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How to Effectively Deal With False Advertising Disputes

February 16, 2021

In this episode…

The world of advertising is constantly shifting and changing. With ever-evolving technology and increased competition, even small advantages can make all the difference to a company.

However, not every advertising tactic is ethical or legal. False or misleading advertising is as old as commerce itself, and these claims can be unfairly damaging to companies and organizations. Because of this, businesses need to understand their options. So, how should you take legal action when a simple cease and desist is not enough?

Andrew Lustigman, an attorney and expert in advertising law, joins Russ Rosenzweig in this episode of Engaging Experts to talk about the various options for responding to false advertising claims. From pursuing a lawsuit under the Lanham Act to contacting the National Advertising Division (NAD), there are a variety of directions a business can take with an advertising dispute. Tune in as Andrew discusses the pros and cons of each and shares his best practices for taking legal action today.

Episode Transcript:

Note: Transcript has been lightly edited for clarity. 

Guest: Andrew B. Lustigman, Partner Olshan Frome Wolosky, LLP 

Host: Russ RosenzweigCEO and Co-Founder of Round Table Group  

Introduction: Welcome to Engaging Experts, the podcast that goes behind the scenes with influential attorneys. Our guests will describe their practice and expertise. Then, we will go deep on various topics related to effectively using expert witnesses.   

Russ RosenzweigHi, this is Russ Rosenzweig.I am the CEO and CoFounder of Round Table Group and also the host of this podcast series.We have a great guest for you todayAndy Lustigman, a partner at Olshan Frome Wolosky in New York and our resident expert on all things related to false advertising claims. Welcome Andy.  

Andrew B. LustigmanIt is good to be here, Russ. Thanks for having me.  

Russ Rosenzweig: Now before we dive in, a quick word from our sponsor. 

AnnouncerThis episode is brought to you by Round Table Group, the Expert on Experts®. We have been connecting with experts for over 25 years. Find out more at roundtablegroup.com.  

Russ RosenzweigThank you for joining us today. I want to first, express my gratitude to you. I am not sure if you know this, but you were one of our earliest clients at Round Table Group going back to the early 2000s. Thanks for sticking with us for all these years. 

Andrew B. LustigmanWell, it is our pleasure. It has been a successful relationship over the years. Round Table Group provides excellent service and an excellent selection of very qualified witnesses. It is an easy choice. 

Russ RosenzweigThanks for saying that. Our topic of the day is advertising law and I want to just start by saying many of our listeners are fellow business owners like me who periodically need to engage counsel for many kinds of matters, including advertising-related matters.I want to discuss your background. When you graduated from the University of Michigan, which is the second-best Big 10 school right after my Northwestern Wildcats, I am curious why you decided to go to law school.When did the focus on advertising law as a specialization start? 

Andrew B. LustigmanI originally wanted to go to law school because I had a strong interest in politics and wanted to work in the political arena.I was a political science major at Michigan and I went to law school in Washington D.C at the American University Washington College of LawAs my schooling evolved, I changed to a traditional law practice. The color of politics had worn away, and the interest in it. Although I remained very politically active and interested, it became less of a [professional] interest.  I took a position as an associate at a law firm in Washington, D.C.  When you are going through law school your second summer is a key place. I found that later on that Barack Obama and I were summer associates at the same firm. He was in the Chicago office and I was in the Washington, D.C. office. He became president and I defend and prosecute false advertising claims, so you can see how those things turn out.  

In terms of going into advertising law, my father had a boutique firm focusing on advertising and marketing law, and I had always had an interest in it growing up. My intention was not to join him. A woman I was on law review with joined his practice when she graduated. When she wanted to transition to in-house at Readers Digest and the Washington, D.C. firm I was working with was having some issues, I decided to join my father in New York. His boutique firm has been practicing in the area of advertising law since 1995 and I continue to practice with my father to this day. We merged the boutique firm into a full-service business law firm called Olshan.  

Russ RosenzweigAn amazing story. Thanks for sharing that background. Let’s dive into false advertising. Many of my fellow business owners and I periodically see ads from competitors that seem false. Starting in the 80s which I recall being the Golden Age of Advertising. I fondly recall those famous commercials about garbage bags that leak and batteries that die while your daughter is playing with her favorite toy. I recall all manner of boastful commercials, like Crazy Eddie claiming to have the lowest price in the universe. Were there a lot of false advertising lawsuits back then? How has advertising disputes evolved since the 80s? 

