A business may try to resolve disputed advertising and marketing practices in multiple ways, both formally and informally. The best point of action may depend on the severity of the dispute, what the business is hoping to achieve, and how likely the dispute is to damage the business’s brand reputation and financial position. Here are a few options:
1. Resolution Directly with Competitors: The cheapest and quickest option would be to speak with the competitor directly, by way of demand letters, in-person meetings, or negotiations. This could result in a decision made quickly, while trying to preserve the business relationship and show good faith in attempting to resolve the dispute without third parties involved. However, this is unenforceable, meaning there is no guarantee that the thought competitor will comply, continuing the cycle of dispute.
2. Media and Advertising Networks: If a competitor’s advertisement does not conform to the media guidelines, a company can reach out to the network that is broadcasting the ad and request that it be pulled down. Media networks, particularly major ones, will have a standard process to handle disputes over advertising, and might even pull down the ad if they deem it misleading. This plan does not stop the ad from being seen elsewhere, and some networks may be reluctant to act against major companies, such as brands or big-box stores, who are also their advertisers.
3. Self-Regulation (National Advertising Division): For a dispute about national advertising, a company can file a complaint with the National Advertising Division (NAD), which is the industry’s self-regulatory body. The NAD process is faster and less expensive than litigation, and does not have binding legal consequences, although rulings are expected to be followed. Not following the ruling may have an adverse consequence of being investigated by the Federal Trade Commission (FTC), which puts pressure on the advertiser. NAD proceedings do not provide for any money damages.
4. Litigation Under the Lanham Act Businesses: Businesses can pursue litigation under the Lanham Act if they cannot resolve false advertising claims informally. The Lanham Act addresses false advertising claims in the United States, and a prevailing plaintiff can obtain various remedies, such as injunctive relief to stop the ad immediately, monetary damages, and sometimes – but rarely – court-ordered corrective advertising. However, litigation is expensive and time-consuming and can expose a business to counterclaims and public exposure.
5. Regulatory Complaints (FTC or State Attorney General): Another route businesses can pursue is to complain to government agency offices, such as the regard to the FTC or state Attorneys General, because they have the power to investigate and bring enforcement actions against false or deceptive advertising practices against the advertiser. This may carry enormous weight with the advertiser, but it is completely on the complainant’s ability to control sorting out the complaint and may take an unpredictable amount of time.
Several notable cases of marketing lawsuits in the U.S. demonstrate the dangers of misleading advertising. For example:
In the case of AT&T’s deceptive data throttling, the FTC sued AT&T for marketing “unlimited data” when AT&T was secretly throttling (slowing down) users’ speeds after they hit a certain limit. The lawsuit resulted in AT&T settling with a $60 million payment.
In the case of Volkswagen’s “clean diesel” scandal, Volkswagen deceptively marketed its diesel cars as environmentally friendly when, in fact, it was using illicit software to cheat emissions testing. This led to billions of dollars in penalties for Volkswagen.
In the case of Lumosity’s false health claims, the brain-training app was fined by the FTC $2 million for marketing unproven cognitive benefits.
In the case of Red Bull “gives you wings” lawsuit, consumers sued the company for false advertising because they argued the slogan was misleading about the benefits of the energy drink, which resulted in Red Bull settling for $13 million.
It is critical that businesses evaluate and assess the nature of the false advertising claim, the timeline, and resources necessary for the resolution method. In some instances, there may be value in using more than one method; for example, a business could attempt a direct resolution to advertising first and then go through litigation or a regulatory complaint process later. In many instances, the best way to protect brand integrity and avoid financial exposure is to consider various resolutions and manage the outcome timing.
