FALSE ADVERTISEMENT


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FALSE ADVERTISING

False Advertising – What is it?

Generally, False Advertising is making false, misleading or misrepresenting statements a service or product causing damage to a consumer, individual or company.

What must I prove to succeed in suing a company for False Advertising?

The exact elements a person or company must prove to prevail in a False Advertising lawsuit depend on the state statute, federal law, or common law claim that is pursued.

Examples of Categories of Claims

Under Georgia’s Deceptive and Unfair Trade Practices Act (O.C.G.A. Section 10-1-390 (2014), for example, claims may be brought for:

Passing off goods or services as those of another such as representing that a product or service is manufactured or provided by company X, when in fact it is manufactured or provided by company Y. Example: Passing off counterfeit labeled products.

Claiming that goods come from a particular place, when in fact they do not. Example: representing that products are manufactured in the U.S.A. when they are manufactured in China.

Representing that goods are new when they are actually used.

Claiming falsely that goods or services are of a particular quality or grade, or that products are a certain style or model. Example selling 10K gold jewelry as 14K.

Making false or misleading statements about another business or its products or services.

Advertising goods or services with the intent not to sell them as advertised (example: using “bait-and-switch” tactics). Car dealers who advertise a general price not tied to a vehicle stock number (or the vehicle listed was never actually available). Electronics stores who advertise a television at a bargain price and it was never actually available.

Advertising goods or services without having enough merchandise on hand to meet expected demand, unless the advertisement states “quantities limited.”
Making false or misleading statements about sale prices (example: advertising “On sale today only,” when the item has been offered at that price for the past month).


Georgia’s Fair Business Practices Act also contains specific provisions relating to:

Health clubs and fitness centers
Promotional contests/giveaways
Telemarketing fraud
Fraud committed over the Internet
Price gouging during a declared state of emergency
Credit reports
Going-out-of-business sales
Vacation prize offerings
Odometer tampering

FEDERAL LANHAM ACT FALSE ADVERTISING

Claims may also be brought under the U.S. Lanham Act which is the federal trademark statutory scheme.

The following excerpts come from a very recent 2014 U.S. Supreme Court decision on False Advertising claims under the Lanham Act. The case is worthy to note because it addresses who may sue under the Lanham Act and what they must prove. These are excerpts only, and context matters, so please do not consider this legal advice. This is general information only.

EXCERPTS FROM Lexmark International, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (2014).

§43(a) of the Lanham Act, 60 Stat. 441, codified at 15 U. S. C. §1125(a). Section 1125(a) provides:

“(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

“(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

“(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,
“shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

Section 1125(a) thus creates two distinct bases of liability: false association, §1125(a)(1)(A), and false advertising, §1125(a)(1)(B). See Waits v. Frito-Lay, Inc., 978 F. 2d 1093, 1108 (CA9 1992).

The statute authorizes suit by “any person who believes that he or she is likely to be damaged” by a defendant’s false advertising. §1125(a)(1).

First, we presume that a statutory cause of action extends only to plaintiffs whose interests “fall within the zone of interests protected by the law invoked.” …. The zone-of-interests test is therefore an appropriate tool for determining who may invoke the cause of action in §1125(a).

We thus hold that to come within the zone of interests in a suit for false advertising under §1125(a), a plaintiff must allege an injury to a commercial interest in reputation or sales. A consumer who is hoodwinked into purchasing a disappointing product may well have an injury-in-fact cognizable under Article III, but he cannot invoke the protection of the Lanham Act—a conclusion reached by every Circuit to consider the question. SeeColligan v. Activities Club of N. Y., Ltd., 442 F. 2d 686, 691-692 (CA2 1971); Serbin v.Ziebart Int’l Corp., 11 F. 3d 1163, 1177 (CA3 1993); Made in the USA Foundation v.Phillips Foods, Inc., 365 F. 3d 278, 281 (CA4 2004); Procter & Gamble Co., 242 F. 3d, at 563-564; Barrus v. Sylvania, 55 F. 3d 468, 470 (CA9 1995); Phoenix of Broward,489 F. 3d, at 1170. Even a business misled by a supplier into purchasing an inferior product is, like consumers generally, not under the Act’s aegis.

Second, we generally presume that a statutory cause of action is limited to plaintiffs whose injuries are proximately caused by violations of the statute. For centuries, it has been “a well established principle of [the common] law, that in all cases of loss, we are to attribute it to the proximate cause, and not to any remote cause.” Waters v. Merchants’ Louisville Ins. Co., 11 Pet. 213, 223 (1837); see Holmes, 503 U. S., at 287 (SCALIA, J., concurring in judgment).

