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Brand Protection & Advertising

Stay ADvised: What's New This Week, February 14

02.18.22
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In This Issue:

Appeals Court Gives Poor Reviews to Restaurant Group's Bid to Resuscitate Yelp Review Software Suit

A California court of appeal has affirmed Yelp's victory in a long-running lawsuit that alleged that Yelp falsely advertised its recommendation software and engaged in unfair competition.

Following a bench trial in which Yelp prevailed entirely, the appellate court affirmed, in a published opinion, that the trial court acted within its discretion when it refused to compel the popular site to disclose highly confidential source code to plaintiff during discovery and that the exclusion of the plaintiff's representative during portions of the trial in which trade secrets were discussed did not warrant a reversal.

Plaintiff's Rafters restaurant received a string of Yelp reviews critical of its business and had several positive reviews (some posted by its own representatives, including five-star reviews by the restaurant's manager) that were not recommended by Yelp's recommendation software, which Yelp uses to identify less reliable reviews.

Restaurant owner James Demetriades demanded that Yelp change Rafters' rating and give him access to the "source code and algorithm for the so-called filters." When Yelp refused, Demetriades sued, as the sole representative of Multiversal Enterprises-Mammoth Properties, LLC.

The 2012 complaint alleged that Yelp falsely advertised the veracity and trustworthiness of its reviews and recommendation software. Demetriades alleged that Yelp's software actually highlighted "the most entertaining" reviews onto the site and suppressed unbiased positive reviews.

Following a 2019 bench trial held in Los Angeles Superior Court, the trial court ruled for Yelp, finding no evidence that it made false statements about its software and plenty of evidence that Yelp went to great lengths to "ensure real people with established profiles are writing the top reviews, and that business owners and employees are not writing their own biased or inaccurate reviews." On the source-code issue, the court held that Demetriades, who has a background as a software developer, failed to show that access to the source code was necessary to prove his case. The trial court's decision took into account the potential damage that access to the source code by the wrong person could cause to Yelp.

At issue in the appeal was whether the lower court erred in refusing to compel the production of Yelp's source code and excluding Demetriades during the trade secrets portions of the trial. The appeals court held that both rulings by the trial court were within its discretion.

On the source code issue, the appeals court noted that the evidence showed the source code was unnecessary to analyze the claims Demetriades alleged. "Given the mediocre value of information available from review of the source code," the lower court was within its discretion when it held that that the code wasn't necessary to determine whether Yelp's challenged statements were false.

The appeals court also rejected Demetriades' argument that the trial court erred in excluding him from the trade secrets portion of the trial due to the sensitive proprietary nature of the source code information. Demetriades' background as a software developer, his persistent desire to gain access to it, and his efforts to "undermine Yelp's review process" by asking employees to post reviews rendered the trial court's conclusion that plaintiff could benefit from Yelp's trade secret information reasonable. It didn't help plaintiff's case that he had the opportunity to rely on a previously designated expert but chose not to call him during the trial.

Key Takeaways

The issue of deceptive online reviews is a hot topic at the moment, with the Federal Trade Commission recently issuing guidance on this issue and the National Advertising Division also taking a hard line on pay-to-play review sites.

This case was originally filed a decade ago, long before the current wave of legal developments in the area, but the appeals court decision is prescient and shows that courts will likely consider review recommendation systems legitimate where, as Yelp did here, the evidence shows that a platform makes concerted efforts to develop a system that is accurate and unbiased. The appeals court also took into account the fact that Yelp admits that its software is not "foolproof," and that reviews that are not recommended also do not factor into a business's rating on Yelp.

After NAD Snub of Flea & Tick Ad, Merck Itching to Appeal

The advertising is going to the dogs. So claimed Boehringer Ingelheim Animal Health USA in a recent challenge at the National Advertising Division (NAD) to claims made by Merck Animal Health, a competing seller of flea and tick prevention medicine chews for our canine friends.

