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Claim Substantiation Strategies
Presentation by Tim Civil, General Counsel, Frito Lay Canada
and Bill Hearn, Partner, McMillan Binch LLP
The Canadian Institute’s 11th Annual Advertising & Marketing Law Conference
January 25, 2005Toronto
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Overview of Presentation
1. General principles of claim substantiation2. When does a claim need backing?3. What is adequate and proper testing?4. Testimonials and disclaimers5. Tactics to deal with unsubstantiated claims6. Current trends in remedies
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Appendices to Paper
1. Advertising clearance process2. Advertising do’s and don’ts3. Digest of selected leading cases4. Annotated bibliography5. Excerpts from PAAB Code6. Hypotheticals and Discussion Points7. KFC’s our-fried-chicken-is-healthy claim8. “The Language of Advertising Claims”
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Introduction
• Performance claims are heart and soul of advertising
• Temptation to overreach sometimes irresistible
• KFC’s Fall 2003 our-fried-chicken-is-healthy claim is case in point
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Introduction
• Canada has comprehensive legal and regulatory regime for dealing with unsubstantiated claims which include
Private proceedings before courtsComplaints to regulatory bodies – such as Competition Bureau and CFIAComplaints to industry associations –such as ASC, Rx&D, OMVIC and CMA
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General Principles
• Section 74.01(1)(b) of Competition Actcreates affirmative obligation on advertisers to substantiate all of their materials claims
• Statements, warranties or guarantees of the performance, efficacy or length of life of a product must be based on “adequate and proper tests”
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General Principles
• If not, then “reviewable conduct”• Is “criminal matter” under section 52 of
Competition Act if misrepresentation made “knowingly or recklessly”
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When does claim need backing?
• Generally if claim provable or might reasonably be taken as true
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Claims that do not require proof
• Puffery• Hyperbole• Opinion
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Puffery
• Is a self-congratulatory statement of opinion, bluster, boasting on which no reasonable consumer would rely
• Is general, subjective, vague; can’t be measured
• Example: Disney’s “The Greatest Show on Ice”
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Hyperbole
• Is so exaggerated that consumer could not reasonably rely on the claim
• Example: Bayer aspirin “works wonders”
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Opinion
• No proof required if claim consists solely of advertiser’s subjective opinion
• Example: “We brew good beer”• Don’t fall into trap of cloaking objective
fact in form of opinion – e.g., “We think our dishwasher cleans dishes twice as fast as the leading brand” requires proof
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No proof required
“A-1 makes hamburgers taste like steakburgers”
“The best part of waking up is Folger’s in your cup.”
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“Diamonds are forever…”
“The best a man can get.”
“You meet the nicest people on a Honda.”
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Not all the world’s a puff.But where to draw the line?
• “Earth’s most comfortable shoes” – puff?• “Nature’s perfect food” – needs proof?• Pepsi Stuff loyalty program: redeem
points for Harrier jet – just kidding?
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Claims that do require proof
• ComparativeMost likely of all claims to “draw fire” -examples
- Remington’s “shaves closer than any other shaver”
- P&G’s claim that its teeth-whitening strips are superior to Colgate-Palmolive’s because they whiten teeth “5 times better”
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Claims that do require proof
• Parity Are often perceived by consumers as superiority claims so likely to be scrutinized vigorously by competitors and regulators
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Claims that do require proof
• Preference or perceptionMust have adequate and proper consumer survey to support claim
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Claims that do require proof
• Explicit and implicit claims• Both literal meaning and general
impression important and must be true
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KFC’s our-fried-chicken-is-healthy campaign: explicit and implicit claims
• Explicit claims that were truea KFC skinless chicken breast has just 3 grams of fat, 11 grams of carbohydrates, and 40 grams of proteintwo KFC chicken breasts have less fat than a Burger King Whopper
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KFC’s our-fried-chicken-is-healthy campaign: explicit and implicit claims
Implicit claim (that eating KFC chicken is part of healthy lifestyle) was false
Commercials failed to mention that two KFC Original Recipe breasts with skin have 38 grams of fat, 12 grams of saturated fat, 6 grams of trans fat, 2,300 mg of salt and 290 mg of cholesterolFine print superscript “Not a low sodium, low cholesterol food” did not save KFC from false implicit health claim
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Other lessons from KFC’s our-fried-chicken-is-healthy campaign
• Is any publicity good publicity?• Importance of sensitivity to societal
concerns• US class actions against “Big Food”
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Onus and timing of proof
• Onus on advertiser to establish proof• Must have proof before claim is made
See Competition Bureau’s Misleading Advertising GuidelinesSee Eveready Canada v. Duracell Canada Inc (1995)
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What to do when competitor asks for proof of your claim?