The proximate-cause inquiry is not easy to define, and over the years it has taken various forms; but courts have a great deal of experience applying it, and there is a wealth of precedent for them to draw upon in doing so. See Exxon Co., U. S. A. v. Sofec, Inc.,517 U. S. 830, 838-839 (1996); Pacific Operators Offshore, LLP v. Valladolid, 565 U. S. ___, ___ (2012) (SCALIA, J., concurring in part and concurring in judgment) (slip op., at 3). Proximatecause analysis is controlled by the nature of the statutory cause of action. The question it presents is whether the harm alleged has a sufficiently close connection to the conduct the statute prohibits.

Put differently, the proximate-cause requirement generally bars suits for alleged harm that is “too remote” from the defendant’s unlawful conduct. That is ordinarily the case if the harm is purely derivative of “misfortunes visited upon a third person by the defendant’s acts.” Holmes, supra, at 268-269; see, e.g., Hemi Group, LLC v. City of New York, 559 U. S. 1, 10-11 (2010). In a sense, of course, all commercial injuries from false advertising are derivative of those suffered by consumers who are deceived by the advertising; but since the Lanham Act authorizes suit only for commercial injuries, the intervening step of consumer deception is not fatal to the showing of proximate causation required by the statute. See Harold H. Huggins Realty, Inc. v. FNC, Inc., 634 F. 3d 787, 800-801 (CA5 2011). That is consistent with our recognition that under common-law principles, a plaintiff can be directly injured by a misrepresentation even where “a third party, and not the plaintiff, . . . relied on” it. Bridge v. Phoenix Bond & Indemnity Co., 553 U. S. 639, 656 (2008).

We thus hold that a plaintiff suing under §1125(a) ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff. That showing is generally not made when the deception produces injuries to a fellow commercial actor that in turn affect the plaintiff. For example, while a competitor who is forced out of business by a defendant’s false advertising generally will be able to sue for its losses, the same is not true of the competitor’s landlord, its electric company, and other commercial parties who suffer merely as a result of the competitor’s “inability to meet [its] financial obligations.” Anza, 547 U. S., at 458.[6]

We hold instead that a direct application of the zone-of-interests test and the proximate-cause requirement supplies the relevant limits on who may sue.

This case, it is true, does not present the “classic Lanham Act false-advertising claim” in which “`one competito[r] directly injur[es] another by making false statements about his own goods [or the competitor’s goods] and thus inducing customers to switch.’” Harold H. Huggins Realty, 634 F. 3d, at 799, n. 24. But although diversion of sales to a direct competitor may be the paradigmatic direct injury from false advertising, it is not the only type of injury cognizable under §1125(a).

When a defendant harms a plaintiff’s reputation by casting aspersions on its business, the plaintiff’s injury flows directly from the audience’s belief in the disparaging statements. Courts have therefore afforded relief under §1125(a) not only where a defendant denigrates a plaintiff’s product by name, see,e.g., McNeilab, Inc. v. American Home Prods. Corp., 848 F. 2d 34, 38 (CA2 1988), but also where the defendant damages the product’s reputation by, for example, equating it with an inferior product, see, e.g., Camel Hair and Cashmere Inst. of Am., Inc. v.Associated Dry Goods Corp., 799 F. 2d 6, 7-8, 11-12 (CA1 1986); PPX Enterprises,Inc. v. Audiofidelity, Inc., 746 F. 2d 120, 122, 125 (CA2 1984). Traditional proximate-causation principles support those results: As we have observed, a defendant who “`seeks to promote his own interests by telling a known falsehood to or about the plaintiff or his product’” may be said to have proximately caused the plaintiff’s harm. Bridge, 553 U. S., at 657 (quoting Restatement (Second) of Torts §870, Comment h (1977); emphasis added in Bridge).

But when a party claims reputational injury from disparagement, competition is not required for proximate cause; and that is true even if the defendant’s aim was to harm its immediate competitors, and the plaintiff merely suffered collateral damage. Consider two rival carmakers who purchase airbags for their cars from different third-party manufacturers. If the first carmaker, hoping to divert sales from the second, falsely proclaims that the airbags used by the second carmaker are defective, both the second carmaker and its airbag supplier may suffer reputational injury, and their sales may decline as a result. In those circumstances, there is no reason to regard either party’s injury as derivative of the other’s; each is directly and independently harmed by the attack on its merchandise.

“Where the injury alleged is so integral an aspect of the [violation] alleged, there can be no question” that proximate cause is satisfied. Blue Shield of Va. v. McCready,457 U. S. 465, 479 (1982).

To invoke the Lanham Act’s cause of action for false advertising, a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or business reputation proximately caused by the defendant’s misrepresentations.

END OF EXCERPTS FROM SUPREME COURT CASE

Comments:
This is provided as an example of one case brought pursuant to the Federal Lanham Act and is not representative of all cases that might be brought under the act.

These are excerpts, and thus the reader is cautioned to not make any legal conclusions from them because context is critical.

This is for INFORMATIONAL PURPOSES ONLY and does not constitute legal advice to the reader.

Legal advice should be obtained directly from a lawyer pursuant to a formal legal consultation.