Endorsements Testimonials Comparative Advertising

1. EndorsementsTestimonialsComparative Advertising

2. 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)

3. What does that mean, in terms of Petty’s (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)

4. 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)

5. What does this mean in terms of Petty’s 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)

6. What does this mean in terms of Petty’s 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)

7. 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

8. 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

9. What is the product claim implied in the advertisement? • STP cleans fuel systems • A clean fuel system is better than a dirty fuel system

10. 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

11. FTC v. Steve Garvey • Former LA Dodger star • Paid endorser for Enforma Products • “Exercise in a Bottle” • “Fat Trapper”

12. 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)

13. 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)

14. What is the advertiser’s 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)

15. “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)

16. FTC v. Jenny Craig International.What kind of testimonials were involved? • Testimonials by consumers about their success in losing weight

17. 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 consumerswill generally achieve with the advertised product in actual, albeit variable, conditions of use.” 255.2 (a)

18. 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

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

20. History of the infomercial • Some identify birth of infomercial with children’s programming in 1970’s • 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

21. Creation of MTV was next step in process • Ads for Coke, Levi’s 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

22. 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”

23. 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 we’ll never be dateless again

24. Infomercials saturate some cable stations • Lifetime Channel airs ~ 43 hours/week • > six hours a day • ~ 25% of total programming • Nashville Network • 42 hours a week • Family Channel • 28 hours • USA Network • 19 hours

25. 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

26. TV pitchmen have become pop culture icons • 2002 Forbes Magazine listed “Top Pitchmen”

27. 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

28. What are the problems associated with infomercials? 1. Consumers may not understand that they’re 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

29. 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

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

31. 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

32. 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

33. 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

34. 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

35. Are there too many out there for the FTC to chase them all down? • Ridiculous Infomercial Review

36. Comparative Advertising

37. 2003: Battle of soup ads • 2004: Battle of beer ads • 2005: Battle of sugar ads

38. 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)

39. 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

40. 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

41. 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

42. 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"

43. 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.

44. 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.”

45. 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

46. 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 < 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

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

48. 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

49. 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

50. 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