Boehringer challenged comparative claims Merck made for its flea prevention product Bravecto in a 30-second commercial—Best in Show. The spot featured a "dog show" for flea and tick chews pitting Merck's Bravecto against Boehringer's NexGard. In a side-by-side comparison, the dog treated with Bravecto is still itch-free after "Week 5," while the dog treated with NextGard starts to scratch—the unhappy victim of a flea infestation. An actor playing a veterinarian proclaims Bravecto the "clear winner."

Boehringer challenged the express claim that NexGard provides "a rejection in protection at week 5," as well as alleged implied claims that Bravecto is better than NexGard at preventing flea and tick infestations and that NexGard is ineffective and doesn't provide long-lasting flea and tick protection.

Merck argued the commercial conveyed a limited comparison of the products' relative duration of action, not relative efficacy. To Boehringer, and ultimately to NAD, the commercial presented an improperly qualified "apples to oranges" comparison that failed to convey material differences in the product dosing instructions.

NAD acknowledged that there were elements in the commercial that spoke to the products' relative duration once ingested, including the depiction of the passing of time and the statement "nearly 3 times longer than any other chew," as well as a disclosure about the products' relative duration. However, NAD determined the ad's overarching message was an inappropriate "apples to oranges" comparison that went beyond a time and dosage comparison.

"[T]he commercial blends the duration of action claims with a comparative superiority message and … one reasonable interpretation of the commercial is that Bravecto is superior to NexGard at protecting dogs from flea infestations," wrote NAD.

NAD noted that onscreen disclosure did not limit the commercial's message. The disclosure appeared in small print and light font in front of a dynamic background, which rendered it insufficiently clear and conspicuous. NAD noted that it generally considers that visuals moving behind a small text "distracts" the viewer from the message, rather than effectively conveying necessary information.

Merck argued that it had adhered to NAD precedent which "established clear rules for effectively comparing [product duration] without making an implied efficacy claim." NAD disagreed, noting that the commercials in the earlier case between competing medicines included clear limitations of the comparative claim to only dose and duration, whereas the "Best in Show" commercial was not clearly limited to the dosing differences. Further, the earlier matter had been mostly monadic in every other respect, whereas the comparisons in "Best in Show" were hardly an "isolated reference." Merck said it would appeal NAD's recommendation to discontinue the commercial.

Key Takeaways

This case provides a reminder of NAD's approach to what it considers apples to oranges comparisons: the differences between the products must be as clearly stated as the comparison itself to avoid misleading takeaways.

Upscale Yoga Brand ALO Sues Italic Over Comparative Ads, Deceptive Website Claims

In another matter challenging comparative ads, upscale athleisure retail brand ALO has filed a lawsuit against online clothing retailer Italic, alleging that the latter's comparative marketing amounts to false advertising that violates plaintiff's trademarks.

Italic markets that it sells clothing and accessories for less than brand names because it uses "a network of independent manufacturers" that "meets or exceeds the quality of leading brands," according to the complaint. Italic claims to charge "50 to 80% less" than name brands while selling items of the same quality by working directly with the same manufacturers that make the brand name clothes—a sort of clothing Trader Joe's business model, if you will.

To advertise itself and this retail model, Italic ran an ad campaign—at issue in this case—that was displayed on billboards and buses. It compared similar ALO and Italic products side by side, noting the prices below the products, with Italic's seemingly similar product listed at significantly lower prices. The ads featured taglines like "Price tags shouldn't make you sweat."

The complaint alleges Italic's "side-by-side comparisons" and false and misleading statements imply that the brands' products are equivalent when in actuality ALO makes items of far better quality and craftsmanship. The advertisements are designed to mislead consumers about the "origin, nature, characteristics, and qualities of Italic's versus ALO's products and to cause confusion in ALO's customers," alleges plaintiff.

