Advertising Law

NAD Considers Grocery Store Claims, Including Jurisdiction Question

By Jeffrey S. Edelstein, Partner, Advertising, Marketing and Media

A grocery store chain should discontinue comparative pricing claims, the National Advertising Division recommended in a new decision, finding the accompanying disclosures to be too vague and nonspecific.

HEB Grocery Company challenged claims made in print and YouTube advertising by Aldi Inc. touting its low prices, such as “Receipts don’t lie. Save up to 51% shopping at Aldi.” and “Move over HEB, Kroger, and Walmart. We’re the low price leader in this town. Save up to 50% shopping at Aldi.”

Aldi told the self-regulatory body the comparative price claims were limited to the Houston area and not national in scope, placing them outside the NAD’s jurisdiction. Further, the claims were truthful and accurate, the advertiser said, with a disclosure that clearly identified the basis for comparison in its advertising of Aldi-brand products versus national brands sold at competing grocers that were comparable in size, quality and ingredients.

While the NAD recognized the importance of grocery stores informing consumers that they can save money by purchasing high-quality products at lower prices, the decision disagreed with both of the advertiser’s arguments.

First, the NAD determined it had jurisdiction over the dispute, noting in its reply letter that HEB identified Aldi pricing claims that appeared on YouTube in addition to the print advertising found in Texas. That meant the challenged advertising “has the purpose of inducing a sale or other commercial transaction and has been disseminated to a sufficiently substantial portion of the United States,” according to the decision.

Turning to the merits of the claims, the NAD found that one message reasonably conveyed by the advertisements was that consumers who shop at Aldi will always save up to 50 percent (or a significant dollar savings) by purchasing Aldi-brand products versus brand-name products at HEB and competing grocers.

The disclosures, “when actually present, are vague,” the NAD wrote, and do not specify “(1) what the referenced comparable products (brand name or otherwise) are; (2) whether the products compared are based on reliable consumer habits and purchasing studies to indicate that the products selected are representative; or (3) what percentage of the inventory of the particular store the chosen products represent.”

For example, the NAD noted that Aldi’s YouTube video made comparative references to fresh produce—despite the fact that produce does not form the basis of the advertiser’s price comparison. “Consequently, NAD determined that the evidence in the record failed to demonstrate that the products chosen by the advertiser as the basis of comparison are sufficiently representative to support Aldi’s broad store-wide savings claims,” according to the decision.

The NAD recommended the advertiser discontinue the challenged YouTube ads, avoid featuring unqualified savings claims in future advertisements and stop running all the challenged qualified savings claims.

In addition, Aldi should “ensure that future price comparisons clearly define the basis of comparison, are limited based on the scope of the comparison, and where the comparison made is to competing grocers who also have private-label products, avoid the implication that the comparison being made is to a competitor’s private-label product or that the competitor does not make a private-label product.”

Aldi disagreed that its comparative advertising was vague and/or unsubstantiated, but agreed to comply with the NAD’s recommendations for future ads. However, the advertiser indicated its intention to appeal the jurisdictional part of the decision to the National Advertising Review Board.

“Aldi’s challenged advertising campaign was directed at and distributed to consumers through print and email to a small geographic area around Houston, Texas comprising approximately 1% of the U.S. population,” the company said in its advertiser’s statement. “The [YouTube] videos were not mentioned in HEB’s complaint or the NAD’s letter transmitting the complaint and were mentioned for the first time in HEB’s reply.”

To read the NAD’s press release about the decision, click here.

Why it matters: The NAD’s decision provides a helpful reminder to advertisers about making comparative pricing claims, from ensuring they clearly define the basis of comparison to limiting the claim based on the scope of the comparison to endeavoring to make clear, conspicuous disclosures that appear in proximity to the claim being qualified.

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Designers Battle Copyright Infringement on Social Media

By Jesse M. Brody, Partner, Advertising, Marketing and Media

For designers, the new battlefield for copyright infringement can be found on social media—not in the courtroom.

Social media websites make it possible for knockoffs and duplications to be on display like never before, but they also provide a means for designers to fight back. For smaller companies, the social media route is also more accessible—and far cheaper—than litigation.

Earlier this month, designer Phillip Lim posted side-by-side pictures of his original designs and images of products from retailer Topshop, which he alleged were copies. “This happens all the time,” he wrote on the post. “And the sad thing is there is no law that protects intellectual property in [the] fashion industry—but that doesn’t mean I can’t call it out.” He followed up that post with a similar one comparing a current line of Gucci tote bags to Lim’s fall 2014 line.

