Endorsements Testimonials Comparative Advertising

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EndorsementsTestimonialsComparative Advertising
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Is the Kyle Petty ad for STP an endorsement
under the FTC Guides?

• Any advertising message (including verbal
  statements, demonstrations, or depictions of the
  name, signature, likeness or other identifying
  personal characteristics of an individual or the
  name or seal of an organization) which message
  consumers are likely to believe reflects the
  opinions, beliefs, findings or experience of a
  party other than the sponsoring advertiser.
  255.0 (b)

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What does that mean, in terms of Pettys (a)
belief in and (b) use of STP?

• Endorsements must always reflect the honest
  opinions, findings, beliefs, or experience of the
  endorser. 255.1 (a)
• Where the advertisement represents that the
  endorser uses the endorsed product, then the
  endorser must have been a bona fide user of it at
  the time the endorsement was given. 255.1 (c)

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Is Kyle Petty an expert endorser?

• An individual, group or institution possessing,
  as a result of experience, study or training,
  knowledge of a particular subject, which
  knowledge is superior to that generally acquired
  by ordinary individuals. 255.0 (d)

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What does this mean in terms of Pettys use of
the product?

• An advertiser may use an endorsement of an
  expert or celebrity only as long as it has good
  reason to believe that the endorser continues to
  subscribe to the views presented.
• An advertiser may satisfy this obligation by
  securing the endorser's views at reasonable
  intervals where reasonableness will be determined
  by such factors as new information on the
  performance or effectiveness of the product, a
  material alteration in the product, changes in
  the performance of competitors' products, and the
  advertiser's contract commitments. 255.1 (b)

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What does this mean in terms of Pettys
obligation to evaluate the product?

• His endorsement must be supported by an actual
  exercise of his expertise in evaluating product
  features or characteristics with respect to which
  he is expert and which are both relevant to an
  ordinary consumer's use of or experience with the
  product and also are available to the ordinary
  consumer.
• This evaluation must have included an
  examination or testing of the product at least as
  extensive as someone with the same degree of
  expertise would normally need to conduct in order
  to support the conclusions presented in the
  endorsement. 255.3 (b)

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If Petty was paid for doing the ad, does that
fact have to be disclosed in the ad?

• When there exists a connection between the
  endorser and the seller of the advertised product
  which might materially affect the weight or
  credibility of the endorsement (i.e., the
  connection is not reasonably expected by the
  audience) such connection must be fully
  disclosed.
• An example of a connection that is ordinarily
  expected by viewers and need not be disclosed is
  the payment or promise of payment to an endorser
  who is an expert or well known personality, as
  long as the advertiser does not represent that
  the endorsement was given without compensation.
  255.5

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If Petty owned a share of the company, would that
fact have to be disclosed?

• When there exists a connection between the
  endorser and the seller of the advertised product
  which might materially affect the weight or
  credibility of the endorsement (i.e., the
  connection is not reasonably expected by the
  audience) such connection must be fully
  disclosed. 255.5

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What is the product claim implied in the
advertisement?

• STP cleans fuel systems
• A clean fuel system is better than a dirty fuel
  system

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If either claim is false, is Kyle Petty liable in
any way?

• Expert endorsers held to higher standards than
  consumer or celebrity endorsers
• Consumer endorser needs to have used the product
  as basis for evaluation
• Expert endorser required to conduct independent
  evaluation of product based on own expertise

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FTC v. Steve Garvey

• Former LA Dodger star
• Paid endorser for Enforma Products
• Exercise in a Bottle
• Fat Trapper

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• FTC took position that
• Garvey an expert because of status as former
  professional athlete
• thus liable for making unsubstantiated claims
  about product
• Court held Garvey not an expert endorser
• Was a consumer endorser and claims about his own
  experience were accurate (lost weight)

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Dorothy Hamill does testimonial ads for Vioxx as
a treatment for osteoarthritis. Is she an expert
endorser?

• An individual, group or institution possessing,
  as a result of experience, study or training,
  knowledge of a particular subject, which
  knowledge is superior to that generally acquired
  by ordinary individuals. 255.0 (d)

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What is the advertisers responsibility in this
(consumer/celebrity) type of claim?

• An advertisement employing an endorsement
  reflecting the experience of an individual or a
  group of consumers on a central or key attribute
  of the product or service will be interpreted as
  representing that the endorser's experience is
  representative of what consumers will generally
  achieve with the advertised product in actual,
  albeit variable, conditions of use. 255.2 (a)

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• Therefore, unless the advertiser possesses and
  relies upon adequate substantiation for this
  representation, the advertisement should either
• clearly and conspicuously disclose what the
  generally expected performance would be in the
  depicted circumstances or
• clearly and conspicuously disclose the limited
  applicability of the endorser's experience to
  what consumers may generally expect to achieve.
  255.2 (a)

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FTC v. Jenny Craig International.What kind of
testimonials were involved?