Andrew B. LustigmanI could even take it back to the 70s and it relates to a lot of the things we have been talking about. There were significant problems in advertising. A famous case would be for soup. To make the soup look like it had more meat and vegetables, they put rocks underneath the bowl. Or someone would have two different wipers, [and they] would put something on the glass to make one blurry. There were lots of different mechanisms that were being used to manipulate product advertising, particularly in the comparative sense. There would be instances where there was a concern about using a competitor’s product name. You may recall seeing those ads comparing your product to Brand X or they’ll try the leading brand and show it as Brand X.  

Russ RosenzweigOr the other guy.  

Andrew B. LustigmanYou could see that. There was a significant problem with national advertising that was going on. The typical remedy for a competing business was to file a lawsuit under what’s known as the Lanham Act, which is typically thought of as infringing a trademark, but there is a provision that allows a competitor to sue for false representations. Overall, what was happening is that the government was very much going to step in and heavily regulate some of these advertisements, and some of these manipulations. What happened was the industry banded together and said if we do not act in terms of self-policing, we are going to find ourselves facing onerous federal regulation. They founded what is known as the National Advertising Division (NAD) as a self-regulatory body, to oversee national advertising, and for competitors to have matters resolved outside of government interference. That is the origin of NAD. People were taking too many liberties with advertising. 

Russ RosenzweigThat is an interesting evolution and I want to talk more about NAD because I am a member of various organizations of fellow fast-growing company business owners like the Young Presidents Organization and Entrepreneurs Organization, Collective 54, ProVisors, etc.  We regularly talk about our concerns about competitors advertising claims.It is real [concern] these days and business owners do not know what to do. We do not have a blueprint or a plan of action. We call our lawyers and ask them to write cease and desist letters. Sometimes, we’ll be so upset that we will go full bore with the Lanham Act lawsuit. I do not think any of my peers are aware that there is a national advertising division. Can you tell us more about the options for executives to pursue if we feel like one of our competitors is advertising falsely? 

Andrew B. LustigmanThere are several options, and they all have pluses and minuses, and ultimately, the course of action may include multiple steps, but it’s important to have a candid conversation with your client to determine what his or her goal is concerning advertising. The simplest thing that you can do is to have a well-constructed cease and desist letter. That puts the advertiser on notice as to the offending conduct and request voluntary compliance or else. The “or else is the biggie. Are you prepared to back up your threat or as they say, Are you going to be all hat and no cattle? Are you going to say, I am going to do horrible things to you if you don’t comply? “Then you do not do them?  Do you have a mechanism to back it up so a cease-and-desist letter could be backed up with a lawsuit, typically in federal court? Under the Lanham Act, as I mentioned before, there are benefits and there is a significant downside.  In many of my cases, I would say when we were talking about the 80s and 90s, the Lanham Act cases were the route that people went in trying to stop advertising. There is significant case law from that period and that remains to this day as an option.The key thing is a lot of that context is the ability to get damages potentially for offending conduct. If that is of critical importance to your client concerning somebody’s advertising, you must look at what the claim is. Is the person denigrating your product? Is the person making a false statement about your product? Then maybe that is the route to go. Is the person making a simply unsubstantiated claim? Are they saying that the performance of their product is backed by sound scientific proof when that’s not the case? Now the Lanham Act does not afford a remedy for unsubstantiated advertising. Imust be a false representation. You must be able to plead that what the advertiser is doing is a false representation. That is the key component. 

Russ RosenzweigThe Lanham Act is only available if a competitor is citing you and your company in their ads. Is that fair? 

Andrew B. LustigmanNo, it can be about their product, but it must be one that is going to be damaging to you as a competitor. Sometimes you know that is the question. How do you say that this damages me as a competitor? If you are in the same marketplace, and you are both selling toothpaste, and this person says theirs gets their teeth extra white, and you do not think it does? That can be a basis because you are selling your version of toothpaste, but that is the question. Can you show that you are going to be damaged by that act, even if they do not mention you? The typical case is going to be a situation where they are saying one product is better than the other. 

Russ RosenzweigGot it. If you feel strongly that you have been damaged by the competitor’s ad, is that a strong argument to pursue Lanham Act litigation versus a NAD action? 

Andrew B. LustigmanTypically, not for a couple of reasons. First, usually when you drill down to what the client wants, the client wants the false advertisement to stop. The question is how quickly can we get there? The second thing is, how important are these damages, and are you going to spend a significant amount of money with the hope of trying to collect additional funds? How much have you been damaged versus the costs and the distraction of getting there? Those are sort of heart-to-heart conversations that you must have with the client. There are other downsides, one of which is being at risk for counterclaims. He who lives in a glass house should not throw stones and the challenger’s advertising may not be as pure as he or she thinks. Are you going to be subject to potential counterclaims and having them defend your turf? That is one area, and the other area of increasing concern is discovery, meaning the production of emails, depositions, and electronic communications end up being a significant cost of any litigation. Those factors along with how long it is going to take the courts to come to a resolution are things you need to consider. As we are recording this, we are still in the COVID-19 pandemic courts, which are not operating at full capacity. No jury trials are going on right now and courts are very reluctant to proceed in civil litigation right now. Even outside of that, civil litigation generally takes a backseat to criminal litigation and tends to move slower in the United States. Those are factors that you need to keep in mind. When I am discussing a potential matter with the client, my question at the end of the day is what is your goal besides getting irate about what the person is doing? 

