Legal Review: Differentiation Is Not Just in the Eye of the Marketer1 Nov, 2012 By: Amy Ralph Mudge, Venable L.L.P., Randal M. Shaheen, Jeffrey D. Knowles Response
In the hyper-competitive direct response marketplace, differentiation can be the key to a product’s success. Products that are “new,” “first,” “fastest” or “the only” can make the cash register ring. However, consumers, competitors and regulators frequently question whether a product truly lives up to the differentiators marketers use to describe the product.
In a series of recent decisions, the National Advertising Division of the Council of Better Business Bureaus (NAD), a self-regulatory body for the advertising industry, examined several different types of differentiation claims. The decisions in these cases provide guidance to marketers.
Unqualified “est” Claims
Few things say “better” better than claims ending in “est” — “largest,” “fastest,” “easiest” and other similar differentiators usually, in the opinion of NAD, communicate a superiority claim over all or the majority of competing products. The rule of thumb on superiority claims is that the product making the claim should be tested against 90 percent of the marketplace, based on unit sales. The problem with such superiority claims is that the marketplace is constantly evolving, which means these claims require continual substantiation.
An excellent example of the evolution of a superiority claim is the recent NAD case involving T-Mobile. For quite a while, T-Mobile’s claim to have “America’s Largest 4G Network” was the centerpiece of its advertising campaigns. When T-Mobile began the campaign, the company clearly had the nation’s largest 4G network. However, as competing mobile providers expanded their 4G network coverage, the superior size of T-Mobile’s network was less clear. Although T-Mobile unilaterally discontinued use of the claim, it did not do so in time to avoid an NAD challenge brought by AT&T.
Marketers who decide to use “est” claims need to ensure that they have in place the infrastructure to monitor and, as appropriate, revise their claims.
The Federal Trade Commission’s (FTC) longstanding guidance has been that a product can use the differentiator “new” up to six months after its launch. While the FTC has not committed resources to policing “new” claims, they are a frequent subject of NAD decisions. One such case is the recent decision in a monitoring case NAD brought against luxury jeweler Tiffany & Co. in response to the company’s advertising for jewelry made from “Rubedo.” Tiffany’s ads claimed Rubedo was a “new jeweler’s metal.” The NAD inquiry asked whether the pinkish alloy comprised primarily of gold, silver and copper was really a new metal. After Tiffany supplied expert testimony that Rubedo was, indeed, a newly developed alloy, NAD administratively closed the case.
“First and Only” Claims
In another recent case, NAD recommended that marketer Church & Dwight discontinue claims that the company’s First Response digital ovulation test is the “first and only” test to predict ovulation using an adaptive algorithm based on a woman’s individual hormone level.
The challenge in this case was brought by Clearblue Easy, a competing marketer of ovulation tests. In its decision, NAD noted that “first and only” claims necessitate the marketer having information about how competing products function. That information may or may not be readily available to the marketer making the “first and only” claim. Because it was reasonable that Church & Dwight did not know exactly how the Clearblue Easy product functioned when it made the claim, NAD did not find Church & Dwight at fault. However, the self-regulatory body did recommend that Church & Dwight discontinue the “first and only” claim going forward.
Aggressively highlighting a product’s differences from its competitors can be the difference between a hit product and an also-ran. However, reckless use of differentiation claims can result in charges of deceptive advertising from consumers, competitors or regulators. ■