Advertising

2. Advertising Exclusive---The law behind the ads!

3. Contract Theory • Older way of analyzing advertising • Only issue was whether ad constituted an offer. • Not usual analysis any more.

4. Lefkowitz v. Great Minneapolis Surplus Store, Inc. “Where one offers for sale by newspaper advertisement a certain article of definite value at a quoted price, which offer is clear, definite, and explicit and leaves nothing open for negotiation, it constitutes an offer, acceptance of which may complete the contract.”

5. Government Regulation • Advertising law now largely a matter of government regulation. • State and federal law • Federal more important, since wider range. • State law usually mirrors federal law • But what about . . .

6. . . . The CONSTITUTION?!! Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

7. The U.S. Supreme Court has ruled on this issue

8. Bigelow v. Virginia • Prosecution for violating law against advertising abortion services. • Advertised travelling to states where abortion was legal. • Fact that advertisement had commercial aspects did not mean no 1st Amendment protection. • Set out grounds for governmental regulation of advertising:

9. Government may restrict ads that are: • Deceptive or fraudulent • Advertising illegal goods or services • Advancing a criminal scheme • Invasions of personal privacy • Infringing on rights of others or • Thrust upon a captive audience

10. Va. State Board of Pharmacy v. Va. Citizens Consumer Council • Struck down restrictions on advertising drug prices • Legal drugs, of course • Public has an interest in receiving truthful information to compare goods and services • Consumer’s interest in free flow of information may be as keen, if not keener by far, than interest in most urgent political debates

11. Bates v. State Bar of Arizona • Allowed advertising of professional services • Public’s interest in receiving truthful information outweighs state’s need to restrict • Disclaimers etc. may be required to keep ads from being deceptive • This is why we get:

13. Food and Drug Administration (FDA) • Regulates drug advertising and labeling • Focus is on adulteration and misbranding • Labeling is all labels and printed matter • Package inserts • Design of product

14. Federal Trade Commission (FTC) • Regulates all other advertising • Issues orders to cease and desist from using unfair method of competition or unfair or deceptive act • Protects consumers, not just competition • Law includes false advertising • Civil action on behalf of consumers • Case-by-case determination

15. FTC Statement on Deceptive Acts or Practices Deceptive ads • Material misrepresentation, omission, or practice • Likely to mislead consumer acting reasonably in circumstances

16. Presumed Material • Express or intentional deception • Implied deceptive claims about health, safety, durability, or performance

17. Actual deception need not be proven • Standard is “likely to mislead” • Implied representations may be deceptive • Factual claims imply that they can be substantiated

18. Substantiation of Facts • Reasonable factual basis at the time claim is made • Must reasonably support claim made • Amount needed depends on whether claim is express, implied, or omitted • Look at consumer expectation of amount of substantiation needed

19. How do we know what a consumer expects?

20. Things to Consider • Type of ad • Type of product • Possible consequences of a false claim • Degree of reliance placed on claim • Benefits of truthful claim • What do experts think?

21. Amount of substantiation increases as risk of harm increases • Health or safety claims require more substantiation • If risk of harm is minimal, clinical or general experience may suffice • Failure to disclose a fact a consumer would want to know could be deceptive

22. Qualifying information may not be omitted • Mock—ups or demonstrations must show real results • Falsity theory may be used—is express or implied message false?

23. UNFAIR ADVERTISING

24. When deciding if an ad is unfair, we look at: • Consumer injury • Substantial • Not outweighed by competing benefits to consumers or general competition • Public policy • Cost-benefit analysis • Would the costs of correcting the unfairness be greater than the benefits?

25. Claims targeted to vulnerable audiences get extra scrutiny • Elderly • Hearing aids • Insurance • Children • Toys • Cereal

26. So what do they do to you if you’re bad?

27. Penalties • Civil penalties up to $10,000 per violation • Temporary injunction—rare • Cease and desist order—usual remedy • Action for refund to consumers • Corrective ads

28. Cease and Desist Orders • Typical remedy • Prevents additional ads or misrepresentations • May require additional information or disclosures • Often agreed to as a part of a settlement

29. Corrective Ads • Usually ordered as a part of a settlement (consent decree) • Determination that discontinuing ad would not be enough • Residual effect of earlier ad

30. Rulemaking

31. FTC Rulemaking • Future guidance for advertisers • Rules are made after a determination that a particular practice is deceptive • Rules have the force of law • 30+ industries are covered • Regulate presentation of content, design, and disclaimers • Set out practices considered unfair or deceptive

32. Example—”Green Marketing” • Environmental claims • FTC publishes “Green Guides” • Guidance on use of environmental terms in advertising • Biodegradable • Recyclable • Ozone Safe

33. First “Green Guide” published in 1992 • Updates in 1996 and 1998 • Efforts to update have been going on since 2008 • New rules officially proposed in October of 2010 • Not final yet • Guides are not official regulations • Does not change other rules • Only puts them in context

34. “Bamboo-zling” The FTC’s word, not mine Textiles marketed as made out of bamboo Actually made of rayon Said to retain anti-microbial properties Claimed biodegradable Biodegradable paper Unsubstantiated claim “Biodegradable” means product will decompose if disposed of as usual Products sold were disposed of in landfills or incinerators Two cases settled; one litigated Examples of environmental advertising enforcement actions

35. Endorsements

36. The FTC has long had guidelines about endorsements • Now, they apply to social media • Must be truthful, not misleading • Must disclose generally expected results, if different from endorsement • Connections between endorser and marketer must be disclosed

37. Private Lawsuits

38. Lanham Act § 43 (a) • Private right of action for false or misleading advertising • Action brought against person who uses words, symbols etc. that • Are likely to cause confusion or deceive about affiliation, sponsorship, connection or • Misrepresents nature, characteristics, quality of goods • Do not need to show actual confusion

39. Protects against the following: • Unauthorized use of a celebrity’s image or voice • Misleading endorsement claims • Unauthorized use of fictional characters, if misleading • False attribution of authorship

40. For example: Woody Allen sued American Apparel over the use of his picture on a billboard. The suit was settled for $5 million.

41. Yes, five million dollars.

42. False Advertising Lawsuits • False statement of material fact • Actually deceived, or have a tendency to deceive, a substantial segment of audience • Interstate commerce • Plaintiff injured by false advertising • Diverted sales, lost goodwill • Injury is not presumed

43. If a statement is blatantly false, confusion is presumed • Implicit statements should have tendency to deceive tested by public reaction • Innuendo covered

44. State Law

45. Deceptive Trade Practices Act • Similar laws in most states • Patterned after Lanham Act • Sets out business practices that are violations • Passing off goods as those of another • Casing likelihood of confusion • False representations of quality of goods • Disparaging goods of another by falsities • Bait and switch etc.

46. Actual competition need not be shown • Court will award money only if there was actual confusion • Likelihood of confusion only gets an injunction • Publishers, broadcasters, or printers are not liable unless: • They knew of deception or • Had a financial interest

47. Remedies • Injunction • Damages • Costs and attorney’s fees, if the act was willful • State may obtain restitution for consumers

48. How do I know which rules to follow?

49. Follow the rule that is the most restrictive • U.S. Supreme Court ruled federal laws not always controlling for advertising • No “safe harbor” • State law may require stricter labeling • Not a defense that following state law will violate federal law • Do both