Why truth in advertising matters

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Evolve Technologies, a maker of weapon detectors, recently settled charges with the Federal Trade Commission, that it had made false advertising claims about the effectiveness of its products. Evolve’s marketing material falsely claimed that its AI-powered weapons screening systems, used at 1,000 schools, and at casinos, stadiums and other public venues, will detect weapons and ignore harmless personal items.

The settlement requires Evolve to cease its false marketing claims and to allow all of its school customers to void their contracts without penalty. The stakes for false advertising can be high. In 2024 Guardant was awarded $292.5 million in its false advertising suit against Natera; in 2022 Monster Energy was awarded $293 million against Bang Energy.

An action by the FTC, such as its case against Evolve, is just one of the actions that can be brought against a false advertiser. Other causes of action include violations of state consumer protection laws, state statutes that protect businesses, common law actions for deceptive trade practices, product defamation, actions for false advertising under the Lanham Act and class-action suits.

False advertising generally involves either a false claim of origin or a false claim regarding a product’s qualities, either the advertiser’s product or a competitor’s. Courts will impose strict liability for false advertising.

Ironically, while a great deal of the harm caused by false advertising is visited upon the duped consumer who has relied on the false claim when deciding what product to buy, the Lanham Act does not provide the consumer standing to bring a claim.

A cause of action under the Lanham Act is only available to a plaintiff who falls within what the Supreme Court has called the “zone of interest,” meaning that the false claims have resulted in lost sales and/or damage to business reputation.

Even when a competitor is within the zone of interest, to be actionable the claim must have been made in commercial advertising or promotion, a requirement that is often disputed. The definition of commercial advertising under the Lanham Act is broader than the classic advertising campaign such as claims made in print, television, and social media.

For example, fundraising letters and material distributed at trade shows qualified as commercial advertising or promotion, while some person-to-person communications, so-called whispering campaigns, at trade shows and retail stores have been held not to be commercial advertising or promotion. Whether the communication is, or is not, commercial advertising can become a complex factual inquiry.

The Lanham Act recognizes two types of false advertising claims: those that are literally false and those that are implicitly false because they contain misleading representations that imply a false claim. A classic case of a literal false claim was Tropicana’s claim, voiced by Bruce Jenner, that its orange juice was “pure pasteurized juice as it came from the orange.”

Courts presume literal claims result in irreparable injury due to the impossible task of proving each lost sale; it is, however, a good idea to provide some credible evidence that the false claims resulted in at least some lost sales, such as survey evidence that establishes a significant number of consumers were likely to be misled and act on the false claims.

To obtain injunctive relief when the claim is implicitly false, a plaintiff must establish that the claim, although as far as it goes might be true, is still likely to mislead and confuse consumers. In other words, while the content of the claim may be literally true, the content implies something that is not true about the claimant’s product or its competitor’s.

Ad agencies can be held jointly and severally liable with their client when they help clients make false advertising claims. And a 1988 amendment to the Lanham Act removed any requirement that the ad agency, or anyone else involved, act with knowledge and intent to deceive. For this reason an ad agency should require that its client indemnify it against any claim that arises when the agency relies on client-provided claims.

False advertising can cost dearly. Many of the largest verdicts rendered under the Lanham Act have been the result of false advertising by some of the biggest and most sophisticated advertisers using the fanciest ad agencies. Smaller advertisers are not immune, and their ad agencies’ false advertising can pose an existential threat.

For this reason, it’s a good idea for legal eyes to review the ads developed by an ad agency or its marketing department.

(Editor’s note: An earlier version of this column inaccurately reported the year Guardant was awarded $292.5 million in its false advertising suit against Natera. It was in 2024.)

James B. Astrachan taught trademark and unfair competition law and copyright law at area law schools for 23 years.