• Testimonials by consumers about their success in
  losing weight

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What was the problem?

• An advertisement employing an endorsement
  reflecting the experience of an individual or a
  group of consumers on a central or key attribute
  of the product or service will be interpreted as
  representing that the endorser's experience is
  representative of what consumers will generally
  achieve with the advertised product in actual,
  albeit variable, conditions of use. 255.2 (a)

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What disclosures were they required to make?

• clearly and conspicuously disclose what the
  generally expected performance would be in the
  depicted circumstances or
• clearly and conspicuously disclose the limited
  applicability of the endorser's experience to
  what consumers may generally expect to achieve

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Infomercials

• Relate to topic because a common technique of
  infomercials is endorsement and testimonial

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History of the infomercial

• Some identify birth of infomercial with
  childrens programming in 1970s
• Kid-Vid became primarily opportunity to sell toys
• Toy-based shows included
• He-Man and the Masters of the Universe
• GI Joe
• Thundarr the Barbarian
• Blackstar
• Mr. T

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• Creation of MTV was next step in process
• Ads for Coke, Levis and Ford used same
  techniques as music videos
• Michael Jackson promoted Pepsi in his videos and
  made Pepsi commercials that were knock-offs of
  the videos

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• Prior to 1984 FCC rules limited number of
  commercial minutes per hour
• Initially seven minutes
• Increased to twelve minutes
• Lifting of restrictions gave birth to infomercial
  as we know it today
• Also known as
• long form marketing
• direct-response television

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Infomercials today

• Infomercials sell a wide variety of products
  they tell us how we can
• Inhibit baldness
• Become rich in real estate
• Cut rocks with ginsu knives
• Cook in woks
• Become thin with body cream
• Quit smoking without using will-power
• Wax our cars so they can resist a flame thrower
• Learn to dance so well never be dateless again

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Infomercials saturate some cable stations

• Lifetime Channel airs 43 hours/week
• gt six hours a day
• 25 of total programming
• Nashville Network
• 42 hours a week
• Family Channel
• 28 hours
• USA Network
• 19 hours

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There are now channels just for infomercials

• ATV (advertising television) includes
  infomercials and short-form commercials
• 24 hours of commercials!
• Succeed because they pay cable suppliers to be
  included in basic service

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TV pitchmen have become pop culture icons

• 2002 Forbes Magazine listed Top Pitchmen

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Infomercials a rapidly growing form of marketing

• 1990 to 1997 went from late-night novelty to
  1billion industry
• TV Guide poll
• 29 of consumers have purchased product
  advertised on infomercial
• 91.5 of television stations air infomercials

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What are the problems associated with
infomercials?

• 1. Consumers may not understand that theyre
  watching a paid advertisement
• Early infomercials mimicked format of
  investigative programs like 60 Minutes
• Actors identified as reporters spoke from what
  appeared to be anchor desks
• What appeared to be unbiased evaluations of
  products were pitches for them

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How did the government deal with the problem of
deception?

• FTC sued two companies required them to make
  disclosures
• at the beginning of the infomercial
• whenever ordering instructions are given
• Other advertisers voluntarily adopted same
  disclosure requirements
• Some stations have made these disclosures
  requirement of buying airtime

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• 2. Infomercials are fertile ground for scams
• Many product claims are unsubstantiated
• Others outright false
• FTC brought 30 cases as of 1997
• gt 75 companies or individuals were under FTC order

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Some early FTC cases

• October 1993 settled case with David Del Dotto
  regarding his Cash Flow System
• Del Dotto falsely represented that he helped
  hundreds of thousands of consumers make
  substantial sums of money buying and selling real
  estate

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• June 2003 settled case with Michael S. Levey
  infomercial producer and host
• Alleged numerous deceptive practices in
  promotions selling
• EuroTrym Diet Patch
• Foliplexx baldness treatment
• Y-Bron impotence treatment
• Magic Wand kitchen mixer

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Some recent FTC cases

• October 2003 sued Telebrands Corp., marketer of
  Ab Force electronic muscle stimulation belt
• Alleged falsely claimed product
• Causes loss of weight, inches and fat
• Causes well-defined abdominal muscles
• Is an effective alternative to regular exercise

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• July 2003 sued Wellquest International, maker of
• Bloussant breast enhancement product
• EnerX for male virility
• D-Snore to relieve snoring
• Alleged claims were unsubstantiated, false or both

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Are there too many out there for the FTC to chase
them all down?

• Ridiculous Infomercial Review

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Comparative Advertising
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• 2003 Battle of soup ads
• 2004 Battle of beer ads
• 2005 Battle of sugar ads

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What is Comparative Advertising?

