mere direct competition doesn't plausibly plead false advertising standing

Allbirds, Inc. v. Giesswein Walkwaren AG, 2020 WL 6826487, No. 19-cv-05638-BLF (N.D. Cal. Jun. 4, 2020)

Allbirds sued Giesswein for trademark and related claims, and Giesswein counterclaimed for false advertising under state and federal law; the counterclaims are at issue here.

Giesswein sells footwear made from the wool of Merino sheep, including footwear referred to as “‘runners’ or sneakers,” “wool runners,” and “merino runners.” Allbirds also offers footwear products made of wool and referred to as “wool runners.” Giesswein alleged that “[o]ne of Allbirds’ central advertising messages for its footwear products is that the products are ‘natural’ or made of ‘natural materials,’ ” but Allbirds products allegedly contain synthetic polyamides and therefore the “natural” advertising is materially false or misleading.

Allbirds argued that Giesswein lacked Article III standing because it only plead generalized harm, e.g., “Giesswein has suffered and is likely to continue to suffer significant monetary damages and discernible competitive injury by the direct diversion of sales from Giesswein”; “Giesswein has suffered, and continues to suffer, injury in fact and has lost money, property, and/or goodwill”; and “Giesswein has and will continue to suffer damages, including lost sales, revenue, market share, and asset value.” Giesswein alleged that that parties were “direct competitors,” but that wasn’t conclusive of harm, and there were no allegations that customers chose Allbirds products over Giesswein products because of the alleged false or misleading advertising. The court agreed.

A party may prove its injury (1) by using lost sales data, that is “actual market experience and probable market behavior,” or (2) “by creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business.” “Evidence of direct competition is strong proof that plaintiffs have a stake in the outcome of the suit, so their injury isn’t conjectural or hypothetical.” But here there were no lost sales data, and Giesswein provided only one link in the chain of inferences: direct competition. Standing alone, that wasn’t enough.

Giesswein didn’t allege facts indicating that “the material of shoes is an important factor for consumers in deciding which shoes to buy such that Allbirds captures a larger share of the ‘all-natural’ shoe market because of its alleged false or misleading advertising.” Motion to dismiss granted with leave to amend (though the court suggested that the California UCL and FAL claims would require Giesswein to show that it relied on the alleged misrepresentation to its detriment, which would be hard to do even if it can plead Lanham Act standing).