Reasonable Basis

A "Real Beauty" Blunder (update)

Maintaining that his comments were taken out of context, Pascal Dangin and Unilever released the following statement yesterday:

"The recent article published by The New Yorker incorrectly implies that I retouched the images in connection with the [2005] Dove 'real women' ad. I only worked on the [2007 Dove Pro-Age] campaign taken by Annie Leibovitz and was directed only to remove dust and do color correction -- both the integrity of the photographs and the women's natural beauty were maintained."

A 'Real Beauty' Blunder

A Business Week article says that Dove may be on the hot-seat with consumers for a recent leak about it's "Real Beauty" campaign. According to advertisement airbrush artist Pascal Dangin, the women in Dove's "Real Beauty" ads go through extensive retouching before being publicized. Dangin's profile in the May 12, 2008 New Yorker quotes him as saying, "Do you know how much retouching was on that?" and proceeds to detail the process. This could reflect poorly on the "Real Beauty" campaign's creator, Ogilvy & Mather, who went to great lengths to tout the movement via videos on its website critically revealing society's distorted view of women by showing a model being extensively made-over and digitally retouched.

FTC & wireless content costs

During yesterday's forum on mobile marketing, FTC Commissioner Jonathan Liebowitz announced plans to target wireless content providers that fail to disclose fees. He noted particular concern over messaging, video, and gaming services aimed at teens, who are quick to adopt new technology and and are "easy prey for aggressive marketers."

Price Inflation

In a number of cases plaintiffs have successfully argued that deceptive representations have caused them economic harm because the representations gave the product "an actual value that was less than the amount they paid for the product."  Illustrative of the theory are a couple Massachusetts Supreme Court decisions, Aspinall v. Philip Morris Cos., 442 Mass. 381 (2004) and Chenlen v. Philips Electronics North America, 2006 WL 696568 (Mass. Sup. Ct. Mar. 1, 2006), where the court found that deceptive advertising causes per se injury on consumers -- all members in the class of purchasers are injured because the product is deceptively advertised, falsely labeled or the defendant created a misleading impression.

A recent decision, again from Massachusetts, took a different view and may limit the price inflation theory.  In Kwaak v. Pfizer, Inc., 881 N.E.2d 812 (Mass. App. Ct. 2008) the putative plaintiff class alleged that ads claiming Listerine was as effective as floss were deceptive.  Since the ads and claims were changed a number of times, not all members of the proposed class were exposed to the same ads or same claims, nonetheless the lower court certified a class of all Massachusetts purchasers of Listerine. Distinguishing Aspinall because all class members saw exactly the same claim, the Massachusetts Court of Appeals reversed noting that not all proposed class members were presented with “the same significant deceptive information” about Listerine.  For much the same reason, it expressly rejected the “price inflation” argument — that all purchasers paid more for the product because of the deceptive representations. According to the Court,

there were too many different reasons why consumers purchased these particular products, too many different types of advertisements, too much variation in exposure to the advertisements. . .and too little information on the market impact of the of the deceptive aspects of the advertising campaign to support a conclusion that the consumers in the class were similarly situated and similarly injured by a common deceptive act or practice.

The Court noted that it might be possible to allege a class that could be certified, however, identifying a similarly situated class that sustained economic injury would be more difficult after this decision. .

Cable Companies Step into the Ring

Negative advertising has gotten a boost from cable companies such as Time Warner Cable, DirecTV, and Verizon recently. The latest advertisements from cable companies are focusing on attacking the shortcomings of their competitors rather than touting their own advantages. According to a recent Wall Street Journal article, the culprit appears to be the high turnover rate in the cable business - up to 25% of customers per year as estimated by analyst Craig Moffett. The result has been an aggressive advertising campaign with major companies pouring more money into negative advertisements. Examples of these aggressive ads include a Time Warner Cable ad taking shots at phone companies offering cable service by showing a "boy genius" looking perplexed over his latest telephone bill. Another DirecTV advertisement depicts a group of cable executives dismissing complaints as a result of bad customers, not poor customer service. Evidently increased competition has prompted cable companies to shed the gloves in order to win the fight to keep their customer base.

