What are some criticisms to Advertising?
- not effective
- creates false distortions between similar products
- hurts the market by created barriers to entry (lessens competitions)
Who does false advertising hurt?
Both
- consumer
- seller/producer
What are the 3 ways a consumer can be owed a Remedy for false advertising?
Common Law (contract law)
- advertising is an offer
- need offer and acceptance
- hard to get remedy (b/c advertising is an offer for an offer… no acceptance)
Tort Law
-hard to get remedy
Statutory Remedy
- remedy for breach of “Expressed Warranty”
- advertisement is the Expressed Warranty
- Seller can usually prove consumer would have bought anyway without the expressed warranty
How can a consumer prove False Advertising under Tort Law? (to get a remedy)
HAVE TO PROVE ALL THESE:
- misrepresentation of material fact
- seller knew it was false
- seller’s intent to trick buyer (very hard to prove)
- buyer relied on fact
- DAMAGE to consumer
What are 3 ways a competitor can be harmed with False Advertising?
-other competitor makes false claims about their product
-other competitor makes false claims about them personally
-competitor steals competition
-
Lanham Trademark Act
- holds seller liable
- if they false advertise about their own product
Gillette v. Wilkinson Sword
- both are shaving companies
- Wilkinson false advertises saying they have better razors
- they don’t
- Wilkinson guilty under Lanham Trademark Act
Coca Cola v. Tropicana
- Tropicana false advertises saying their juice is fresher than it really is
- Coca Cola sues and wins
- Tropicana guilty under Lanham Trademark Act
When the FTC investigates for “deceptive advertising”, explain how it all goes down
-FTC starts to informally investigate
-if company stops right then, nothing happens
…but if don’t stop…..
FTC find adequate basis for complaint: Company could settle lawsuit by:
- redress for injured consumers
- payment for their penalties
- prohibition penalties
If not Settlement, go to trail before ALJ:
- ALJ can dismiss case
- ALJ can issue “cease and desist order”
Can appeal ALJ to 5 member FTC
Can appeal again to Court of Appeals
What are two Remedies the FTC can order you to do b/c false/deceptive advertising?
- cease and desist orders
- corrective advertising
What company was ordered to do “Corrective Advertising” (FTC remedy) for Listerine toothpase?
Warner-Lambert
Explain the Bait and Switch deceptive advertising technique
- advertise low price of product to draw in customers
- refuse to sell at that price
-offer a new product at higher price (switch)
What are the 3 tests the FTC uses to determine Unfair Advertising?
Unfairness must be Substantial
- few people suffer Large damages
- a lot of people suffer Few damages
Unfairness is NOT outweighed by countervailing benefits
- benefits of competitors and the consumers is less then the benefit of the seller from unfair methods
- Net Benefit
Unfairness must cause Unavoidable Injury of Consumer
- interrupts consumer sovereighnty
- means “reasonable consumer” would be confused and mislead in their decision making
In the 1980s, what did Congress tell the FTC to do regarding Unfair Advertising and why?
Congress said to:
- don’t focus on unfair advertising
- focus on decpetive business
Congress said this b/c Political backlash was coming from
- FTC tried to make Funeral Homes have to disclose prices
- FTC tells companies they can’t advertise for children (1978)
- FTC tries to get used car dealers to disclose prices
In the 1990s, Congress allowed the FTC to regulate Unfair Advertising again and what was the first big thing they did?
- Joe Camel and the Tobacco industry
- unfair advertising with cigarettes
- 206B dollar settlement
*made R.J. Reynolds Tobacco Company run corrective ads
