Stopping Competitors From Denigrating Your Product

[author: Nancy Morgan]

"Cats prefer Whisker Nibblets to Gato Gourmet 4:1." "Only Marie’s sandwich cookies are made with real chocolate and cream." "Seatur’s Slick works 40 percent faster than other leading motor oils." "Shampoo with Lixertonic and watch your sex drive skyrocket." "My daughter ate Grape Expectations cereal and threw up."

In their advertising and marketing campaigns, your competition may be using similar representations that have no basis in fact. If your product is adversely affected, there are ways to put the skids on the besmirching.

Understanding False Advertising Laws

Federal and state laws prohibit advertisements that overstate the qualities of a product or that falsely disparage those of a competitor. This is true even if the competitor’s product is not expressly mentioned but the implication is obvious. For example, Nabisco could argue that the above "Marie’s cookies" tagline directly invokes an Oreo. If Nabisco uses real chocolate and cream in its celebrated cookies, then Marie will have some explaining to do.

A plaintiff suing for false advertisement must establish that its competitor’s product claims are either literally false or technically true but likely to deceive. Unless there truly is a connection between shampoo and sex drive, the "Lixertonic" slogan above is a good example of an overtly false claim.

The motor oil and pet food taglines present closer calls. A statement that cats prefer a particular food 4:1 is a "preference claim," because the claim is that particular group (in this case, cats) prefers one product over another. The claim that the motor oil works 40 percent faster than its rivals is a "superiority claim," as it touts the merits of one product over another. In either case, a successful plaintiff will need to ascertain the defendant’s methodology behind the claims and poke holes in it.

For a preference claim, ask the advertiser how it determined preferences. Were five cats given the option of eating Whisker Nibblets or Gato Gourmet and opted for the former? If so, find out the proximity of the bowls to the felines; an animal will naturally gravitate toward the closer food source. If the claim is based on speed of consumption, learn how long it had been since the cats had last eaten. Maybe the Whisker lovers had not been fed in 12 hours whereas the Gato Gourmet aficionado had eaten minutes earlier. Such facts will show that the defendant’s basis for its preference claims lack muster because the two competing products were never given an even chance.

In contrast, the level of proof needed to prevail on a superiority claim depends in large part on the nature of the claim (what the company claims in the ad). A phrase such as "works better" is pretty amorphous, but including a concrete percentage in a "works faster" claim suggests that it has some form of scientific support. In these situations, a plaintiff can challenge that claim on grounds that such substantiation is inadequate —no tests were done, surveys were not properly conducted—and that its own product works as good or better.

Product Disparagement 

A competitor’s statement may be actionable even if it is not in a conventional advertisement. These days, it is extremely common to find statements about a product in a blog entry, a newsletter or posted to Facebook or Twitter. It is similarly common to find that a competitor influenced the "review."

In such situations, you may be able invoke the assistance of the Federal Trade Commission, which requires strict compliance with its laws and regulations governing online content, particularly in the context of reviews. The FTC commenced an investigation of Hyundai after learning that bloggers who promoted Hyundai products had failed to disclose that they had received incentives. The investigation ended favorably for Hyundai because the carmaker was unaware of the incentives; they had been provided by an outside media consultant in violation of Hyundai’s social media policy, which called for bloggers to disclose their receipt of compensation.

The author of the derogatory comments about Grape Expectations may not be so fortunate. If the parent of the unhappy cereal eater turns out to have been the recipient of a coupon for a free box of oatmeal and failed to disclose it, that may be deemed an unlawful incentive.

Finally, even if the disparagement comes via a review by an author who has no commercial bias, you nevertheless may have recourse. The First Amendment provides a safe haven for some critical comments, but it does not create a legal right to cross the line into trade libel or defamation.

When considering your marketing and advertising approach (and the approach of your competitors), consider both what is being said and the source of the claim. When you think that a representation smells bad, consult your in-house counsel or outside law firm. If a claim is actionable, your competitor will have to put their money where their mouth is.