A federal court in Massachusetts recently affirmed a jury verdict in favor of an advertiser who proclaimed it could beat the competition’s price by 15% (“or it’s free”) because of inadequate proof at trial.
The case involved competing carpet and flooring companies: National Floors Direct and Empire Today. NFD advertised, including in television commercials, that it would beat any competitor’s price by 15% or would give its products away for free. Empire alleged that NFD was not providing the discount that it advertised and brought claims for false advertising under Massachusetts state law (Chapter 93(a)), which is governed under the identical standard as Lanham Act false advertising cases. Empire sought approximately $5 million in damages.
At trial, Empire introduced evidence that NFD’s sales representatives complied with the advertising offer by “dividing the competitor’s price by 1.15.” This method proved that the advertised offer was not being honored – dividing the competitor’s price by 1.15 “results in only 13% off the competitor’s price, whereas multiplying by 0.85 would result in a 15% price reduction.” Notwithstanding this smoking gun, the district court concluded that this was simply an innocent “miscalculation” or was evidence of “an internal disagreement at NFD over a mathematical calculation.” The court concluded that this type of “negligence” does not support a claim of false advertising. (This part of the ruling is interesting given that “intent” to deceive is not a required element of a Lanham Act false advertising claim).
The court also was skeptical of Empire’s damages claim. Although Empire was able to show a diminishment in sales, the district court concluded that there were “a bounty of reasons” for plaintiff’s suffering sales, including “management issues.” Even though Empire was able to show that an increase in NFD’s sales corresponded to a decrease in Empire sales, the district court concluded that this evidence “only proves a correlation, not a causation.”
This case underscores the difficulty of prevailing in a false advertising case in the setting of a trial to obtain money damages. Although the facts of this case could have supported injunctive relief, it fell short of the kind of proof necessary to collect damages. Practitioners should manage their clients’ expectations to let them know that even a technical showing of false advertising will not guarantee a money damages award. In cases like this, where the evidence appears to be anecdotal, a strategy intended for injunctive relief may be more appropriate.