False Advertising & The Lanham Act

Learn What Business Owners and Executives Need to Know About Filing a False Advertising Claim Through The Lanham Act

Attorney Nick Oberheiden
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When companies make misleading statements in their advertising and engage in other deceptive marketing practices, this can have serious consequences for their competitors. Companies that do not engage in deceptive advertising can lose business as a result of this unfair competition—even if they clearly have a superior product or service.

Fortunately, the law is clear in these cases: When companies publish false advertisements and other misleading marketing materials, they can be held accountable in court. Companies can sue for false or misleading advertising; and, in doing so, they can seek compensation for lost revenue as well as other appropriate remedies.

Federal and State False Advertising Laws: An Overview

Prohibitions on false advertising exist under both federal and state law. At the federal level, the primary statutes that come into play are the Federal Trade Commission Act (FTC Act) and the Lanham Act. While the FTC Act does not establish a private right of action, the Lanham Act provides grounds for companies to pursue false commercial advertising claims, and companies can file false advertising lawsuits under state law in many cases as well.

Federal Trade Commission Act (FTC Act)

The FTC Act prohibits companies from making false or misleading statements in their advertising and marketing materials. This applies to advertisements in all media, and it includes not only companies’ direct statements, but also statements made by influencers and other third parties on their behalf. The FTC Act prohibits various other fraudulent business practices as well. However, as noted above, it does not grant a private right of action. As a result, companies must rely on other laws to issue cease-and-desist demands and seek monetary damages in false advertising lawsuits.

Lanham Act

The primary federal cause of action for false advertising is a violation of the Lanham Act. Under Section 43(a) of the Lanham Act (15 U.S.C. Section 1125(a)(1)(B)):

“Any person who . . . uses in commerce any . . . false or misleading description of fact, or false or misleading representation of fact, which . . . in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

Unlike the FTC Act, the Lanham Act expressly provides a private right of action in false advertising cases. This means companies that suffer financial losses due to competitors’ false statements and/or other fraudulent advertising practices can seek both injunctive relief and monetary compensation in federal court.

State Laws on False Advertising and Unfair Competition

State laws on false advertising and unfair competition also provide companies with grounds to pursue claims based on commercial fraud and deception in many cases. Similar to the Federal Trade Commission (FTC) and other federal authorities, while state attorneys general also generally have the authority to enforce these laws, enforcement actions in this area are uncommon. Additionally, even when governmental authorities pursue enforcement actions, they generally do so with a focus on protecting individual consumers and recovering compensation for higher prices customers were tricked into paying.

As a result, companies that have suffered losses due to competitors’ false advertising practices will need to take action to assert their legal rights in most cases. This starts with engaging a law firm to assess the viability of filing a lawsuit under federal or state law.

General Requirements to Sue a Company for False Advertising

While the specific requirements for filing a false advertising lawsuit vary between the Lanham Act and the various statutory and common law claims that exist at the state level, generally speaking, there are four overarching elements that a company must be able to prove in order to seek remedies in court. These elements are:

1. The Defendant Made a False or Misleading Statement

Suing for false advertising requires proof that the defendant made a false or misleading statement (or that a third party made a false or misleading statement on the defendant’s behalf). This could be a false or misleading statement about the defendant’s own product or service, about the plaintiff’s product or service, or about the defendant or the plaintiff itself.

2. The False or Misleading Statement Had a Tendency to Deceive (or Caused Actual Deception)

Establishing economic injury resulting from a false or misleading statement also requires proof that the statement either (i) had a tendency to deceive reasonable consumers; or, (ii) caused actual deception in the marketplace. Evidence of actual or potential deceit can take a variety of forms—from consumer statements to market analyses and expert reports.

3. The Potential or Actual Deception is Material

To be actionable in a false advertising case, the potential or actual deception caused by a false or misleading statement must be material. This means that it must lead to (or have the potential to lead to) consumers making misguided purchasing decisions. If a company is only able to sell its products because of its misleading claims—or if a company is only able to command a premium price because of its misleading claims, then a false advertising lawsuit may be warranted.

4. The Plaintiff Suffered Actual Damages (Not Required for Injunctive Relief)

To seek monetary relief in a false advertising lawsuit, a plaintiff must be able to prove actual damages. However, this is not a requirement for seeking injunctive relief. Under the Lanham Act, for example, companies can seek to enjoin competitors from engaging in false and deceptive advertising if they can prove that they are likely to suffer lost sales, lost market share, or loss of goodwill.

FAQs: False and Misleading Advertising Claims

What Constitutes a “False Claim” or “Deceptive Claim” in Advertising?

False and deceptive advertising claims can take many different forms. Some examples of potential grounds for companies to sue their competitors for false advertising include:

False statements about the company’s products or services
False statements about a competitor’s products or services
False statements about the company itself or about a competitor
Bait-and-switch advertising tactics
Misleading warranty or guarantee claims

Again, these are just examples. If you believe that one of your company’s competitors is misleading consumers in any way, we recommend consulting with an attorney about the options your company has available. False and deceptive claims in print, on TV and radio, on websites, and on social media can all provide grounds to sue for false advertising under the Lanham Act or state law.

When Should I Seek Legal Help with a False Advertising Claim?

We recommend consulting with an attorney as soon as you have concerns that your company may be losing business to false advertising. There are two equally important reasons why: (i) companies that engage in false advertising typically do not stop voluntarily; and, (ii) the longer you wait to take legal action, the more harm your business can suffer. Our attorneys can provide an in-depth assessment of your company’s legal options so that you can make an informed decision about how best to proceed.

Can Companies Sue for False Advertising Under the FTC Act?

Companies cannot sue for false advertising under the FTC Act. Even though the FTC Act prohibits false and deceptive marketing practices, it does not provide companies with a private right of action. However, many states’ “little FTC acts” do provide a private right of action, and companies can often sue for false advertising under the federal Lanham Act as well.

Can Companies Sue for False Advertising Under the Lanham Act?

The Lanham Act provides clear grounds for companies to sue their competitors in cases of false advertising. If your company is facing substantial losses due to a competitor’s deceptive marketing practices, then seeking immediate injunctive relief and pursuing a claim for monetary damages under the Lanham Act could be your company’s best option.

How Can Companies Prove Their Losses Resulting from Competitors’ False Advertising?

There are a variety of ways to prove losses resulting from a competitor’s false advertising. If your company has suffered actual losses (or is continuing to suffer actual losses), our attorneys can engage qualified experts who can testify regarding the direct and indirect economic impacts to your company. We can also work quickly to preserve any and all available evidence of your competitor’s deceptive advertising practices. If you need to know more, we encourage you to contact us promptly for a free and confidential consultation.

Experienced Legal Representation for False Advertising Cases | Schedule a Free Initial Consultation Today

If you need to know more about your options for suing a competitor for false advertising, we invite you to get in touch. Our attorneys can assess your company’s legal options and take all necessary and appropriate legal action on your company’s behalf. To schedule a free initial consultation at Oberheiden P.C., please call 888-680-1745 or tell us how we can get in touch online today.