fine print won't necessarily fix misleading comparison

Asurion, LLC v. SquareTrade, Inc., 2019 WL 4142154, No. 18-cv-01306 (M.D. Tenn. Aug. 30, 2019)

The parties compete to provide extended warranties for mobile phones. Typically, wireless carriers bundle Asurion’s insurance with an extended warranty and technical support and sell the combined “Carrier Protection Plan.” SquareTrade sells a “Protection Plan” that provides protection against defects and accidental damages for a variety of consumer products, including cell phones, but doesn’t cover theft or loss as Asurion’s plan does. In addition, the SquareTrade plan doesn’t include technical support, as does the carrier bundle.

Asurion challenged a mail ad:

And an online ad:

The fine print in both advertisements states: “… Price comparisons based on smart phone protection for the following providers: [a bunch of bundles]. Prices and terms are as of 08/01/2018 and may change. SquareTrade plans do not cover loss or theft. …”

Asurion alleged that the side-by-side comparison in the advertisements falsely and misleadingly implies that SquareTrade offers coverage equivalent to the bundles for a lower price and that using the name of its affiliate, Allstate, in the online advertisement misleadingly implies SquareTrade offers insurance (i.e. theft and loss protection). It alleged false advertising under the Lanham Act and the Tennessee Consumer Protection Act (TCPA). The court denied SquareTrade’s motion to dismiss.

Context matters; a disclaimer or clarifying language may defeat a claim of deception “if it renders an otherwise false statement true, so that consumers are not misled. To be effective, a disclaimer must actually be read by the consumer. Consequently, a disclaimer that is unlikely to be read because of its print size or location will not remedy a misleading claim.” 

Asurion alleged misleadingness. At this stage, it needed to plead facts that support a “plausible inference that the challenged advertisements in fact misled a significant number of reasonable customers.” The core of the complaint was the allegedly implied false equivalency between the SquareTrade plan and the bundles. For example, the mailer allegedly falsely suggested” that SquareTrade “offers insurance coverage by co-branding the advertisement with Allstate (an insurance company) and stating ‘Stop overpaying for phone insurance through your wireless carrier’ and ‘By switching to SquareTrade your family could save hundreds vs. carrier insurance.’ ” [It sounds a bit different to say “save on insurance by not paying for insurance.”] Asurion argues that the logical conclusion implied by the statements and by the comparison charts is that “a consumer could replace one of the Carrier Protection Plans with SquareTrade’s plan without any change in coverage.”

SquareTrade argued that the fine print disclaimer avoided misleadingness and that any reasonable consumer “would know that each plan offered by a different company at a different price likely has some differences in the services offered.” The court disagreed for purposes of a motion to dismiss. “Here, the side-by-side comparison suggests that the plans are, if not identical, at least comparable. The fine print disclaimer does not conclusively remedy the potentially misleading nature of the advertisement as a whole. Other than the notice that the SquareTrade plan does not cover loss or theft, the fine print does nothing to dispel any misleading comparisons between SquareTrade and the Carrier Protections Plans with which it is compared.”  Although people know that dog food isn’t made from people food, “SquareTrade’s Protection Plan is not so obviously different from the Carrier Protection plans that consumers would instinctively know they were not the same product.”  Plus, even the disclaimer didn’t explain that the other plans listed did cover theft or loss, so it didn’t dispel the perception that the plans listed had comparable coverage, the way the ingredient list on dog food explains what’s in it.

For similar reasons, the TCPA claim survived, after the court found that competitors had standing to bring such claims, given the statutory language that a claim may be brought by any person, including corporations, who “suffers an ascertainable loss” proximately caused by unfair or deceptive actions declared unlawful by the TCPA.