Companies’ false advertisements and other deceptive business practices can have significant adverse commercial consequences for their competitors. Along with short-term loss of business, misleading claims and outright false statements about a company’s products or services (or the company itself) can cause long-term loss of goodwill—and this can potentially lead to even greater financial losses in the future.
As a result, when dealing with false and misleading advertisements, it is critical that business owners and executives make informed and strategic decisions. In many cases, prompt legal action will be warranted. If a false advertising lawsuit is justified, filing a lawsuit promptly can not only mitigate the company’s losses resulting from a competitor’s deceptive trade practices, but it can help mitigate the costs of the dispute resolution process as well.
“State and federal false advertising laws provide grounds for companies to take legal action against their competitors when warranted. These laws provide access to both injunctive relief and monetary damages, and companies can seek relief on an emergency basis when necessary to prevent losses due to consumer fraud or confusion.” – Dr. Nick Oberheiden, Founding Attorney of Oberheiden P.C.
This article provides an overview of false advertising claims and the legal process for pursuing false advertising claims in state and federal courts. If your company is facing losses—or potential losses—due to deceptive claims or other fraudulent business practices and you have questions about taking legal action, you should consult with an experienced false advertising attorney promptly.
The Essentials of False Advertising Litigation for Business Owners and Executives
False advertising claims are based on laws that prohibit companies from attempting to mislead consumers for commercial gain. False advertising is broadly classified as a form of unfair competition; and, while companies that engage in false advertising can face civil penalties (or other statutory penalties) in state and federal enforcement actions, companies that suffer losses due to competitors’ efforts to deceive consumers can seek monetary compensation as well.
Companies that are facing actual or potential losses due to false ads and other fraudulent misrepresentations and omissions can also seek injunctive relief in the state and federal courts. When immediate relief is necessary to prevent ongoing or future losses, companies can seek a preliminary injunction while the litigation process runs its course.
Common Examples of False Advertising Claims
Fraudulent advertising and marketing practices can take many different forms—and all of these forms can potentially warrant legal action depending on the circumstances involved. With this in mind, the following are just some of the most common grounds for companies to file false advertising lawsuits:
- False Claims About a Company’s Products or Services – If a company makes false claims about its own products or services to lure consumers away from competitors, this is a textbook example of false advertising. This includes false claims about a product or service itself as well as deceptive guarantees and other similar forms of consumer fraud.
- False Claims About a Competitor’s Products or Services – Companies can also face false advertising lawsuits if they make false claims about a competitor’s products or services. If a company lied about the quality, capabilities, or risks associated with your company’s products or services in its marketing materials, a false advertising lawsuit may be warranted.
- Misleading Comparisons – Misleading comparisons about companies’ products or services can provide strong grounds for false advertising claims as well. If a competitor is making false comparisons that are influencing customers’ purchasing decisions and costing your company business, prompt legal action may be necessary to prevent further harm.
- Non-Disclosure of Hidden Fees – Charging hidden fees has become an increasingly common form of consumer fraud, especially in certain industries. While consumer protection laws allow the Federal Trade Commission (FTC) and state attorneys general to pursue enforcement, competitors can also take legal action when necessary.
- Other False Statements in Commercial Advertising – If your company is facing actual or potential revenue losses due to any false or misleading statements in a competitor’s advertising, it will be worth speaking with a false advertising lawyer about your company’s legal rights and options. Misuse of a company’s trademarks (or use of confusingly similar trademarks) can provide grounds to take legal action as well.
Again, these are just examples. Ultimately, if you have questions about filing a false advertising lawsuit against a competitor for any reason, it will make sense to engage a law firm to evaluate potential claims and help you make informed and strategic decisions about your company’s next steps.
False Advertising Laws that Prohibit False or Misleading Claims
The following are a few examples of the state and federal laws that prohibit false and misleading claims in commercial advertising:
Federal Trade Commission Act (FTC Act)
The Federal Trade Commission Act (FTC Act) is one of several federal laws pertaining to false advertising and other forms of unfair competition at the federal level. Notably, however, the FTC Act does not provide companies with a private right of action. This means that enforcement is largely up to the FTC.
Lanham Act
The Lanham Act does include a private right of action, and this makes it a critical tool for companies that need to pursue false advertising lawsuits. Along with providing trademark protections, the Lanham Act also prohibits companies from engaging in false advertising.
State “Little FTC Acts”
State laws generally prohibit companies from engaging in false advertising practices as well, and many of these “little FTC Acts” also include private right of action provisions. If your company needs to take legal action, an experienced false advertising lawyer will be able to advise you regarding whether it makes the most sense to pursue your company’s claims in state or federal court.
When Companies Should Engage a False Advertising Lawyer
Due to the potential for both immediate and long-term harm, business owners and executives who have questions about their companies’ rights under false advertising laws should not hesitate to engage legal counsel. Not only can false advertisements leave lasting impressions for consumers (or other customers), but they can also spread quickly online.
This is among the reasons why injunctive relief is an available remedy in false advertising cases—and it is also among the key reasons why business owners and executives need to be as proactive as possible. There is no harm in seeking legal advice, but companies can face significant harm if they do not take legal action against false or misleading advertising campaigns when necessary.
What to Expect in False or Misleading Advertising Litigation
Like all forms of commercial litigation, false or misleading advertising litigation is a process that requires time, commitment, and resources. With that said, taking legal action promptly can help mitigate companies’ losses and legal costs in many cases.
The more a competitor invests in an advertising campaign, the more likely it is to fight any legal efforts to shut the campaign down. This is particularly true in cases involving inadvertent misrepresentations or infringement. Of course, there are no guarantees, and if full-blown litigation is necessary, then starting the process as soon as possible will allow for a resolution as soon as possible as well.
Potential Remedies in Litigation Involving Misleading Statements and Other Forms of Deceptive Advertising
Potential remedies in litigation involving false advertising generally include both injunctive relief and damages. Companies can seek injunctions that require their competitors to withdraw any false or misleading marketing materials, and they can seek damages for any actual losses they have incurred.
As noted above, companies can seek preliminary injunctive relief when necessary—and this will often be a critical step in the process. If a court grants preliminary injunctive relief, this can mitigate the company’s losses (or prevent potential losses), and it can often help spur favorable settlement negotiations as well.
Commercial False Advertising Litigation vs. FTC Enforcement Actions
As also noted above, the FTC has the authority to pursue civil enforcement under the FTC Act in cases involving essentially all forms of false advertising. However, FTC enforcement actions in this area are relatively rare; and, even if the FTC is ultimately successful in pursuing enforcement, this does not provide relief to any companies that were harmed by the defendant’s false or misleading claims.
Thus, companies that are facing losses due to false advertising cannot rely on the FTC to pursue enforcement—and they should not wait to see if the FTC takes action. Again, time is often of the essence in these cases, and it is up to business owners and executives to ensure that they are seeking appropriate relief on their company’s behalf.
Commercial False Advertising Litigation vs. Consumer Class Action Lawsuits
Likewise, while false advertising can trigger class action lawsuits in some cases, these actions are far less common than commercial lawsuits targeting competitors. They also do not provide relief to any competitors that have been financially harmed. As a business owner or executive, if you believe that your company is facing (or is at risk of facing) revenue losses due to a competitor’s fraudulent misrepresentations or omissions, it is important that you engage litigation counsel to advise you regarding your company’s legal options promptly.