Best engineered

The National Advertising Division of the Council of Better Business Bureaus (NAD) found claims by Lenovo that is PCs were the "The World's Best-Engineered PCs with the Awards to Prove It" and "The World's Best-Engineered PCs" were unsubstantiated superiority claims rather than puffery.  Lenovo (United States), Inc., Case #4820 (3/25/08).  I think the NAD got it right with respect to first claim, but was wrong with respect to the second.

Advertising claims fall into two broad categories. The first is statements of fact, which if false or otherwise deceptive, give rise to a cause of action for false advertising. A statement of fact is one that can be determined to be true or false in a way that allows for verification.  In other words, the claim itself provides a means for determining whether it is true or false.  The second broad category is non-actionable claims, usually referred to as “puffery.” Puffery is those statements that are exaggerated bluster or boast upon which no reasonable person would rely. Statements of opinion fall into this category.  Statements of fact and puffery are mutually exclusive. If a statement is "not specific and measurable and cannot be reasonably interpreted as providing a benchmark by which the veracity of the statement can be ascertained, the statement constitutes puffery.”

Looking at the two claims, "The World's Best-Engineered PCs with the Awards to Prove It" provides something of a benchmark -- awards -- for determining whether or not the claim is true.  Though I have doubts as to whether "awards" is truly a benchmark, determining puffery is not easy so I'll give the NAD the benefit of the doubt here.  The second claim, "The World's Best Engineered PCs," however, strikes me as pure opinion and bluster.  I would hope that a company believes that it has the best engineered products and it should be allowed to state its opinion without risk of being charged with making a deceptive superiority claim.

This one hurts

A jury verdict in favor of adult web site operator Impulse Media is a blow to the Federal Trade Commission's efforts to hold advertisers liable for the conduct of their affiliates.  When it filed its complaint against Impulse Media (and others) alleging violations of the federal CAN SPAM Act, the Commission acknowledged that Impulse Media did not send the allegedly violative email.  Rather the Commission asserted that Impulse Media operated “affiliate marketing” programs in which it paid others to market on its behalf and thus was liable for the illegal spam sent by those affiliates.

According to seattlepi.com's Todd Bishop, Impulse Media argued that its policies prohibited affiliates from using spam and that it terminated affiliates that did.  These policies were "a sham," according to attorneys for the government, and terminated affiliates were allowed to re-enter the program.  Siding with Impulse Media, the jury returned a unanimous verdict in its favor.

Affiliate marketing is a cost effective way for advertisers to reach potential customers and its use is not limited to operators of adult websites.  The Commission should set out some realistic guidance on when it will seek to hold advertisers liable for the conduct of affiliates.  The version of "strict liability lite" the Commission is trying to impose is ignored by businesses, questioned by judges, and has now been rejected by at least this jury.  Likewise, advertisers and marketers need to realistically address problematic conduct by affiliates.  Affiliates that spam, employ spyware, violate the Do Not Call provisions of the Telemarketing Sales Rule, and engage in other deceptive conduct will invite overreaching by the Commission and reinforce the negative perception of affiliate marketing.

Thanks to Venkat at Spam Notes for the link.

Green Guides, round 2

The Federal Trade Commission will host its second workshop on the Green Guides on April 30, 2008.  This workshop will address developments in green packaging claims and consumer perception of such claims.  Interested parties have until April 11, 2008 to file comments regarding the issues to be addressed at the workshop. Additional information is available here.

How many members?

Last month commercial real estate company, Costar Group, Inc. filed a lawsuit alleging that a competitor, Loopnet, Inc. violated the federal Lanham Act by repeatedly misrepresenting the number Loopnet registered members and by deceptively associating "registered members" with "active users."  With respect to the latter claim, the complaint asserts that since Loopnet has been accumulating members since 1995, its claimed 2.5 million members include people that did not view property, are no longer interested in viewing property, and are bots or non-human visitors.  Some of the claims noted in the complaint, such as "massive users," sound like puffery.  However, claims regarding the number of members or users are factual claims that are commonly used to promote online communities -- and strike me as the type of claims that might be taken for granted. 

Download costar_group_v. Loopnet.pdf

Data breach impacts 4.2 million accounts

The Boston Globe reports that Hannaford Bros. supermarket disclosed that a data breach potentially exposed the credit and debit card data of 4.2 million accounts.