ALO's complaint alleges that this ad campaign not only violates a trademark it used in commerce continuously since as early as 2006, but also "consists of false and misleading statements, depictions and purported comparisons" of ALO products. These ads are misleading, alleges ALO, because they suggest that the sports bras or leggings sold by Italic are pretty much the same as those items sold by ALO, when in fact the "quality, craftsmanship and materials" at ALO are vastly and deliberately superior to Italic's.

Further, plaintiff alleges that it offers a diverse product line with "distinctive product names and corresponding product descriptions." By deliberately concealing the specific ALO product name on the side-by-side comparison, Italic further makes it impossible for consumers to find out which actual product the misleading ad references and thereafter judge the better quality of ALO's product for themselves.

On top of that, Italic's ads are literally false, claims ALO. ALO argues the ads price the ALO products incorrectly, which devalues a high-quality product whose "value is reflected by the innovative designs and quality materials and are priced accordingly." Italic's website is also false and misleading, says ALO. On the product page for the advertised products, Italic falsely claims the items are made by the "same manufacturer as Alo Yoga." That's not so, says plaintiff, and only contributes to the false advertising.

Italic's actions infringe on the "considerable goodwill and reputation" that ALO has built over the years, claims plaintiff. The company's suit alleges causes of action for trademark infringement as well as false advertising and unfair competition under the Lanham Act and California consumer protection laws.

Key Takeaways

If litigation is any indication, established retail brands seem none too pleased with Italic's retail model and its advertising. Prior to this lawsuit, upscale candle company Diptyque sued Italic over similar advertising. That case quickly settled, with Diptyque voluntarily dismissing the lawsuit without prejudice.

Dating App Bumble Fumbled Premium Feature Claims, According to False Ad Lawsuit

A newly filed class action lawsuit filed in the Northern District of California alleges that dating app Bumble deceptively markets its premium offerings by overhyping their effectiveness.

Bumble is an app that works like many other dating apps—swipe left for no; right for yes—except for one key distinguishing factor: only women can make the first move by initiating a conversation. To help the men on the site stand out, the app offers a couple of premium options. And therein lies the problem that plaintiff alleges led to the suit: these premium options not only do not have the intended effect but can actually harm a prospective suitor's chance of winning a date.

To market its premium features, Bumble claims that its "SuperSwipe" feature, which allows users to let potential matches know they are especially interested in them and is sold in packs, garners "Up to 10x more conversations." The app advertises that its "Spotlight" feature, which puts a person's profile at the top of the list of potential matches and is also sold in packs, can get users "Up to 10x more matches."

Citing Reddit threads, the complaint alleges that, in reality, neither premium feature results in anything close to the advertised results and that the marketing is a "gross exaggeration" of the actual benefits of the features. Bumble's own Twitter account and website even appear to contradict these claims, argues plaintiff, as they advertise that "men who use SuperSwipe are twice as likely to get a match," a far cry from the "up to 10 times" results advertised elsewhere.

"But even twice the number of matches is a gross exaggeration of the benefit that SuperSwipes provide. In reality, it appears most men who use SuperSwipes see no increase in matches whatsoever," alleges plaintiff. He also claims that he purchased SuperSwipes and Spotlights expecting significantly more matches and conversations but received no benefit from the purchase.

The complaint also anticipatorily addresses the "up to" language used in the ads, making the case that both the Federal Trade Commission and the National Advertising Division have concluded that (depending upon the type of claim) consumers generally read out the words "up to" in advertising, believing that the results touted will apply to all or almost all consumers.

Plaintiff asserts claims under California's Consumer Legal Remedies Act, False Advertising Law, and Unfair Competition Law. It seeks injunctive relief halting the allegedly deceptive practices and actual and punitive damages or, in the alternative, equitable monetary relief.

Key Takeaways

Romance has been on the FTC's mind of late as well, recently issuing a report that "romance scams" have cost consumers hundreds of millions of dollars. Whether this suit falls into that category, time will tell. It may provide some insight as to how courts interpret "up to" claims, an area that has engendered controversy with little court precedent as guidance.

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