Fights Over Advertising Claims Among Telcos, ISPs Are on the Rise
Battling for each other’s customers, telcos and ISPs increasingly are warring over each other’s advertising claims. Telco-related ad cases before the Council of Better Business Bureaus' National Advertising Division (NAD) are up. That growth could point to an increased emphasis on comparative advertising on the differences among options for consumers, now that two-year commitments and early termination fees have given way to more flexible contracts and even competitors paying customers’ early termination fees, said Alysa Hutnik, a Kelley Drye attorney with advertising expertise.
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Over the past two years, NAD has handled 17 telecom product/services cases, 15 of them challenges from competitors to ad claims. The two previous years saw nine such cases before the NAD, eight of them brought by competitors. In the two years before that, there were a total of 10 cases, with nine of them challenges from competitors. NAD said it also generates some cases internally by its own in-house advertising monitoring.
NAD so far this year has fielded challenges from Verizon about Comcast Xfinity home internet speed claims (see 1608090029), from T-Mobile regarding Sprint and savings for switching carriers (see 1606030049) and DirecTV on Charter Communications and Comcast (see 1602110022). Earlier this month, NAD said in a news release it was referring those Sprint claims to the FCC after company revisions "presented the same issue that troubled NAD in the underlying case -- namely that sweeping rate comparisons may be too detailed to fully explain in a 15- or 30-second spots." Multiple companies didn't comment.
The overall volume of ad complaints being taken to court also seems to be growing, Notre Dame law professor Mark McKenna told us. McKenna and Deborah Gerhardt, associate professor, University of North Carolina School of Law, are crunching data on ad complaints in U.S. District Court. The increase might relate at least partially to the business cycle, with companies more likely to sue each other when times are tougher, he said.
While ads typically go through multiple rounds of marketing and legal review and screening before being aired, ad disputes usually fall into one of two categories, said Eric Goldman, Santa Clara University School of Law professor. One comes from claims that require judgment calls about accuracy, he said, with the other being the "downward spiral" of a competitor making a legally risky claim and other competitors following suit. "It's not a direct conspiracy, it's basically a standard application of the prisoner's dilemma -- do you cooperate or cheat?" he said. The result is some industries, like dietary supplements, "where universally the claims are not credible," Goldman said.
NAD, which handles roughly 150 cases a year across multiple industries, is constrained somewhat by staffing and resources, and if it had more people it likely would handle more cases, a spokeswoman told us. Hutnik said complaints brought to NAD typically get picked up, but companies usually tackle such disputes first more informally with a desist letter or call to the competitor. "You need to make sure your own claims are well tailored [so] that they are not going to likewise fall down on the same charge," Hutnik said.