Today, it is not just headache remedies and beverage companies that engage in comparative advertising. Many companies in the healthcare industry, including hospitals, HMOs and health insurers, engage in such print and media ad campaigns.
Comparative advertising, by way of endorsements, testimonials and other means, is more popular than ever before. These tools are highly effective means designed to sway the consumer -- which is precisely what can create potential violations of federal and state laws which prohibit false advertising and give the competitor a right to sue.
Commercials always can open an advertiser to liability: to the consumer, the government regulator, and competitors. With comparative advertising, the exposure to various claims brought by the advertiser's competitors has the potential to be even greater. These claims can be based on state law, including claims alleging defamation or disparagement and various "business torts," as well as for false advertising under federal and state statutes.
The federal false advertising statute, the Lanham Act, is found in, of all places, the federal trademark statute. But its reach goes well beyond trademark violations.
The Lanham Act provides strong remedies where "commercial advertising or promotion misrepresents the nature, characteristics, [or] qualities... of... goods, services or commercial activities." Under this federal law, a competitor can recover damages for lost good will or lost profits resulting from false or deceptive advertising. In some instances, competitors have been permitted to recover their own costs of running a corrective advertising campaign. In addition, a court will typically award an injunction in favor of the victor that will require the party who is guilty of false advertising to pull the objectionable ads.
The court also can require the loser to run new ads with disclaimers, reflective of accurate information, or to run an entirely corrective advertising campaign designed to correct the prior objectionable one.
Obviously, being on the losing end of a false advertising lawsuit can cause a company to pay a large verdict and other costs --not to mention the costs of the litigation itself.
Blue Cross of Greater Philadelphia and U.S. Healthcare each learned a lesson as a result of the comparative ad campaigns they waged against each other a few years ago, as a federal judge found many of the ads to be capable of defamatory meaning and potentially violative of the Lanham Act, which is the federal false advertising statute.
In that case, the court addressed the comparative advertising campaigns that each competitor ran against the other. The two campaigns focused on the perceived differences between a traditional indemnity health insurance plan and the benefits provided by an HMO. Each advertiser thought the other's ad campaign placed it in an unfavorable light, and they sought relief in the litigation. This case can help marketing professionals because it makes clear, not only what types of ads or ad content are a "problem" under the federal statute, but it also can clarify how a court can view an ad campaign under state law.
One of the TV advertisements in dispute depicted a woman in obvious distress. The woman in the commercial stated, "The hospital my HMO sent me to just wasn't enough. It's my fault." The court found that this ad implied that the HMO had adversely affected the woman, and that she had made a poor choice by choosing such coverage over typical health insurance. The court held this be a scare tactic capable of defamatory meaning.
Another ad at issue was U.S. Healthcare's. In this TV spot, as funereal music is heard in the background and a voice-over sets forth alleged inadequacies in Blue Cross/Blue Shield's plan, a sheet was pulled over a Blue Cross/Blue Shield brochure, which is resting on a hospital bed. All the while, distressed family members look on.
The court held that this ad, with its very strong imagery, was capable of a defamatory construction and was actionable as false or misleading advertising.
Pretty strong stuff. What steps should health care marketers take to limit the risk of becoming the subject of such litigation in this very competitive environment?
Look at the message being conveyed by the advertisement. Look at the ad on its face, as well as at its context. Does the ad have a false message? Is it misleading?
If an ad contains "mere puffery," then it doesn't violate the law. Surprisingly, mere lack of substantiation for the claims made in the ad is not enough to establish that the ad is false or deceptive. On the other hand, an advertisement may be literally true and still open one to liability if it leaves a false impression.
If your company thinks it is the subject of false advertising, a court will look at consumer surveys, focus groups, and other statistical information to see if a portion of the consuming public would find the ad misleading or have it change its purchasing.
Such statistics can help prove that a company lost profits, or allow it to get an injunction against the false commercials.It is important to review prospective ads with the federal and state false advertising statute (and court decisions!) in mind.
As the competitive climate in the healthcare industry heats up, it is likely that marketing professionals will consider the need for a comparative advertising campaign. In response, advertisers and marketers alike need to be aware of the risks involved in order to minimize latent pitfalls.