Telebrands Corp. v. Federal Trade Commission, --- F.3d ----, 2006 WL 2243584 (4th Cir.)
Telebrands uses direct-response ads to promote its “compare and save” strategy – it finds popular items it can copy and sell cost-effectively. Some of Telebrands's more successful products include Ambervision Sunglasses, the Magic Hanger, the Safety Can Opener, the Audubon Singing Bird Clock, the Better Pasta Pot and the Roll-a-Hose Flat Hose.
Using this strategy, Telebrands introduced the Ab Force, an electronic muscle stimulation ("
Telebrands was copying other
The FTC issued an administrative complaint alleging that Telebrands had made false and misleading claims in violation of the FTCA, specifically, unsubstantiated claims that the Ab Force caused loss of weight, inches or fat, caused well-defined abdominal muscles, and was an effective alternative to regular exercise.
An administrative law judge found that Telebrands had made the claims alleged and that the claims were material to consumers. Furthermore, the parties stipulated that Telebrands neither possessed nor relied on substantiation of the alleged claims, and that, in fact, the use of the Ab Force did not result in the claimed benefits.
The FTC imposed a “fencing-in” remedy barring Telebrands from making any representation, express or implied, about weight, muscle, health, safety, performance, or efficacy in relation to “Ab Force, any other EMS device, or any food, drug, dietary supplement, device, or any other product, service or program,” without substantiation. Telebrands sought to have the order narrowed on the ground that there was no reasonable relation between the fencing-in provision and Telebrand’s violation of the law. The seriousness and deliberateness of the violation, the ease with which a violative claim may be transferred to other products, and a respondent’s history of prior violations are the three factors the FTC considers for whether an order’s scope bears a reasonable relationship to the violation it’s supposed to remedy. Telebrands challenged the FTC’s findings that Telebrands intended to make false claims, that its implied advertising claims were transferable to other product advertising, and that its entry into three prior consent orders for unrelated alleged violations on other products constitutes a history of prior violations.
The court found the violation serious. This wasn’t just overselling a product that was essentially fit for the advertised purpose. Rather, without substantiation, Telebrands mounted an expensive, nationwide ad campaign claiming that the Ab Force could deliver results that it just couldn’t. And it was successful: Telebrands sold 747,000 units with gross sales over $19 million.
The court also found substantial evidence of deliberateness. Telebrands’s use of “compare and save,” given its extensive experience with direct-response ads in general and with the “compare and save” strategy in particular, prevents any suggestion that it acted unintentionally. It wanted to capitalize on the popularity of existing
The second factor is the transferability of the offending conduct to other products. As with the first factor, substantial evidence supported the FTC’s finding of transferability. The marketing strategy for the Ab Force can be applied to almost any kind of product or service. Telebrands seeks out heavily advertised products to imitate. “Compare and save” is one of Telebrands’s standard marketing tools, and unsubstantiated benefit claims can easily be evoked by reference to other products combined visual images.
The FTC concluded that the first two factors were enough to justify a broad fencing-in order, but still considered Telebrands’s entry into three prior consent orders, even though it had never admitted liability, as support under the third factor. Because the court agreed that the strength of the first two factors was enough, it didn’t reach the issue of whether this was legal error.
1 comment:
Rightly said...yet it would be more better if you can add example which may acquaint prospect/customer about false ads by telebrands
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