Lim isn’t alone. M2Malletier, the designer of a handbag line, took a similar approach in March when it displayed images of a CH by Carolina Herrera line of bags it claimed copied some of its distinctive features. “We are deeply shocked that @houseofherrera takes such an unfair advantage of our brand’s signature handle,” according to the post.

The experience of one small designer encapsulates the current trend. Aurora James, the founder of Brother Vellies, a luxury footwear line launched in 2013, was tipped off to a possible knockoff by social media users. Instead of directly contacting Steve Madden about the issue, James took to social media to propose that if the company wanted similar styles, it could move production to her workshop in Ethiopia.

“It’s not even about the money necessarily,” James told the Business of Fashion. “The revolution is not going to happen in the court system, it’s going to happen on the consumer level.”

Why it matters: Social media has changed the way companies communicate with consumers as well as with competitors, including setting the stage for confrontations over trademark and trade dress issues. Although social media can provide a convenient and inexpensive outlet for designers, it can also prove risky, opening them up to the possibility of a defamation or libel claim.

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Vizio Gets False Ad Suit Tossed

By Jesse M. Brody, Partner, Advertising, Marketing and Media

Vizio Inc. was successful in its motion for summary judgment in a false advertising suit brought by Dr. Roger Larsen, who alleged in a putative class action in California federal court that the company deceived consumers about the refresh rate on its televisions.

Despite being advertised as having a refresh rate (a reference to the number of times per second an image is displayed on a TV screen) of 120 hertz, the Vizio set Larsen purchased had only a 60-hertz refresh rate, he said.

While video is currently not recorded at any more than 60 images per second on Vizio sets, Vizio uses a scanning backlight that flashes between two images in succession, effectively doubling the number of images displayed per second. This practice is not misleading, the company said, because its use of refresh rate refers only to images per second, not unique images per second. To convey this to consumers, Vizio’s promotional materials typically refer to the rate for its TVs as “120 hertz effective refresh rate” or state that the refresh rate is “enhanced with backlight scanning.”

At his deposition, Larsen was asked if he remembered the wording used to describe the television’s refresh rate when he purchased his TV in October 2014 from Amazon. He stated that if the web page had used the term “effective” refresh rate, he would have looked it up and found out what that meant. When asked, “[A]ssuming that the website said 120Hz effective refresh rate enhanced with backlight scanning, would you believe that promotion is misleading?” Larsen responded, “No.” Counsel for Vizio then asked, “And if you saw that text on Amazon and you purchased the TV, then it follows that you wouldn’t be harmed; is that correct?” Larsen replied, “Yes.”

Vizio moved for summary judgment, contending that the plaintiff’s claims for violation of Maine’s consumer protection statute, common-law fraud, breach of express warranty, negligent misrepresentation and undue enrichment failed because he could not demonstrate he was misled by the company’s representations about the refresh rate of his television.

U.S. District Court Judge Cormac J. Carney agreed.

“Individual reliance is an element of the [Maine statute], fraud, negligent misrepresentation, and breach of express warranty,” he wrote. “Dr. Larsen conceded at his deposition that, although he did not believe the Amazon.com webpage for his television had used qualifiers like ‘120Hz effective refresh rate enhanced with backlight scanning,’ if it had such qualifiers, he would not have found the representations of the refresh rate misleading. This concession is fatal to Dr. Larsen’s claims.”

The Amazon page did not state what Dr. Larsen thought it did, the court noted. Shortly before his deposition, the plaintiff printed a copy of the web page and it contradicted his recollection, advertising the television as having an effective refresh rate of 120Hz, not simply a 120Hz refresh rate.

In addition, the defendant provided copies of the web page as it existed on six different days during October 2014 (albeit not the actual date Larsen purchased his TV), and on all the dates the page described the television as having a “120Hz effective refresh rate enhanced with backlight scanning.”

“Thus, Dr. Larsen’s recollection of the contents of the Amazon.com webpage as it existed in October 2014 was incorrect,” Judge Carney wrote. “And because Dr. Larsen has conceded that 120Hz in conjunction with the qualifier ‘120Hz effective refresh rate enhanced with backlight scanning’ is not misleading to him, and he must have seen such a qualifier on the Amazon.com webpage, Dr. Larsen could not have been misled.”

Dismissing Larsen’s objections to the admissibility of the “damning copies” of the web pages from October 2014, the court said the content of the pages was directly relevant and that Vizio laid the necessary foundation for introduction of the evidence.

Larsen also argued that his reliance could be presumed if a jury decided Vizio’s representations were material, but the court was not persuaded. “[S]uch an inference of reliance always can be rebutted and Vizio has clearly done so here,” the court said, granting summary judgment in favor of the defendant.

To read the order in Larsen v. Vizio, Inc., click here.

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