The Lanham Act and the Potential for Liability When Businesses Advertise Online
In today’s digital marketplace, many businesses have turned to online marketing campaigns to reach their target audience. Whether handled in-house or by outside agencies, businesses must be aware of the potential for liability under the Lanham Act. This article will delve into the ways in which businesses could unknowingly be liable for false advertising online and the consequences they may face.
False Advertising Under the Lanham Act
The Lanham Act, specifically Section 43(a), prohibits false advertising, which includes any false or misleading description or representation of goods or services that misrepresents their nature, characteristics, qualities, or geographic origin. To establish false advertising, a competitor must prove that the challenged message is either literally or impliedly false, material, placed in interstate commerce, and the cause of actual or likely injury to the plaintiff. The interpretation of what constitutes a false message is a heavily litigated issue, with courts distinguishing between literally false and impliedly false messages.
The consequences of false advertising can be severe for businesses. Aside from injunctive relief, businesses accused of false advertising may face significant monetary damages, including the competitor’s lost profits, disgorgement of its own profits, reputational damages, treble damages, corrective advertising costs, and attorney’s fees. These damages can amount to tens of millions of dollars, potentially bankrupting a company before a jury trial even begins.
Keyword Bidding Gone Wild
One common online marketing strategy is keyword bidding on platforms like Google Ads. Advertisers bid on keywords to ensure their website links and ads appear higher in search results. While this can be an effective way to drive traffic, businesses must be cautious of potential liability. Bidding on a competitor’s name is a common practice, but it could lead to legal issues if the search result or landing page misleads consumers or causes confusion. Dynamic keyword insertion, a tool that dynamically updates displayed ads to include the user’s search query, can also lead to misrepresentation and liability if not used properly.
Affiliate Marketing Pitfalls
Affiliate marketing, where businesses compensate third parties for reviews and endorsements, is another area where businesses can face liability under the Lanham Act. If influencers fail to disclose their association with the advertiser or materially mislead consumers, businesses could be held accountable. The Federal Trade Commission requires clear and conspicuous disclosure of these connections, and courts often consider FTC guidelines in false advertising cases. Businesses must monitor their affiliate marketing programs closely to ensure compliance with the Lanham Act.
Ignorance Is Not Bliss
While businesses may hire digital marketing firms to handle their online advertising, they cannot escape liability under the Lanham Act. Intent and bad faith are not elements in false advertising cases, making businesses ultimately responsible for any harm inflicted on competitors. It is crucial for businesses to actively monitor their online marketing campaigns to avoid potential legal issues.
In conclusion, businesses engaging in online advertising must be vigilant about compliance with the Lanham Act to avoid potential liability for false advertising. By understanding the risks and taking proactive measures to ensure compliance, businesses can protect themselves from costly legal battles and reputational damage.
