False Advertising

Common-law and statutes allow for a cause of action when a company misrepresents the nature or characteristics of its goods to consumers. In Minnesota, a false statement in an advertisement is defined as follows,

Any person, firm, corporation, or association who, with intent to sell or in anywise dispose of merchandise, securities, service, or anything offered by such person, firm, corporation, or association, directly or indirectly, to the public, for sale or distribution, or with intense to increase the consumption thereof, or to induce the public in any manner to enter into any obligation relating thereto, or to acquire title thereto, or any interest therein, makes, publishes, disseminate, circulate, or places before the public, or causes, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in this state, in a newspaper or other publication, or in the form of a book, notice, handbill, poster, bill, label, price tag, circular, pamphlet, program, or letter, or over any radio or television station, or in any other way, an advertisement of any sort regarding merchandise, securities, service, or anything so offer to the public, for use, consumption, purchase, or sale, which advertisement contains any material assertion, representation, or statement of fact which is untrue, deceptive, or misleading, shall, whether or not pecuniary or other specific damage to any person occurs in the direct result thereof, be guilty of a misdemeanor, and any such act is declared to be a public nuisance and may be enjoined as such.

Minn. Stat. § 325F.67. The statute exists because the public should have accurate information regarding the representation of any product or service that they want to buy in the marketplace. The Federal Trade Commission goes as far as to require proof from advertisers to back up any representations they make in their advertising.

Minnesota citizens are able to bring forth claims under Minnesota’s false advertising statute pursuant to Minn. Stat. § 8.31, the private attorney general statute, which provides for private remedies to any person injured by any violation of the laws listed in § 8.31, subdivision 1, which includes the false advertising statute, as long as the plaintiff alleges that the action has a “public benefit.” Minn. Stat. § 831, subd. 3(a); Ly v. Nystrom, 612 N.W.2d 302, 314 (Minn. 2000). Further, only nominal damages need to be present to bring forth a claim.

In Wexler Bros. v. Entertainment Group, a telephone company that operated a trivia game was liable under the false advertising statute because it failed to award prizes more than seven months after the contestant who brought the lawsuit first called. The promoters of the game said that a contestant could win cars, boats, trips and other monthly grand prizes. 457 N.W.2d 218, 220. The court specifically stated,

In order to prevail on up consumer protection claim, Wexler must prove that [defendants] violated Minn. Stat. § 325F.67 of Minn. Stat. § 325F.69 and that Wexler was injured in some way by the violation. Wexler alleges that [defendants] advertised that contestants could win cars, boats, trips and other monthly grand prizes by playing TeleFun Trivia. Allegedly, as of March 17, 1989 more than 7 months after Daniel called TeleFun Trivia, [defendants] had awarded no prizes. Assuming for purposes of this appeal that these allegations are true, the trier of fact could find that [defendants] never intended to award any prizes and had engaged in false and misleading advertising and fraud for the purpose of inducing persons to play TeleFun Trivia.

Id. at 221.

False Advertising Under the Lanham Act

Section 43(a) of the Lanham Act prohibits use of a “false or misleading description of fact, or false or misleading representation of fact” when used in commercial advertising or promotion that “misrepresents the nature, characteristics, qualities, or geographic origin of…goods, services, or commercial activities.”

Most courts agree that the elements of a Lanham Act false advertising claim include the following:

  1. The defendant made a false or misleading statement of fact in a commercial advertisement about a product;
  2. The statement either deceived or had the capacity to deceive a substantial segment of potential consumers;
  3. The deception is material, in that it is likely to influence the consumers purchasing decision;
  4. The product is in interstate commerce; and
  5. The plaintiff has been or is likely to be injured as a result.

An example of a claim under Section 43(a) of the Lanham Act comes from the Second Circuit. In S.C. Johnson & Son, Inc. v. Clorox Co., S.C. Johnson & Son challenge the truthfulness of a television commercial and print advertisement that depicted two plastic food bags, one owned by plaintiff and one owned by defendant, being held upside down with a goldfish inside. In the advertisement, S.C. Johnson’s Ziploc bag was shown to be leaking at a rate of one drop per one to two seconds. The Court found in favor of S.C. Johnson and held,

Clorox argues that, because approximately eight seconds passed between images of the drops forming and falling in…television commercial, the commercial depicts an accurate rate of leakage. However, the commercial does not continuously show the condition of the Slide-Loc bag because the Slide-Loc bag is off-screen for eight seconds. Likewise, the print ad does not depict any rate of leakage at all, other than to indicate that the Slide-Loc bag is “dripping.” Clorox’s argument that it is commercial shows a “continuum” also fails given that in each of the… advertisements is a background image containing three puddles of water, when only two drops from and fall the television commercial just one drop forms a nearly falls in the print advertisement….we find no clear error in the district court’s finding that the depiction of the risk of leakage from Slide-Loc bags in the…television commercial and print advertisement is literally false as to an inherent quality or characteristic of Ziploc Slide-Loc storage bags.

Id. at 239.

It is important to note that Section 43(a) does not give a cause of action to consumers, instead while its aim is to protect consumers interests it makes it easier for competitors to stop false advertising. To stop false advertising under this section the plaintiff only has to show that he or she is likely to be damaged instead of having to show actual damage. But, if monetary damages are sought for a violation of Section 43(a), then a plaintiff must prove actual injury meaning some sort of demonstration that there was actual reliance on the false advertisement that had a negative impact on the plaintiff’s business.

Under this section of the Lanham Act a representation must be material. In other words, the representation has to have a substantial likely effect on someone’s purchasing decision. False representations as well as presentations that are literally true, but are somehow otherwise misleading can be determined to be false, thus giving rise to a cause of action under the Lanham Act.

Lastly, a plaintiff does not have to show that the defendant acted with intent to mislead consumers. But, if a plaintiff does have evidence of intent to deceive, the court can presume that some consumers were in fact deceived and therefore the plaintiff would not need to provide any survey evidence.