• No legal obligation to share proof with competitor but can be compelled by courts and/or regulator to establish that adequate and proper tests have been conducted
• Good reasons not to share proof with competitor include: tests and results may be proprietary; and a serious challenger will likely not be satisfied with any proof and will find fault in anything provided
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What is an “adequate and proper test”
• Test is intentionally flexible and so can address the infinite number of constantly changing claims about products –downside is some uncertainty in application
• Important to consider type of product and nature of claim
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What is an “adequate and proper test”• Where available, industry standards and
best practices help clarify – some examples:
PAAB Code – see Appendix 5 of paperOMVIC CodeCCFTA-Health Canada-ASC Guidelines for Cosmetic Advertising and Labelling Claims
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What is an “adequate and proper test”• Canada (Commissioner of Competition) v.
P.V.I. International Inc. (2004)Must use test data appropriatelyTest methodologies must not be poorly designed
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What is an “adequate and proper test”• Competition Bureau’s Misleading
Advertising Guidelines include thatTest results must be reproducibleConsideration must be given to “test effects”Sample must be representative and not biased
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Substantiating preference or perception claims• See ASC Guidelines (endorsed by Canadian
Association of Broadcasters)• Survey research should
be of reasonable qualityreflect accepted principles of design and executionbe economically and technically feasible
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Substantiating preference or perception claims• ASC Guidelines also address:
SamplingGeographic dispersionTarget groupSample sizeProduct testingAge of data
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Special advertising techniques
• TestimonialsSection 74.02 of Competition Act
- Testimonial must have been previously published or before being published, permission to publish has been approved in writing and testimonial accords with the testimonial previously published or approved
ASC’s Canadian Code of Advertising Standards- Testimonial must reflect genuine current
opinion, be based on adequate information about product, and not be deceptive
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Testimonials
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Testimonials
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Special advertising techniques
• DisclaimersCan clarify, expand or reasonably qualify a representation, but cannot contradict or retract itThe main body of the advertisement, apart from the disclaimer, should be capable of standing alone (i.e., incapable of being misleading when read on its own)
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Special advertising techniques
• DisclaimersPrint advertising
- Disclaimer placement, format and symbols should be consistent and not confuse reader
- Size of fine print should be large enough that it is clearly visible and readable
- The more important the message, the larger it should be
- Absolute size of fine print important as is relative size in context of entire advertisement
- Commissioner’s position is that disclaimers in print size smaller than 7 point will not save a representation from being misleading This is 7 point font
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Special advertising techniques
• DisclaimersTelevision advertising
- Commissioner’s position is that viewer must be able to read and comprehend print disclaimer in one normal viewing
- It is unreasonable to expect that viewers will have the opportunity to see the ad repeatedly and get the “gist” of it over a number of viewings
- It is also unreasonable to expect viewers to record ads and “freeze frame” them to read the disclaimer
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Special advertising techniques
• DisclaimersRadio Advertising
- Disclaimed radio commercials bring with them problems similar to those associated with disclaimed TV advertising
- Disclaimer is often read in manner (i.e., quickly and in a monotone voice) that makes it fleeting and so detracts from its effectiveness
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Who can forget…
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Happy Fun Ball DisclaimerWarning: Pregnant women, the elderly, and children under 10 should avoid prolonged exposure to Happy Fun Ball.
Caution: Happy Fun Ball may suddenly accelerate to dangerous speeds.
Happy Fun Ball contains a liquid core, which, if exposed due to rupture, should not be touched, inhaled, or looked at.
Do not use Happy Fun Ball on concrete.
Discontinue use of Happy Fun Ball if any of the following occurs: itching vertigo dizziness tingling in extremities loss of balance or coordination slurred speech temporary blindness profuse sweating or heart palpitations.
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Happy Fun Ball Disclaimer
If Happy Fun Ball begins to smoke, get away immediately. Seek shelter and cover head.
Happy Fun Ball may stick to certain types of skin.
When not in use, Happy Fun Ball should be returned to its special container and kept under refrigeration. Failure to do so relieves the makers of Happy Fun Ball, Wacky Products Incorporated, and its parent company, Global Chemical Unlimited, of any and all liability.
Ingredients of Happy Fun Ball include an unknown glowing green substance which fell to Earth, presumably from outer space.
Happy Fun Ball has been shipped to our troops in Saudi Arabia and is being dropped by our warplanes on Iraq.
Do not taunt Happy Fun Ball.
Happy Fun Ball comes with a lifetime warranty.
