INSIGHT: Seven Steps to Guard Against False Advertising Claims

April 29, 2020, 8:01 AM

If your company is currently operating, chances are that you’ve had to swiftly and drastically change your business, your operations, or both, to respond to the Covid-19 pandemic.

Companies ranging from liquor distilleries to apparel manufacturers to automakers are converting their factories to produce personal protective equipment (PPE) and other essential goods to help those on the frontline and those of us staying at home. Other essential businesses like airlines, grocery chains, eldercare facilities, and distributors, have all taken new measures to ensure the safety of their employees and customers from potential transmission of Covid-19.

These steps may be mission-critical, but every representation a company makes about them opens up the risk of allegations of false advertising. A claim that a product “protects against coronavirus,” for example, is an obvious target. But even claims that companies have stepped up sanitation procedures or have implemented social distancing measures can be susceptible to creative litigants.

It’s important to remember that the risk comes not only from the plaintiffs’ bar, but from competitors and government agencies as well, including increasingly active state attorneys general as well as the Federal Trade Commission and Food and Drug Administration, and even the Department of Justice. The FTC has publicly warned that any coronavirus-related advertising claims will be under a magnifying glass. And several high-profile Covid-19-related enforcement actions and lawsuits have been widely reported.

So what is a well-intentioned company to do? Here are seven practical steps companies can take to avoid liability:

Vet Your Claims Very Carefully

False advertising under the Lanham Act requires:

  1. a false or misleading statement,
  2. in connection with commercial advertising or promotion, that
  3. deceived or is likely to deceive in a material way,
  4. was made in interstate commerce, and
  5. harmed or will likely cause harm.

It should go without saying that you should make sure what you say about your products—whether standing alone or in comparison to competing products—is both true and accurate. Remember that risk can arise even if a statement isn’t literally false if a consumer is likely to be misled by context or implication.

And even if you’re not making express claims about the efficacy of your product, you could still face claims concerning implied warranties. Companies new to the business of creating general-use masks, for example, should consider including a disclaimer that no warranties or representations are being made about their efficacy.

Support and Document Claims

Not only should whatever claim you’re making be well-supported, that support should be clearly documented. Claims regarding efficacy or properties require reliable, scientific proof, such as studies with proper protocols.

Similarly, claims about sanitation protocols should be substantiated by thoroughly documenting the cleanings, the materials used, and even the trainings of the cleaning staff. Assume from the start you will have to “prove up” whatever claims are made. Competent documentation can sometimes deter would-be plaintiffs from even filing a complaint.

Build in Cushion When Making Representations to Accommodate Future Change in Circumstances

The one known quantity about Covid-19 is that it is novel. Its course as a disease, and the government response to it, are inherently unprecedented.

Companies should allow for the unknown unknowns when making representations: use language that has wiggle room for when circumstances inevitably change. What we know about Covid-19 and its transmissibility is changing day-by-day. CDC guidance is changing.

And a company’s ability to staff out its work may be threatened by the current economic upheaval, or disrupted by government shutdown orders. To the extent you can avoid it, this is not the time to saddle yourself with the administrative burden of constantly revising or updating representations.

Consider Your Company’s Reach Across Jurisdictions

Where your company is based is not the end of the inquiry. If your products and services are available in other states or nationwide, aim for the highest common factor when assessing potential risk of suit and liability—plaintiffs can come from anywhere you sell your products.

Massachusetts, for example, has a wide-ranging unfair competition/consumer protection statute that carries the potential for treble damages and attorney’s fees, making it a favorite of the plaintiffs’ bar. State attorneys general are also looking to show leadership during these times and are reviewing consumer complaints carefully.

Review Your Supplier and Other Vendor Contracts Carefully

False advertising claims may extend beyond the original manufacturer. If you’re a distributor, seller, or reseller of third-party products that advertise claims, you may find yourself dragged into the fray.

Carefully review your contracts to understand if you are indemnified against such claims. And negotiate for these indemnification clauses when entering new contracts.

Think About Where the Potential Sources of Liability Arise, and Minimize Risk Where You Can

Disputes do not arise out of a vacuum. You’re more likely to face trouble when consumers or third parties feel aggrieved.

Take steps to minimize outrage from both your customers and vendors: address complaints promptly and fairly, be sensitive to third party optics, price carefully to avoid allegations of price-gouging, and over-communicate during these times of crisis to avoid misunderstandings and festering grievances.

Think through where your companies’ actions may draw the ire of others and aim to blunt potential attacks on your business model. Social media, in particular, should be carefully monitored and deployed.

Be Responsive to Changes in Circumstances—and Update Where Needed

Hopefully, if you had built in enough wiggle room, you will not find yourself needing to revisit and revise early claims. Suffice it to say, if circumstances materially change, promptly update your communications to avoid the allegation that you failed to correct inaccuracies.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Caroline K. Simons is a partner in the Boston office of Orrick, Herrington & Sutcliffe and member of the firm’s global IP Litigation practice. She specializes in advising clients in disputes involving trade secrets misappropriation and trademark infringement and has tried cases in the state and federal courts and ITC on behalf of companies across the life sciences, pharmaceutical, materials, manufacturing, tech and financial sectors.

Sheryl Koval Garko is a partner in Orrick’s Boston office and a member of the firm’s global IP Litigation practice. She has advised major companies in copyright, trade secrets and trademark litigation, including high-profile trade dress cases before the ITC.

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