Basics of Advertising

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Gonzalo Mon, partner at Kelley Drye & Warren LLP, and Adrienne Montes, director of intellectual property counsel at Kendra Scott, shared basic advertising law principles and examples of brands failing to comply with advertising regulatory authorities.

Key Takeaways

Ads should be truthful, provide consumers with the information needed to make an informed decision, and comply with advertising laws. Brands that fall short can be challenged by the FTC, state attorneys general, competitors, and consumers. Brand that aren't complying with advertising laws can be forced to stop running an ad, agree to strict standards for future ads, and pay settlements and refunds to consumers. Brands need to follow strict rules related to claims, puffery, substantiation, comparison, disclosures, endorsements, and reviews in order to avoid these repercussions.

Claims

Brands must be able to substantiate all claims reasonable consumers take away from an ad. These can be expressed claims (what's actually being said), or implied claims (what a consumer may infer from an ad). Ads can be literally true but still misleading. For example, a Spectrum ad suggesting its service was more reliable than satellite dishes, that can go out in bad weather, was challenged by DirecTV. The National Advertising Division (NAD), the regulatory authority for advertising truthfulness in the U.S, sided with DirecTV arguing that the light drizzle featured in the ad implied that outages could occur during mildly inclement weather.

Puffery

Puffery generally refers to subjective claims that can't be measured or claims that are unlikely to be taken seriously. Brands don't need to substantiate puffery, but puffery isn't easily defined. For example, Kohler, a performance toilet brand, declared in its advertising that it's the global leader in its category. This was contested by a competitor. While the NAD agreed that Kohler's declaration on its brochure cover was puffery, within it the brand defined its criteria for superiority by measuring its flushing power, water conservation, and cleanliness. Once puffery is tied to something that can be measured, it must be proven.

Substantiation

What brands need to substantiate depends on what they say. For example, if an airline says they have the most non-stop flights to Miami, they simply need to count the number of flights. If the claim is that an item is made in the U.S., the brand needs to provide evidence that the majority of its product is made in the U.S. However, when quantifying performance, brands need to substantiate claims with a measurable test. For example, Wagner Brake claimed in an ad that its brakes can stop up to 50 feet sooner than competitors. However, the brand substantiated its claim with a brake test that deviated from the industry standard. While the industry standard requires drivers to slam on brakes, Wagner Brake's test involved drivers applying even pressure to brakes. This prompted the FTC to deem the ad misleading, as it featured a woman slamming on her brakes to avoid a collision.

Comparisons

Brand must also sufficiently qualify claims that argue aspects of its offering are greater than a competitor's. For example, Atomic Beam claimed it had the most powerful flashlight, but only tested against one other flashlight. In order to make such a broad claim, the product in question needs to be tested against 85 percent of the market.

Brands also need to disclose if claims are representative of its entire product line or service. For example, Spectrum claimed its internet download speed was 20 times faster than AT&T. The NAD ruled that Spectrum was in violation because, despite having a disclosure at the bottom of the ad, it didn't ostensibly disclose that the claim was line specific.

Apples to oranges claims

BRAVECTO made a claim that its dog tick protection works three times (12 weeks) longer than competitor NexGard (4 weeks). However, the claim is misleading as NexGard continues to work after an additional dose, which is how the product is intended to be used.

Misrepresenting comparisons

AT&T Fiber claimed its internet plan was 20 times faster than cable services in an ad that featured a faulty virtual meet -and-greet. While the brand's claim was true, the NAD ruled that the ads illustration of cable internet was exaggerated, thus noncompliant.

Disclosures

Brands need to ensure that disclosures are clear and conspicuous and include additional important information. For example, Mint Mobile provided consumers with an unlimited data plan and disclosed that the data would be throttled after a certain threshold. However, it didn't express how significantly the lower speed would impact the phone's capabilities.

Endorsements and Reviews

An endorsement must clearly disclose the material connection with the brand. These disclosures must also be conspicuous and visible without people having to take further action outside of the ad. For example, an endorsement on Instagram must be visible without clicking on the post or having to click "more" on the post's caption.

Consumer Reviews

To ensure that consumers aren't being misled, brands need to disclose if they offered customers incentives (free products, entry into sweepstakes) for reviews and are not allowed to suppress negative reviews. For example, Fashion Nova had a process where they automatically published any reviews from 4.5 to five stars, while having a review process for lower ratings. This resulted in inflated star counts that didn't accurately reflect consumer sentiment. Brands can only suppress negative reviews if they include profanity, obscenities, or are unrelated to the product.

Action Steps

  • Review ads from a consumer standpoint independent of additional context that employees may have internally.
  • Be careful about deviating from industry standard tests to substantiate claims.
  • Test against 85 percent of the market for comparative claims.
  • Make sure test conditions match how the product is used and depicted in ads and communications.
  • Don't exaggerate differences in performance.
  • Identify specific products to avoid line claims.
  • Don't rely too much on fine print.

CLE Materials

Source

"Basics of Advertising." Gonzalo Mon, partner at Kelley Drye & Warren LLP; Adrienne Montes, director of intellectual property counsel at Kendra Scott. 2022 ANA Masters of Advertising Law Conference, 11/8/22.

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