Are ads true? New lawsuits asking for proof

A diamond is forever? Prove it.

Companies that were once content to fight in grocery-store aisles, on television commercials and in newspaper ads are now choosing a different route — filing lawsuits and other formal grievances challenging their competitors’ claims. Longtime foes such as Pantene and Dove, Science Diet and Iams, AT&T and Verizon Wireless, and Campbell Soup and Progresso have all wrestled over advertisements recently.

The suits themselves might seem a little absurd — an argument over hyped-up advertising copy that not many consumers take at face value. Pantene has attacked Dove’s claim that its conditioner “repairs hair better,” and Iams has been challenged on its line, “No other dog food stacks up like Iams.”

Dueling advertisers, however, argue that these claims can mislead consumers and cause a pronounced drop in sales. Because advertisers are required by law to have a reasonable factual basis for their commercials, their competitors are essentially demanding that they show their hand.

The goal is usually not money but market share. Companies file complaints to get competitors’ ads withdrawn or amended. The increase in these actions may be a reflection of the dismal economy: During recessions, when overall spending lags, marketers must fight harder for customers.

“In this economy, where margins are a bit tighter, a lot of marketing departments have decided to become more aggressive in going after their competitors in the hopes that they can either protect their market posi- tion or capture additional market share,” said John Villafranco, a law partner at Kelley, Drye & Warren who specializes in advertising.

The number of complaints over ads from competitors filed with the National Advertising Division of the Council of Better Business Bureaus, the industry’s main self-regulatory program for national ads, is on track to set a record this year. There have been 82 formal complaints so far in 2009, after last year’s record of 84 challenges, a sharp increase from 62 in 2007 and 52 in 2006.

Other companies file false-advertising lawsuits under the Lanham Act, enacted in 1946 to strengthen trademark law. While there are no reliable tracking numbers on cases filed under that law, lawyers say they are seeing an increase.

This May, a judge issued a temporary restraining order telling DirecTV to modify ads claiming that the bankruptcy of its rival Charter Communications would affect its service, after a lawsuit from Charter. (The companies later settled.) UPS stopped running ads saying it was the “most reliable” shipping company after FedEx sued in May, arguing that the claim was based on outdated information.

Defending claims made in ads sometimes requires delving into minutia. The Pantene-Dove case centered on whether Dove Therapy repaired hair better than a Pantene conditioner. To defend its conditioner ad, Dove supplied a study measuring the combing force required by treated hair, a study on breakage in a 200-strokes-per-tresses test, and had an expert defend its decision to use the “wet combing” method rather than “dry combing.” (The National Advertising Division ruled that Dove should limit its better-than-Pantene claims to smoothness and strength on severely damaged hair.)

Linda Goldstein, a partner at Manatt, Phelps & Phillips, who represents clients in advertising disputes, said such disputes had become part of a “war game” for marketers.

“How brands will deal with their competitors’ advertisements is an increasingly important component of the overall marketing strategy,” she said. “When we’re sitting with clients, we will explore lots of permutations, whether it’s offensively or defensively.”

Filing a complaint with the National Advertising Division is cheaper than a lawsuit, costing from $2,500 to $20,000. The downside is that the program is voluntary and its decisions limited.

By going to court, Goldstein said, companies can file for an injunction and get the ads stopped within days, versus the two to three months that the voluntary process takes, she said.

“If there’s a true injury to market share, then going to court may be a more desirable alternative,” she said.

Rewards can be significant: In March, a U.S. District Court in New Jersey ruled that General Electric had inappropriately used study results to suggest that its X-ray product was safer than that of a competitor, Bracco Diagnostics. The court ordered GE to pay $11.4 million and to issue a news release and ads correcting its claims.

But, as with all attacks on competitors, these disputes run the risk of persuading consumers to avoid not just a rival’s product, but the product altogether.

Last fall, Campbell Soup started an ad campaign that said its Select Harvest soups were “Made with TLC” while labeling Progresso soups, from its rival General Mills, “Made with MSG.” Progresso responded with its own campaign, and then both companies complained to the advertising review division, which recommended withdrawal of some ads from both sides.

The damage was already done. Unit sales in the General Mills category that includes Progresso (called, unappetizingly, ready-to-serve wet soups) rose in the fourth quarter of 2008, compared with the same quarter a year earlier, said Information Resources, a research firm in Chicago. But since then, unit sales of wet soups at both companies have declined every quarter. A UBS analyst, David Palmer, attributed the drop largely to the scorched-earth advertising battle.

“They’re navel-gazing, and they’re not thinking about what consumers want to hear — they’re just talking at conference tables about how to strike back or how their integrity has been affected,” said James Othmer, author of “Adland: Searching for the Meaning of Life on a Branded Planet.” “They get caught up in each other’s messages.”

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