Can I Mention My Competitor in an Ad?
We’ve all seen countless ads where a company compares their goods or services favorably to those of their competitors. Where does this cross the line and run into a false advertising issue? H&R Block recently sued Intuit (a San Diego-based company, of course – Go Padres! – wait, does it seem like I’m playing favorites here?) over a pair of commercials that suggested that Intuit’s TurboTax tax professionals were better trained and more experienced than those at H&R Block and other retail tax outlets. So how far can you go in this type of ad?
Here’s a YouTube clip of one of Intuit’s commercials in question. To summarize: a man and a woman are standing in their kitchen while a plumber works under their sink. The plumber recognizes the gentleman. The guy asks the plumber where they know each other from, and the reply is, “I’m Bob. We talked at the tax store; I did your taxes.” You get the idea – Intuit is suggesting that the tax preparers you might find at H&R Block and other retail tax preparation outlets are not all full-time tax advisors. The commercials go on to state that “More Americans trusted their federal taxes to TurboTax last year than H&R Block stores and all other major tax stores combined.” This is illustrated with a graph showing TurboTax in green and H&R Block in red.
H&R Block sued Intuit in Federal court for false and/or misleading statements (false advertising) under the Federal Lanham Act, trademark infringement, and unfair competition under Missouri law (where H&R Block’s headquarters are located). For technical reasons, the court addressed only the false advertising Lanham Act claim.
In order for a false advertising claim to prevail, the plaintiff has to prove all of the following elements:
- Defendant made false statements of fact about its own or another’s product [including either (a) literally false factual commercial claims; or (b) literally true or ambiguous factual claims “which implicitly convey a false impression, are misleading in context or [are] likely to deceive consumers,”]
- The statement “actually deceived” or had the “tendency to deceive a substantial segment” of its audience [proof on this element is not necessary if the statement is literally false]
- The deception created was material [again, proof on this element is not necessary if the statement is literally false]
- Defendant caused the statement to enter interstate commerce; and
- Plaintiffs have been or are likely to be injured as a result of the false advertisement.
Failure to prove any one of these elements will cause the false advertising claim to fail. You can see from the outset that this is a fairly high standard.
Why is it so hard to assert a claim for false advertising? The simplest answer is that courts have recognized that the First Amendment affords at least limited protection to commercial speech. While commercial speech might not enjoy the same standard of constitutional protection as, for example, political or religious speech, it is nonetheless protected. Also, we understand that consumers are reasonably sophisticated; generally speaking, courts will assume that consumers are not likely to be deceived by advertisements unless the advertiser’s conduct is particularly egregious. Whether this presumption of media literacy is valid is another question entirely.
How did the court rule in this case? Well, Factor 4 is an easy one – Intuit’s commercial was clearly intended to be used in interstate commerce. The court focused then on Factor 1 – whether there was a false statement of fact. H&R Block was unable to prove, in the eyes of the court, that any specific factual statement was either literally false or sufficiently ambiguous to convey a false impression, was misleading in context, or was likely to deceive consumers. Because Factor 1 failed, the court didn’t spend much time on Factors 2, 3, 0r 5, simply stating that they would fail for substantially the same reasons.
Note: a large part of the court’s analysis centered on their rejection of survey evidence entered by H&R Block’s expert. This should caution advertisers not to read too much into this case – if H&R Block’s expert had conducted a more compelling survey, the court may have been persuaded to find in the plaintiff’s favor. All of which is to say that these types of cases are very fact-based; there is often enough ambiguity to allow a court to go either way. Play nice and make sure that all of your evidence is rock-solid.
So Intuit and TurboTax live to advertise another day. And we all get to enjoy more commercials where Company X says they’re so much better than Company Y, and why. For a bit more detail on the trademark implications of this case, I recommend Rebecca Tushnet’s 43(B)log on the topic.
