A federal judge in Los Angeles recently granted the FTC’s motion for summary judgment in the agency’s case against a number of corporate and individual defendants who created and marketed three money-making programs.
There’s a lot to chew on in that decision. But today we’re just going to highlight one footnote – footnote 88, which quotes from the FTC’s 2005 decision in the Telebrands case.
“[The administrative law judge held correctly that as a matter of law [that] the net takeaway – which ranged from 10.5% to 17.3% for [four of the five tested claims] – was sufficient to conclude that the challenged claims were communicated.”
That statement was supported with citations to several federal court decisions in FTC and Lanham Act cases where a net takeaway of 10% – or even a little less – supported a finding that the ads communicated the claims at issue. In other words, if 10% of those consumers who see an advertisement understand it to make a particular claim, that supports an allegation that the claim was made by the advertiser.
Footnote 88 goes on to say that the defendants’ copy test results – which apparently indicated that over 10% of the surveyed consumers said that one of more of the challenged claims had been communicated by the ad – not only failed to raise a triable issue of material fact that might defeat the FTC’s summary judgment motion, but actually constituted additional support for the FTC position.
It’s interesting that the judge in this case cited only an FTC opinion in an administrative appeal – not a decision of another federal court – especially given that the precedents cited in support of the FTC’s finding in that case were not that strong. The FTC’s Telebrands decision cited two Lanham Act decisions – which are arguably distinguishable from a Section 5 case. The third case it cited was a 6th Circuit opinion from 1973 that affirmed the FTC in a matter involving a copy test showing that an ad communicated a deceptive claim to 15% of the surveyed consumers. The court noted that it would be hard for them to overturn the Commission’s decision “if the ad thus misled 15% (or 10%) of the buying public” given the high degree of deference that the FTC Act says a reviewing court must give to the agency’s findings. But the reference to 10% in that case is clearly dictum.
In any event, companies may not want to rest quite so easily with surveys that show 10% of consumers potentially interpreting an advertisement as making a misleading claim.