United States: Rivals Pounce on Overblown Ad Claims

Last Updated: May 15 2014
Article by David O. Klein

Small Businesses Often Tripped Up by Rules, Suits

Craig Dubitsky, founder and CEO of Hello Products, which was sued by Procter & Gamble. Daniella

Weeks after Craig Dubitsky's new company delivered its first shipment of "pink grapefruit" and "mojito mint" toothpaste to about 8,000 stores across the U.S., a letter arrived at his small Montclair, N.J., business, Hello Products LLC.

The sender: Procter & Gamble Co.

The consumer products giant and maker of Crest toothpaste wanted Hello to retract its claim—on its labels, in a print ad and on its website—that its toothpaste was "99% Natural." "It really puts the fear of God into you," says Mr. Dubitsky, a 48-year-old entrepreneur.

Though he stood by the claim, Mr. Dubitsky said he offered to remove it on the next batch of toothpaste labels, to be printed within a few months. That wasn't good enough. In January, P&G sued Hello, charging it with false advertising as a direct competitor under federal law.

Claims about a product's benefits are almost always the jumping off point for marketing and advertising, but overstating the situation—intentionally or unintentionally—can open a manufacturer up to allegations of false advertising. Rivals can claim violations of federal law, while consumers may launch class-action lawsuits under state consumer-protection laws. Small businesses, without a team dedicated to legal and regulatory issues, can easily land on the wrong side of the rules, at least in the eyes of a rival.

Under truth-in-advertising rules, ads must be "truthful and nondeceptive" with evidence to back up their claims, according to Federal Trade Commission guidelines for small advertisers. Penalties can range from cease-and-desist orders, to fines of $16,000 a day, per infraction, according to the government agency. Since 2010, for instance, the FTC has brought charges against 65 advertisers for deceptive health ads alone.

In March, a Supreme Court ruling widened the range of businesses that can sue other companies for false advertising under the federal Lanham Act, by allowing businesses that aren't direct competitors to pursue claims.

Mr. Dubitsky of Hello settled its legal dispute with P&G in March, agreeing to stop selling products with the old label by the end of that month.

Mr. Dubitsky says he believes P&G used federal advertising laws to bully a small competitor—a trend he says he believes is also on the rise. "They were saying that we couldn't call it natural because there were chemicals involved. You know another 'chemical' process? Photosynthesis," he says. "All this stuff is a gray area," he says about such advertising claims.

A spokesman for P&G declined to comment although it confirmed the details of the dispute. In its March statement, P&G accused Hello of violating advertising laws because its toothpaste "contains ingredients that are extensively and chemically processed," including Fluoride, and wasn't as "natural" as it claimed.

On top of legal fees, which Mr. Dubitsky said came to "six figures," his company was also left with roughly 100,000 tubes of toothpaste that couldn't be sold. Mr. Dubitsky wouldn't disclose the company's annual revenue, saying only that it's "well over" $1 million. The company currently has seven employees.

After the P&G injunction, Hello changed its packaging from "99% Natural" to "Naturally Friendly." As for the old tubes, Hello handed them out on the streets of Manhattan—getting some marketing mileage out of the problematic packages.

Many of the companies that get tangled up in false-advertising claims "are small companies that aren't intentionally doing something wrong, but simply don't know where to draw the line," says Lee Peeler, a former deputy director of Federal Trade Commission's consumer protection bureau and the president of the Advertising Self-Regulatory Council, a division of the Council of Better Business Bureaus that monitors the advertising market. Of the 150 cases of false advertising investigated each year by the council, some 95% are resolved by advertisers after being notified of a problem—such as unsubstantiated claims, misleading prices or uncredited endorsements, Mr. Peeler says.

He adds, "The Internet has really changed things for small companies, because they can now make their own ads and get them in front of consumers fast."

"The Internet makes it easier to make mistakes," says David Klein, a managing partner at Klein Moynihan Turco LLP in New York who represents small advertisers. "In order to keep up with the big players, they feel like they have to exaggerate and they can get in trouble," he says, adding that he is seeing more small firms getting caught up in false-advertising cases in recent years.

False-advertising lawsuits resulted in more than 60 court decisions in 2010, up from fewer than 10 in 1990, according to preliminary data gathered in a study by the University of North Carolina and the University of Notre Dame. "We have every reason to believe the numbers have kept going up" during the period from 2010 through 2014, says Deborah Gerhardt, a University of North Carolina School of Law professor who is coauthoring the study, to be released later this year.

Some recent cases—such as federal regulators ruling against health claims by Pom Wonderful LLC's juice (which the company is appealing)—have raised the profile of claims of misleading marketing, and may inspire similar lawsuits. Many food companies are backing away from claims of "natural" in the face of lawsuits.

Last week, Vibram USA Inc., the maker of FiveFingers running shoes, settled a class-action lawsuit, filed in U.S. District Court in Massachusetts in March 2012, over ads claiming its five-toed shoes strengthened muscles and prevented injuries. The Concord, Mass., company offered to pay a total of $3.75 million to customers, who paid about $100 for the shoes, and agreed to stop making the claims.

"For us it was a decision based on legal costs," said Vibram USA CEO Mike Gionfriddo, adding that the legal fees to date are already higher than the cost of the settlement. He said the company removed the health claims in 2012, when the complaint was filed: "We didn't want to mislead our customers."

Source: WSJ

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

David O. Klein
In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions