Comparative Advertising

This week, the California Attorney General announced a settlement involving allegations that Gatorade made misleading claims about the relative performance benefits of Gatorade and water  in a mobile game that was targeted to teens.

Players controlled a cartoon version of Olympic Gold Medalist Usain Bolt, and ran a race to recover gold coins stolen by

Last week the FTC announced that it had reached a settlement with NetSpend over allegations that NetSpend deceived consumers by promising “immediate access” with “guaranteed approval” to money loaded on its general purpose reloadable cards.  Approved 2-1 with a vote by then-Commissioner Ramirez before her resignation, the order prohibits NetSpend from making misrepresentations about the

It’s a common question. A company creates a product with a competitive advantage; it takes steps to substantiate a superiority claim; and, satisfied that it has met the legal standard, it bases an advertising campaign on that claim. Then, a competitor comes along with a new product, and the superiority claim is no longer accurate.

The U.S. Court of Appeals for the D.C. Circuit issued an opinion on Friday, January 30, upholding the Federal Trade Commission’s findings that POM Wonderful’s advertising, in which it claimed that consuming POM Wonderful pomegranate juice could prevent or reduce the risk of heart disease, prostate cancer, and erectile dysfunction, was deceptive. Although the D.C. Circuit acknowledged the importance of clinical trial evidence in supporting disease risk reduction claims, the Court disagreed with the Commission’s application of the two randomized clinical trial (RCT) standard, finding it unjustified under the First Amendment.

The D.C. Circuit Held that POM’s Advertising was Deceptive

The Court’s opinion discusses the research that POM Wonderful conducted regarding heart disease, prostate cancer, and erectile dysfunction and how the studies were used to support the advertising.  In this analysis, the Court was critical of POM’s selective use of favorable small-scale studies in advertising while disregarding other, larger, unfavorable or inconclusive studies.  The Court also noted certain inconsistencies in POM’s arguments regarding the inability to conduct RCTs on certain food products, such as the hurdles of blinding and expense, both of which POM overcame to perform its own research.  The Court gave appropriate deference to the agency as an expert in determining whether an advertisement is deceptive and substantively upheld the Commission’s conclusion that POM’s advertising was deceptive.


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In the Overstock.com case described in the post yesterday, the plaintiff also argued that Overstock’s representations that shipping was “free” or “only $2.95” violated California’s False Advertising Law because the company factored the full cost of shipping into the underlying product price. The court ruled in Overstock’s favor, determining that the claim was “nonsensical,”

Still recovering from the holiday sales? If you’re a retailer or a manufacturer pricing your own products, don’t forget about the state laws governing promotional pricing and deceptive pricing claims. The state of California certainly hasn’t – on Friday, a California judge issued an almost $6.82 million civil penalty against Overstock.com via a tentative ruling and proposed statement of decision regarding the company’s comparative price advertising. The court also imposed stringent injunctive provisions regarding comparative price advertising. Yesterday, Overstock announced that it will appeal.

The complaint alleged that Overstock made false and misleading price comparisons to products’ “advertised retail price” (“ARP”), in violation of California’s False Advertising Law and Unfair Competition Law. Specifically, the state alleged that Overstock exaggerated the Overstock discount by referencing the highest price found for the ARP or constructing an ARP using a formula that applied an arbitrary multiplier to Overstock’s wholesale cost. Additionally, the company allegedly failed to disclose that some ARPs were based on the retail price of a similar, but non-identical, product. The court concluded that comparisons to ARPs identified as “list prices” and based on a formula or the price of a different, non-identical product were false and misleading representations, and every such ARP was an untrue statement because those ARPs did not actually exist. The court dismissed Overstock’s argument that its pricing strategy caused no consumer harm because customers always received the lowest price available on the internet, ruling that harm is presumed when an ad is demonstrated to be false, deceptive, or misleading.


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On December 9, 2011, the Food & Drug Administration (FDA) issued a notice announcing that a proposal to collect information for a “Experimental Study of Comparative Direct-to-Consumer Advertising” had been submitted to the Office of Management and Budget (OMB). FDA is required to submit the proposal to OMB for review and clearance under the Paperwork Reduction Act of 1995. FDA’s submission reveals its intent to study direct-to-consumer marketing of FDA-regulated products, with a focus on prescription drug advertising.

According to FDA, research findings on the effects of comparative versus noncomparative ads on purchase intentions indicate that comparative ads result in greater purchase intentions than noncomparative ads. Given the prevalence of comparative advertising, “FDA is embarking on the proposed research to ensure that it has adequate information to assess whether prescription drug comparative DTC ads provide truthful and nonmisleading information to consumers.”


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Yesterday, we posted that a window manufacturer had entered into a settlement with the Washington Attorney General’s office over allegedly unsubstantiated energy efficiency claims. Today, the FTC announced that it has sued a light bulb manufacturer and its principals to stop them from exaggerating the efficiency, light output, and life expectancy of its Light Emitting

The law of comparative advertising covers advertising that compares alternative brands on price or other measurable attributes and expressly or impliedly identifies the alternative brand by name, illustration, or other distinctive information.

A new article in IP Litigator, “The Law of Comparative Advertising in the United States,” provides an overview, including the