Russ RosenzweigIt sounds like the traditional Lanham Act civil litigation could be fraught with unanticipated risks, costs, and delays. Tell us a little bit more about the National Advertising Division option and how a fellow business owner like me pursues that venue?  What is that experience like?Are there any risks and downsides? What are some of the typical resolutions that come out of it? 

Andrew B. LustigmanSure. The National Advertising Division (NAD) is a unique body. It is self-regulatory, so it is a voluntary process. It is overseen by the Council of Better Business Bureaus. An atypical client reaction when I mention it is,” Wellwhat is the big deal? It is voluntary. I have real concerns and problems.  I do not want to just file a complaint with the Better Business Bureaus.I want this advertising to stop. When they found out what NAD was and what they did was clever, they made a complaint and developed a relationship with the leading regulators, particularly the Federal Trade Commission, which is the federal regulator of advertising. They set up a referral process, so that if someone does not participate in the NAD process or fails to follow NAD’s recommendations after going through an appellate process, the matter is referred to the Federal Trade Commission or the Food and Drug Administration as previously arranged, and the matter goes to the top of the pile. It is assigned to an enforcement attorney.Now, that does not mean that a case is going to be brought by the Federal Trade Commission, but it is going to be reviewed closely and seriously. As a result, there is something like a 97% compliance rate with NAD decisions.   

Russ RosenzweigWow, amazing. 

Andrew B. LustigmanIt is amazing if you think about that. There have been interesting instances where people have gone through the  entire process and have declined to accept the recommendations. Probably the most famous case is POM Wonderful, which began with NAD recommendations, ended up with a major Federal Trade Commission case that went all the way to the Supreme Court and overall did not go great for POM. There have been other cases, Airborne, for example, was a high profile one.Airborne, which is a dietary supplement that helps support your immune system, went through the NAD process and declined to implement the changes NAD recommended. It resulted in a significant FTC case and Airborne paid tens of millions of dollars in restitution and had to change its advertising dramatically, not that dissimilar to what NAD had recommended. They could have avoided many problems.  

NAD does not award damages. It changes advertising. If your goal is to get the person off the air or the Internet, this is a great process given the hammer of the referral to the enforcement authorities. Other benefits to NAD include no counterclaims. If you are the challenger, and the advertiser pokes back saying you are doing the following things, NAD will suggest filing your challenge on that point, so there’s no risk of counterclaims.  There is no discovery. There is no production of documents or emails, or searches. There are no depositions, so the distractions of those litigation areas are not there. 

There is the intangible. When you file a matter with a federal judge, the judge is evaluating a wide spectrum of cases daily.He or she could be hearing criminal cases or all types of civil cases. 

The hearing officers at NAD are advertising attorneys who are experts at understanding the law and the applicable standards. What they are not experts on is the scientific aspects of a case. That is what needs to get substantiated by experts.  Those are the factors that we would discuss with the client in terms of proceeding. 

Now, NAD has evolved from having one track in which the matter would go through the process and typically get resolved. The time frame was about four to six months. They recently initiated a fast-track process in which, if you have a single issue, it is a very streamlined approach. They claim to have a decision within 20 business days, and they have also added a complex track, that can take significantly longer than six months because the matter is quite complex. The timeframe is going to depend on the track you take, but it is typically about six months. I will say in most federal litigations, there is no way you are going from start to finish in six months. It is rare to get a decision, but you may resolve the matter in that six-month timeframe.  

Russ RosenzweigIt sounds like there are some enormous benefits to using the NAD. Currently, unlike in the 70s and 80s, especially when we’re talking about B-to-B companies and professional services firms like Round Table Group and Olshan, we do not do commercials anymore. We do online, LinkedIn, Facebook, and Google ads. Are you seeing litigations and NAD actions in that context, or is it more typically in the traditional commercial and print advertising context? 

