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Responding to False Advertising

One of the most frustrating things for a business owner to experience is having another company gain an unfair advantage through fraud or deceit. One common way this can happen is through false advertising. Fortunately, companies whose competitors are selling products using false or misleading advertising do not have to wait for the government to get involved. Instead, federal law allows companies to sue their competitors for false advertising that is harming their business under a law known as the Lanham Act. Understanding what sorts of ads can potentially give rise to a Lanham Act claim can help companies take back market share and put an end to unfair competition.

Lanham Act Claims

A successful Lanham Act claim requires the plaintiff to prove four things. There must be (1) a false or misleading statement of fact that (2) is used in a commercial advertisement that (3) deceives or is likely to deceive consumers in a material way and (4) that has caused injury to the plaintiff. Each of these requirements can be broken down to be better understood.

First, a false or misleading statement can be just that, either provably false or technically true, but still misleading to consumers. However, it is important to note that a successful Lanham Act claim requires more than mere “puffery.” A competitor’s advertising some broad opinion such as “the best on the market” is not going to be concrete enough to support a claim.

Second, the claim must be made in a commercial advertisement. The law recognizes a wide array of things as advertisements. Certainly traditional ads such as commercials or billboards count, but product labels and sales presentations may also qualify.

Third, the false or misleading statement must deceive the consumers as to something material. This means that it must be misleading enough to capture a noticeable portion of the consumer base, and it must be about a sufficiently important part of the product that it is actually going to affect people’s purchasing decisions.

Fourth, there must be either some injury or a likely future injury for the plaintiff to sue. This means that the plaintiff has to show that the plaintiff is losing business to the defendant or that there is a likelihood of such future losses.

Why Competitors Can Sue

Many people are surprised about the existence of these sorts of claims because they traditionally think of false advertising as a consumer protection issue, not a problem between competitors. In fact, that is actually the right way to think about things. These sorts of Lanham Act claims are a clever mechanism put in place by the government to have private businesses protect consumers. The idea is that consumers are being harmed by the false advertising, but that they are a dispersed class of people and each individual harm is too small for any consumer to care about. Consequently, the law gives competitors the right to sue each other because the lost sales from false advertising can be substantial, and in the process competitors will keep each other honest.

False advertising claims can be an excellent way to level the playing field against a competitor engaging in misleading sales practices. If you believe you may have a Lanham Act claim, contact a West Palm Beach business litigation attorney at Pike & Lustig, LLP today.

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