, and anything else you might find in there doesn’t contain a hundred percent of anything.

Now I’m not saying that Taco Bell is completely in the right here; but when you go to Taco Bell or any major fast food chain, are you really expecting to get the freshest and best ingredients in the world?

Probably not.

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How Business Owners Can Avoid a False Advertising Lawsuit

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The idea of lying is a tricky one. We all know it’s wrong to lie, but how do you know when that line has been crossed? This question is particularly relevant to advertising in business. As a businessman, how do you know when someone will bring a claim of false advertising against you, when all you were trying to do was extol the merits of your product?

As a quick overview, a few major laws govern the area of false advertising in business. On a federal level, two prominent statutes govern this issue: the Lanham Act and the Federal Trade Commission (FTC) Act. Under the FTC Act, only the FTC can bring a claim against businesses, while under the Lanham Act, any private individual can bring a claim against businesses. In addition to these federal statutes, many states have also enacted their own laws against false advertising, which will vary by state.

So under these laws, what are some principles for determining which ads are false, and thus punishable, and which ones are not? Four situations are listed below. The first two, I believe, would be fairly obvious to any person. The last two situations are not as obvious and would be important to take note of.

1. Stealing trademarks.

A company’s trademark is a word, set of words, or logo that identify a product as originating from that company. It should be no surprise that using a company’s trademark without permission can get you into all kinds of legal trouble. There are many reasons why the law around trademark protection is so strong: trademarks protect companies’ reputations, and they also protect customers by acting as a guarantee of what the product is. Don’t think you can get away with trademark infringement even if you are a very small company: companies typically are very protective of their trademarks and are quick to notice any potential infringement.

2. Ads that are literally false.

This category would be the classic case of false advertising. It is saying something which is not literally true. For example, take a company making pain-relieving medication. If the company says that their medication relieves headaches faster than any other medication, when it in fact does not, this would be false advertising.

3. Ads that are impliedly false.

These ads do not make statements that can be proven as definitively false. Instead, they are ambiguous or open to more than one interpretation. In these cases, courts will typically find false advertising if consumer surveys show that the ads have a tendency to give consumers false ideas.

For example, one shaving company advertises that its shaving razor has a moisturizing strip “six times smoother” than its competitor’s moisturizing strip. This statement is accompanied by a picture of someone running his hands over his face. Literally, this ad is saying nothing more than the fact that the company’s moisturizing strip itself is smoother than the competitor’s moisturizing strip. However, consumers viewing this ad would probably believe the ad is saying the company’s shaving razor will provide a smoother shave overall than the competitor’s razor. Thus, this ad will be subject to a claim of false advertising.

In another example, a soft drink company creates an ad showing a polar bear holding a competitors’ product, a can of Coke. The polar bear then tosses this can of Coke into a trashcan labeled “Keep the Artic pure.” Consumers viewing this ad could take it to mean that Coke is not a “pure” soft drink, whatever that may entail. Thus, this ad is enough to bring a claim of false advertising.

4. Puffery

It’s normal in sales talk to use adjectives describing how your product is the “best”, “greatest”, or what have you. But when does using these sorts of words to describe your product get you into trouble?

If your ad falls into the category of “puffery”, then it’s fine. Puffery is defined as words so exaggerated that consumers would not take them seriously, or words that consumers know to be just hype. On the other hand, if there is an objective way to determine whether your statement is accurate or not, then the ad moves beyond puffery and could be considered false advertising.

Examples of puffery would be words such as: “best,” “wonderful,” “comparable in quality,” “a bargain.” However, saying something such as “the world’s lowest price” is an objectively verifiable fact, and thus could get you in trouble for false advertising.

The Big Idea

What does this all mean to you as a business owner? After reading through the laws and cases governing this matter, I can tell you that the law can get pretty detailed and technical. Your best bet, of course, would be to hire an attorney to make sure that your ads and disclosures are in compliance with the law. If that’s not the case, then I also want to point out that the law in this matter, though it gets very technical, generally follows common sense.

For example, if you’re going to use a company’s trademark on one of your products, even if you think that trademark placement would actually help the company, get permission first. If you’re going to make comparisons between products, make sure you have verified your claims.

Of course, there will always be close cases. In those situations, I would suggest that using a little restraint and caution is the way to go. Watch out for any implicitly misleading statements, or cases of puffery gone too far. But, as with all business decisions, trust your instincts, and take confidence in the fact that the law in this area aims to be generally reasonable.

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