One technique that companies often use to advertise their product or service is by drawing comparisons against their competitor’s product or service. This advertising technique is known as comparative advertising. Comparative advertising specifically identifies the competitor by name and highlights discrepancies in the quality of the competitor’s product or service compared to its own product or service.
A common example of comparative advertising that many are familiar with is an advertisement made by cellular telephone companies where a wireless service coverage map of the United States is shown in a side by side comparison to the leading competitor’s wireless service coverage map of the United States. These advertisements are impactful because they show a gripping visual comparison between the advertising company’s coverage map and the leading competitors, and the maps are often strikingly different.
The purpose of these types of advertisements is to illustrate to consumers the inferiority of the competitor’s product or service, while encouraging the consumer to think that their product is better. If companies want to use a comparative marketing campaign, it is important to fully understand the potential legal and business ramifications if something goes wrong with the comparative advertising campaign.
When Comparative Advertising Turns into Trade Disparagement
While comparative advertising is effective, sometimes it can create false advertising legal issues for the advertiser that uses this technique. Specifically, inappropriate or misuse of comparative advertising can result in a trade disparagement lawsuit. Trade disparagement is essentially the same as the tort of libel, except it is applied in a commercial context. It is trade disparagement when a company knowingly makes a false statement about the competitor or the competitor’s product or service with the intention of causing financial harm to the competitor through lost sales or lost customers, and the competitor suffers an actual financial harm as a result of the false comparative advertising.
It is often challenging to prove that the competitor suffered actually financial harm and losses that are directly related to the comparative advertising. But this does not stop businesses from suing companies that run comparative advertising campaigns showing the competitor’s product or service in an inferior light. Not only do competitors sue for trade libel, but they also often sue for defamation as well.
When it comes to false advertising claims, and advertisement claims that make competitors look bad in the eyes of consumers, it is not surprising that the gloves come off when comparative advertising goes too far. Perception is everything in business, and if consumers were falsely led to believe that a competitor’s product or service is inferior to the products or services of the company responsible for the comparative advertising campaign, there will be legal trouble.
Accused of Trade Libel? Get a Lawyer
When you need a qualified business or false advertising lawyer in New York, you should consider working with the professionals at Revision Legal. We understand the impacts that trade disparagement accusations can have on you and your business and we will work closely with you to ensure that your legal matters are resolved quickly. Contact us today using the form on this page or call us at 855-473-8474.
The Lanham Act’s False Advertising Prohibition: How Comparative Claims Become Legal Liability
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), prohibits any “false or misleading description of fact, or false or misleading representation of fact” in commercial advertising or promotion that misrepresents the “nature, characteristics, qualities, or geographic origin” of goods or services. This provision covers both the advertiser’s own products and a competitor’s products—making it the primary federal vehicle for comparative advertising disputes and trade disparagement claims.
Literally False vs. Misleading: Two Different Legal Standards
Courts apply different analytical frameworks depending on whether the challenged advertising claim is “literally false” or “literally true but misleading.” This distinction has significant practical consequences:
A literally false claim is one that is false on its face, without reference to consumer perception. If an advertisement states “Product X has 30% fewer calories than Product Y” and the actual difference is 5%, the claim is literally false. Once a plaintiff establishes that a claim is literally false, harm to the plaintiff is presumed—the plaintiff need not conduct or present consumer surveys demonstrating actual consumer deception. Courts will enjoin literally false advertising relatively readily.
A literally true but misleading claim requires the plaintiff to demonstrate that the advertisement, while technically accurate, has a tendency to mislead consumers—typically through survey evidence showing that a significant portion of the relevant consumer population actually drew the false inference the plaintiff claims. This is a more expensive and uncertain path to relief, requiring expert witnesses, consumer surveys, and significant litigation investment.
Trade Disparagement and Commercial Defamation: The Elements
Trade disparagement—also called trade libel or commercial defamation—is a distinct tort from false advertising under the Lanham Act. While the Lanham Act requires only that a statement be likely to mislead consumers, trade disparagement requires proof of: (1) a false statement of fact about the plaintiff’s goods or services; (2) publication to third parties; (3) malice or at least knowledge of falsity or reckless disregard for truth; (4) actual or probable pecuniary harm; and (5) causation.
The actual damages requirement is frequently the most challenging element. Plaintiffs must show not just that the comparative advertising damaged their reputation, but that it caused measurable financial harm—lost sales, lost customers, lost contracts. Isolating that causation from the normal competitive pressures of the marketplace is analytically complex and expensive. Expert testimony on market share, consumer surveys, and financial analysis is typically required.
The Role of NAD Proceedings in Comparative Advertising Disputes
Many comparative advertising disputes are resolved—or at least initially evaluated—through the National Advertising Division (NAD) of the Better Business Bureau before litigation is filed. NAD proceedings offer several advantages: they are faster and less expensive than federal court litigation, they are confidential, and the NAD has developed substantial expertise in evaluating advertising claims. NAD recommendations, while not legally binding, carry significant weight because the Federal Trade Commission treats NAD referrals as a basis for potential enforcement action.
From a strategic standpoint, filing with the NAD before or instead of litigation can preserve resources, avoid the discovery burdens of federal court, and obtain a faster resolution. However, NAD proceedings are not always the right choice—particularly where injunctive relief to stop ongoing damage is urgently needed, or where the advertiser has a pattern of ignoring NAD decisions.
Practical Guidance for Companies Considering Comparative Advertising
If your business is planning a comparative advertising campaign, or if you have been targeted by a competitor’s comparative campaign, several principles apply:
- Substantiation first. Every comparative claim should be substantiated by competent and reliable evidence before the advertisement runs. The FTC’s substantiation doctrine requires that advertising claims be supported by evidence adequate to support the claim at the time it is made—not after you are challenged.
- Document your testing. If your comparative claims are based on testing, the testing methodology must be well-designed, controlled, and documented. Courts and the NAD will scrutinize testing methodology closely.
- Use “puffery” carefully. Vague, subjective superlatives—”the best,” “superior quality”—are generally not actionable as false advertising because no reasonable consumer takes them as statements of fact. But specific, measurable claims must be accurate.
- Review competitor claims. If a competitor is running a comparative campaign that contains false or misleading statements about your products, document the advertising, quantify the harm, and consult an attorney about your options under the Lanham Act or state law.
Contact the advertising law attorneys at Revision Legal if you are navigating a comparative advertising dispute, whether as the claimant or the respondent. We handle Lanham Act false advertising claims and NAD proceedings for businesses of all sizes. Reach out today.