• "Advertising that compares alternative brands on
  objectively measurable attributes or price, and
  identifies the alternative brand by name,
  illustration or other distinctive information."
  (FTC Policy Statement)

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Arguments in Support of Comparative Advertising

• Consumers are in better position to judge which
  products best suit their needs because
  comparative ads provide additional factual
  information
• Prohibition of comparative advertising violates
  basic freedoms
• freedom to express one's own opinion and
  fundamental freedom of speech
• Limiting comparative advertising incompatible
  with goals of free enterprise system thus not in
  public interest
• comparisons enable consumers to make better
  economic decisions
• Comparisons likely to force manufacturers to
  improve products

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History of Comparative Advertising

• Recent phenomenon in U.S.
• Prior to 1960's most comparative ads made
  nebulous claims of superiority and did not name
  competitor
• referred to "Brand X
• concerned about creating benefits for competing
  brand

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• First comparative ads used by Avis
• "We're number two/we try harder ads in mid-60's
• didn't name Hertz as 1 most consumers were
  aware of that fact
• 1970's saw proliferation of comparative ads in US

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Early obstacles to comparative advertising

• trade association codes of conduct prohibited
  "disparagement" of competitors' products
• three major television networks (ABC, CBS, NBC)
  refused to air them
• FTC pressured networks into broadcasting
  comparative ads
• 1979 FTC issued "Statement of Policy Regarding
  Comparative Advertising"

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FTC Policy Statement Regarding Comparative
Advertising

• The Federal Trade Commission has determined that
  it would be of benefit to advertisers,
  advertising agencies, broadcasters, and
  self-regulation entities to restate its current
  policy concerning comparative advertising. 
  Commission policy in the area of comparative
  advertising encourages the naming of, or
  reference to competitors, but requires clarity,
  and, if necessary, disclosure to avoid deception
  of the consumer. Additionally, the use of
  truthful comparative advertising should not be
  restrained by broadcasters or self-regulation
  entities.

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• The Commission has supported the use of brand
  comparisons where the bases of comparison are
  clearly identified. Comparative advertising, when
  truthful and non-deceptive, is a source of
  important information to consumers and assists
  them in making rational purchase decisions.
  Comparative advertising encourages product
  improvement and innovation, and can lead to lower
  prices in the marketplace. For these reasons, the
  Commission will continue to scrutinize carefully
  restraints upon its use.

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The Importance of Truthfulness U-Haul v. Jartran

• 1979 Jartran entered self-move market dominated
  by U-Haul
• Placed more than 2,000 ads in 160 cities
• Ads compared Jartran's prices to various cities
  to U-Haul's prices

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Problems with ad campaign

• Jartran's prices were represented as their normal
  prices
• in fact were special promotional prices
• U-Haul rates quoted by Jartran contained a
  "distribution fee" U-Haul charged to cover the
  expense of returning one-way rentals from popular
  drop-off cities to cities with temporary
  shortages of rental equipment
• Jartran did not disclose that consumers could
  avoid fee by agreeing to drop off rental
  equipment at another nearby location or delaying
  the move
• such fees were applied in lt 5 of U-Haul rentals
• Jartran's claim that "only Jartran has new
  trucks" was false because U-Haul did have some
  (though not all) new trucks

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• In private legal action brought by Jartran, court
  awarded Jartran
• 20 million in actual damages
• 20 million in punitive damages

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Comparative Advertising in a Global Marketplace

• Many countries have different view on issue of
  comparative advertising
• particularly where competitor's trademark is used
  
• Some view practice as tool for weaker companies
  to trade on stronger competitor's reputation
• Some countries restrict comparative advertising
  on certain products only
• Canada prohibits comparisons for
• drug products (if comparison based on effect)
• alcoholic beverages

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• In some countries, comparative advertising
  discouraged for other reasons
• In Japan advertising agencies are massive
• unlike US, often hold accounts of competing
  companies
• agencies would risk losing clients
• American firms doing business globally need to be
  aware of presence of laws prohibiting or
  restricting comparative advertising in other
  countries

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Guidelines for Effective Comparative Advertising

• Intent and connotation of advertisement should be
  to inform and never to discredit or unfairly
  attack competitors or competing products
• If a competitive product is named, it should be
  one that is truly significant competition
• The competition should be fairly and properly
  identified, but not in a manner or tone of voice
  that degrades the competitor
• If the products and/or services are compared the
  similar properties of the service or product
  should be compared dimension to dimension,
  feature to feature

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• Identification of competition should be for
  honest comparison and not to upgrade by
  association
• If there is testing to be done it should be done
  by an objective testing source
• preferably an independent testing source
• Competitor's trademark should not be used in a
  more prominent fashion than ones own
• could lead to confusion as to source or
  sponsorship