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Tactics to deal with unsubstantiated claims• Jeffrey Schrank’s The Language of
Advertising Claims – Appendix 8The Weasel Claim
- “helps fight bad breath”The Unfinished Claim
- “gives you more”
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Tactics to deal with unsubstantiated claims
The “We’re Unique” Claim- “If it doesn’t say Goodyear, it
can’t be Polyglas”The “Water is Wet” Claim
- “Great Lash Mascara increases the diameter of every lash”
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Tactics to deal with unsubstantiated claims
The “So What” Claim- A claim is made which is true but
gives no real advantage to product- “Campbell’s gives you not one but
two chicken stocks”
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Tactics to deal with unsubstantiated claims
Humour?- Often used to highlight important product
attribute in general way without comparing it to others
- But must still have proof for general performance claim (so not really “unsubstantiated”)
- Usually more memorable for consumers- Caution: competitors, courts and regulators will
still scrutinize and may not share advertiser’s sense of humour
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“Precision”
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“Strength and durability”
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“Patient comfort”
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“Patient satisfaction”
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Current trends in remedies
If Competition Tribunal or courts find violation of s. 74.01 of Competition Act, then advertiser may be subject to the following sanctions:
- a cease and desist order for up to 10 years- a requirement that the advertiser publish a
notice of the misleading claim and court’s order- an administrative monetary payment (AMP) for
individuals up to $50K (first order)/$100K (subsequent orders) and for corporations up to $100K (first order)/$200K (subsequent orders)
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Current trends in remedies
If criminal prosecution, the maximum penalty is a $200K fineIf Crown proceeds by indictment, then directors and officers of advertiser may face prison sentences of up to 5 years and a fine in the discretion of the court
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Current trends in remedies
Proposed amendments to Competition Act - Increase AMPs for corporations to $10
million for first order and $15 million for subsequent orders (for individuals, limits increased to $750K and $1 million)
- Introduce a right of restitution against misleading advertisers whereby consumers could recoup the purchase price for goods advertised under unsubstantiated claims
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To Summarize
• Unsubstantiated claims risky• Ongoing monitoring by competitors,
regulators and consumers• Beware of ad substantiation myths• Be proactive and develop ad review and
clearance process
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Some Ad Substantiation MythsMYTH #1
MYTH #2
MYTH #3
MYTH #4
MYTH #5
MYTH #6
All you need are a couple of studies to substantiate your claims
Anecdotal evidence, letters from satisfied consumers or information in the newspapers provide adequate substantiation
Money-back guarantees obviate the need for substantiation
Consumer or Expert Endorsements are substantiation (“I think Product X is so much
more effective than Brand Y)
I can cure a misleading claim with a disclaimer
“Results May Vary” will immunize my ad from
attack
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CLAIMS
“General Impression”
• What is the “net take-away impression”?
•What are the implied claims?
•Consumer Studies?
PuffPopularity in the Market
ClaimsEfficacy Claims
Consumer Preference
Claims
Consumer Survey data
MethodologyTarget Group
Sample Size
Objective technical data
Independent Market
Research
Product CategoryTimeGeography
No Substantiation
Identify
Classify
Evaluate
CLAIMS
“General Impression”
• What is the “net take-away impression”?
•What are the implied claims?
•Consumer Studies?
PuffPopularity in the Market
ClaimsEfficacy Claims
Consumer Preference
Claims
Consumer Survey data
MethodologyTarget Group
Sample Size
Objective technical data
Independent Market
Research
Product CategoryTimeGeography
No Substantiation
Identify
Classify
Evaluate
Advertising Clearance Process
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Ad Substantiation Do’s
• Get legal input before, not after, there’s a problem.
• Ensure your brand group and marketing executives understand the basics.
• Substantiate, early and often, the golden rule – special onus applies to performance claims.
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Ad Substantiation Do’s• Use caution when using the name of a
competitor or competitive brand of product – some special trade-mark rules apply here.
• Establish, and comply with, a clear approval and “due diligence” policy for claims.
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Ad Substantiation Do’s
• Have a game plan ready to defend the claim, including careful record management and establishment of a crisis management team.
• Watch the competition closely – learn from what they do right and pounce on what they do wrong.
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Ad Substantiation Do’s• Consider every possible basis and forum
for challenge – misleading advertising, failure to substantiate, injurious falsehood, unlawful interference, trade-mark or copyright violations, failure to meet regulatory standards, civil action, complaint to regulations, ASC trade dispute, etc.
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Ad Substantiation Don’ts
• Underestimate the potential damage to your business of a comparative claim gone bad.
• “Gild the lily” – the claim can’t exceed the limits of the support.
• Rely on stale data for ongoing claims.
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Ad Substantiation Don’ts• Exaggerate competitive differences or
unfairly disparage the competition.• Claim general product superiority on the
basis of “cherry-picking”.
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Ad Substantiation Don’ts• Rely on overly-broad or contradictory
disclaimers.• Assume that U.S. or other foreign
comparisons or research are valid in Canada.
• Reproduce competitor’s logos or packaging materials within your own advertising.
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Ad Substantiation Don’ts• Retain the research house or other expert
directly – use your lawyers to preserve privilege.
• Merely assume that you can or should match claims with your competitors.
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Conclusion
• When tempted to push the limits, remember the high level of scrutiny of competitors, regulators and consumers
• Identify, classify and evaluate claims and substantiation
• As much art as science• False economy to give ad substantiation
short shrift
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Questions
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MBDocs1440050v2
