Top Ten Advertising Bloopers And How You Can Avoid Them INS IGHT ADVERTIS ING & MARKETING LAW CONFERENCE NOVEMBER 25, 2005 Jeff S canlon McMillan Binch Mendelsohn LLP
Agenda Advertising Bloopers: • Contests � - 4 bloopers Misleading Advertising � - 1 blooper Comparative Advertising � - 4 bloopers Intellectual Property � - 1 blooper
Contests and the Criminal Code The Skill-Testing Question Paragraphs 206(1)(a) to (d) of the Criminal Code • prohibit schemes for disposing of property by “ any mode of chance” S upreme Court of Canada has clarified that only • games of “ pure chance” are prohibited A proper skill-testing question converts a game • of pure chance into a game of mixed chance and skill
Contests and the Criminal Code “No Purchase Necessary” ection 206(1)(f) of the Criminal Code • S makes it an offence to dispose of any goods, wares or merchandise by any game of chance or any game of mixed chance and skill in which the contestant or competitor pays money or other valuable consideration
Contests and the Criminal Code Penalty Indictable offence punishable by � imprisonment for a term not exceeding two years OR summary conviction offence punishable by a � fine not exceeding $25,000
Contests and the Competition Act Full Contest Rules Adequate and Fair Disclosure: Number and approximate value of prize; � Area or areas to which they relate; and � Any fact within the knowledge of the contest � sponsor that materially affects chances of winning
Contests and the Competition Act • Short List Disclosure in Ads: � Packaging � Point-of-S ale � Billboards � TV � Radio � Internet
Contests and the Competition Act Competition Bureau’s Program of Binding Written Opinions � $1,000 fee � 2 weeks for “ simple” contests � 6 weeks for “ complex” contests
1. McDonald’ s • Blooper Game piece promotion on product containers � Marketing company personnel stole winning pieces � and collected prize money Led to negative publicity and FBI investigation � McDonald’ s published apologies in newspapers and � awarded $10 million in prizes • Lesson Identify and manage any security risks surrounding the � prize fulfillment offer S trong brands can rise above past gaffes �
2. Ultramar Blooper • Gas coupons were to be awarded, � including 3 grand prizes for $1500 of fuel Printing error created hundreds of grand � prize winners Lesson • Insert clause in rules to address this � possibility Over-redemption insurance can be applied � to cover unanticipated responses S imilar to bloopers by Coca Cola (S uper � Bowl) and Pepsi (Philippines)
3. Popsicle Industries Blooper • Points collection program that offered Nintendo game as � prize; but demand exceeded supply Although rules allowed substitute prizes, prizes selected � were of inferior quality Company paid $250,000 to honour demand for games and � paid fine of $200,000 for untimely delivery of prizes under Competition Act Lesson • Ensure that you can deliver on your offer to avoid � misrepresentation claims Carefully review language in rules �
4. Hoover • Blooper Contest promised consumers in Europe free � airline ticket with the purchase of a vacuum Hoover was flooded with requests for vacuums by � consumers seeking cheap airfares; tickets cost more than the revenue generated from the sale of the vacuum Cost $10s of millions, years of litigation and � negative PR • Lesson Ensure realistic assessment of costs of contest �
Misleading Advertising The Competition Act contains criminal and • civil provisions prohibiting misleading representations and deceptive marketing practices Any representation, in any form, which is false or • misleading in a material respect is prohibited The test for materiality is whether the • representation could influence a consumer to buy a product or service The court will look at the general impression • conveyed by the representation in addition to its literal meaning
Misleading Advertising Penalties S ummary offence punishable by fine of up � to $200,000, imprisonment for up to one year, or both OR Indictable offence punishable by a fine at � the discretion of the court, imprisonment for up to five years, or both
Misleading Advertising Representations on the Internet The Competition Act’s misleading • advertising provisions apply equally to material online representations Includes both Internet representations which • could influence on-line purchases and off- line purchases For more info, see The Competition Bureau’ s • “ Information Bulletin on the Application of the Competition Act to Representations on the Internet ”
5. KFC Blooper • KFC advertising referred to the � nutrition value of a skinless chicken breast Commercials failed to mention the � actual levels of fat, saturated fat, trans fat and cholesterol in its chicken breasts with skin KFC’ s implicit health claim that eating � KFC chicken was part of a healthy lifestyle was false
5. KFC Lesson • Advertisers must consider both the � literal and general impression conveyed by ad Advertisements should be evaluated � from the viewpoint of a consumer “ acting reasonably under the circumstances” The advertiser is responsible for all � reasonable interpretations
Comparative Advertising No prohibition against direct comparative • advertising Part of the misleading advertising • sections of the Competition Act Companies must understand the • boundaries and restrictions on comparative advertising re: ordinary price claims, performance claims and trade-marks
6. Forzani (S port Check) Blooper • Forzani’ s price claim, “ compare at” with respect to � the ordinary prices offered by suppliers was overstated; Forzani had failed to support the key requirements for making such price claims, namely that: suppliers in the relevant geographic market area had sold a 1) substantial volume of products at or above the claimed prices within a reasonable time before making the representation and; The suppliers offered products at or above the claimed 2) prices in good faith for a substantial time period recently before making the price claims
6. Forzani (S port Check) • Lesson Retailers should establish a sound corporate � compliance regime that will ensure adherence to the ordinary pricing provisions of the Competition Act
7. General Mills Inc. Blooper • Television commercial in U.S . suggesting that eating � “ Total” instead of “ S pecial K” would increase weight loss This statement not supported by underlying research � Lesson • S ince “ performance claims” test is not what � advertiser intended to communicate, but what was actually said (explicitly or implicitly), be sure to prove your performance claims before starting ad campaign and be narrow in your comparison with competition
8. Pringles Blooper • Pringles using image of Lay’ s � product in its advertising Lesson • If you mention a competitor’ s � registered trade-mark in a negative context, you could be found to have depreciated the value of the value of its goodwill Focus on the differences � between the products rather than the similarities
9. FedEx Blooper: • Ads that make prominent use � of a competitor’ s trade-marks could lead to “ passing off” lawsuits Lesson: • Your own trade-marks should � always be more prominent than your competitors and use a disclaimer
Intellectual Property � Intellectual Property Trade-marks � � word, symbol, slogan, design � that is used by a person � for the purpose of distinguishing the wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others Domain Names �
10. PricewaterhouseCoopers Blooper • PWC spent £75 million renaming its consultancy arm to “ Monday” � PWC did not check to see if similar name was already in use by a � listed company on the stock exchange; PWC paid a firm called “ One Monday” £3.5 million for exclusive use of the word “ Monday” PWC did not secure domain name in the UK; customers were � directed to a parody website set up to mock PWC Lesson • Always conduct a thorough trade-mark search to see what is � available and whether you may be infringing existing trade-marks Always check variations and geographic coverage of domain � name
Top 10 Advertising Tips Identify and manage any security risks surrounding the prize 1) fulfillment offer Insert clause in contest rules that allows solution if contest does 2) not run according to plan or if error Ensure that you can deliver on your offer to avoid 3) misrepresentation claims Ensure realistic assessment of costs of contest 4) Consider both the literal and general impression conveyed by your ad 5) - a dvertisements should give the whole story – don’ t leave out essential information and make sure you disclose any limitations on the representations you have made
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