Andrew B. Lustigman: No, it has certainly evolved to e-commerce and there are a significant number of disputes right now on social media posts. It is an area that a lot of brands have been using [tactics such as] influencers because traditional advertising people do not watch TV in the traditional sense like we did in the 80s when we had eight channels that people watched on.  Today, television and advertising stream on people’s phones, where they can view it on their own time. Advertisers and their brands have transitioned to social media, but similarly, NAD will look at digital advertising, digital advertising campaigns, blogs, and YouTube videos. All of those things are fair game and there have been a significant number of rulings concerning them. With social media, NAD has been at the forefront of disclosure requirements for influence. They are way ahead of even the Federal Trade Commission in terms of it, at least in the early set. NAD continues to evolve as advertising continues to evolve. 

Russ RosenzweigIt is good to know that NAD is highly relevant even in the modern digital era, and my last question is you have mentioned experts, Andy, and the title of this podcast series is Engaging Experts. How often are experts and expert witnesses engaged in the context of advertising disputes, the Lanham Act in particular, and are experts used in the NAD context? 

Andrew B. LustigmanYour expert is a critical component and when I am discussing a matter with a client, the first question I am going to ask is who is going to be our expert? Who do we have?Who can talk about these things?It may be a survey expert and if we are looking at the impression that something has on a consumer, you are also going to need an expert to explain, particularly when it is a substantiation question. Someone is going to need to be able to have undertaken tests or studies, or to be able to explain the scientific literature in a landmark case. An expert witness is going to be extremely important for the jury to hear. Working with your expert on shaping your case and your theories, whether you are on the plaintiff side or the defendant side, is going to be important. In the NAD context, I think it is even more important because you know the hearing officers who are advertising attorneys. They are smart, and they understand the law. What they need to know is who is right on the science and why. It is of paramount importance that your expert is involved in the process, and when you have your hearing, they explain the science and answer hearing officers’ questions. In other words, if the hearing officer will ask, as they always do, questions about what the expert’s points are or what the other side’s expert points are, it is important, not that the lawyer answer those, but you allow your expert to answer those candidly. If your expert is not going to be candid and may make concessions, that is okay, but you want to make sure that your expert retains his or her credibility. You are rarely going to go into a NAD case without your experts and be successful. You need to have your experts lined up, prepared and ready to talk. Many times, there are multiple experts in a case to cover various subject matters proficiently. The NAD wants to hear from the experts, frankly, more than the lawyers. They help each other.  

Russ Rosenzweig: These are certainly the wisest and truest words that I have heard all day and being the self-proclaimed Expert on Experts here at Round Table Group, obviously music to our ears that experts are called upon early and often in these kinds of matters. We have had the privilege of working with you, Andy, and many dozens of your peers over all these years on placing such experts. Thank you for that. Any final words, advice, or wisdom learnings you have gained over the years regarding advertising disputes that you might want to share with our listeners, both executives and fellow lawyers, that are listening to the podcast? 

Andrew B. LustigmanI would say that if you see something that your competitor is doing, it very much makes sense to reach out and call an advertising law specialist to discuss options and what makes sense. Too often someone will say,I am going to go file a complaint with the Federal Trade Commission and just proceed with that.” That can be fine, but they should understand their options. They should understand that every option has pluses and minuses. There is no one size fits all. There is a way to get there. It is just a question of making sure everyone is on the same page with their goals. I would not go off without having a firm idea of what you have in mind and a plan to get there. Developing substantiation takes time. It is important to get involved early to map out and do not say, “Well, this person is doing it and it’s going to cost millions of dollars to get them to stop that.”That is not necessarily the case. There are options, and there are, under the circumstances, reasonable options that can help address the situation. 

Russ RosenzweigAndy, would you be graciously willing to serve as a sort of guide or coach or counselor to those of our listeners that are contemplating acting because of false advertising claims, and if so, how would they reach you? 

Andrew B. LustigmanIt would be my great pleasure to do so. Feel free to reach out. Send me an email at alustigman@olshanlaw.com or you can call me at 212-451-2258, and I will be happy to discuss your concerns with you. 

Russ Rosenzweig: Thank you so much Andy LustigmanThank you so much for being on our show today. It’s been an honor, and it is always a pleasure to hear from you. Thanks again. 

Andrew B. LustigmanGood to hear from you Russ.Thanks. Happy to be here. Cheers. 

Russ Rosenzweig: Take care everybody. Cheers.

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Go behind the scenes with influential attorneys as we go deep on various topics related to effectively using expert witnesses.

How to Effectively Deal With False Advertising Disputes

Andrew B. Lustigman, Olshan Frome Wolosky

Andrew Lustigman is a Partner at Olshan Frome Wolosky LLP, a leading New York law firm. At Olshan, Andrew represents marketers, advertisers, agencies, and suppliers in connection with the legal aspects of their advertising and promotional marketing businesses. He currently heads the Advertising, Marketing and Promotions practice group and serves as a member of the Olshan Executive Committee.