Red Bull, Dunkin’ Donuts and False Advertising Rules
As consumers we are constantly bombarded and influenced by advertisements. They creep into areas where we least expect them, or even consciously recognize them for what they truly are. For instance, when driving on your daily commute, take stock in the number of advertisements that you encounter. Our vehicles bear their make and model symbol, 18 wheelers boldly display the products that they carry, billboards beacon for your attention, and the list goes on and on.
How many of the ads that we encounter on a daily basis do we take for granted, or simply believe that they will do what they promise? So often in our beauty obsessed society, we purchase products that guarantee results, only to find that there is no “miracle in a jar.” What happens when an advertisement is misleading, and/or false? What are the legal ramifications? As consumers, what are our rights?
The Lanham Act, 15 U.S.C. §1125(a), defines false advertisement and outlines the federal laws regarding advertising. Specifically, the Lanham Act states that false advertisement is, “Any advertising or promotion that misrepresents the nature, characteristics, qualities, or geographic origin of goods, services, or commercial activities.” [i]
In order to establish a claim for false advertisement, a plaintiff must show that the false statement of fact was made about the advertiser’s own or another person’s goods or services. Moreover, if a plaintiff prevails in a false advertisement suit, the remedies available to them are injunctive relief, corrective advertisement, and damages. [ii]
Injunctive relief is a civil legal remedy ordering a defendant to stop a specific act or behavior. A plaintiff will prevail with injunctive relief if it is demonstrated that there is a likelihood of deception or confusion on the part of the buying public caused by the products false or misleading description or advertising. [iii]
The second remedy, corrective advertising, involves the court ordering a defendant to correct the advertisement, and to issue a corrective statement. Corrective advertisement allows the courts to award the plaintiff monetary damages to launch a corrective campaign on their own. The final remedy, damages, may be awarded if the plaintiff can prove that some consumers were deceived or that the defendant used the false advertisement in bad faith. [iv]
So how precise does a company have to be in its advertisements? The federal government regulates false advertising under the Federal Trade Commission through the FTC Act. The FTC Act states, that an advertisement must be truthful and non-deceptive. Moreover, the advertisers must have evidence to back up their claims, and the advertisement cannot be unfair. In addition, to the federal law, states have their own consumer protection laws for advertisements, and industries are also regulated by oversight agencies. [v]
In 2014, the energy drink, Red Bull, was sued for falsely advertising that “Red Bull gives you wings”, which was their slogan at the time, and had been for almost 20 years prior to the suit. The plaintiffs in this class action suit alleged that the company made claims that the drink could improve concentration and reaction speeds. The plaintiffs argued that such claims were false. Red Bull agreed to settle the suit for more than 13 million dollars, and to reimburse customers who claimed that the energy drink failed to live up to expectations. Since the suit, Red Bull has revised and withdrawn its market claims that were complained of in court. [vi]
Red Bull is not the only company to face litigation as a result of its advertisements. Most recently, in the Massachusetts, a class action suit was filed against Dunkin’ Donuts, and 23 of its franchisees. The plaintiffs in the suit alleged that the donut store was using margarine or a butter substitute, instead of real butter on its bagels between the periods of June 2012 through June 2016. In fact, patrons of the store were paying an extra 25 cents to butter their bagels, and they were not made aware that a substitute was actually being used. The parties in this case have settled, and if the courts approve the settlement agreements, up to 1400 people may receive no more than three free baked goods at the locations named in the lawsuit.[vii] As seen with the Dunkin’ Donuts suit, false advertisements not only have the potential to hurt a company in their pocketbook, but can also lead to a lack of consumer trust. [viii]
In an effort to avoid such suits, a company should ensure that the advertisement is not likely to mislead consumers acting reasonably under the circumstances, and the ad should not omit important information that would affect a purchaser’s decision to buy the product. Companies should ensure that the advertisement does not cause, or is likely to cause injury to the consumer which a consumers cannot reasonably avoid, and is not outweighed by the benefit to the buyer.[ix]
As consumer’s we have all heard the caveat, “buyer beware” and therefore, as purchasers, we should be guided by the perspective of a reasonable consumer. In most cases, if it sounds too good to be true, it probably is.
[i] Lanham Act U.S.C. § 1125(a)
[ii] Legal Dictionary, Retrieved from http://legal-dictionary.thefreedictionary.com/False+Advertsing
[iii] Legal Dictionary
[iv] Legal Dictionary
[v] https://ftc.gov, Advertising FAQ’s: A Guide for Small Business. Retrieved from https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business
[vi] Business Insider (October 8, 2014), Red Bull Will Pay $10 to Consumers Disappointed the Drink Didn’t Actually Give them Wings, [Press Release]. Retrieved from https://businessinsider.com/red-bull-settles-false-advertising-lawsuit-for-13-million-2010-10
[vii] Victor, D., The New York Times (April 4, 2017), Butter or Margarine? In Dunkin’ Donuts Lawsuit, Man Accepts No Substitutes, [Press Release]. Retrieved from https://www.nytimes.com/2017/04/04/business/dunkin-donuts-butter-lawsuit.html
[viii] Frost, S., The Houston Chronicle, Negative Effect of False Advertising [Press Release]. Retrieved from https://smallbusiness.chron.com/negative-effect-false-advertising-25679.html
[ix] https://ftc.gov, Advertising FAQ’s: A Guide for Small Business. Retrieved from https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business
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