A recent settlement over deceptive advertising with the FTC may have advertising agency executives and their attorneys asking the same question as the bystander in the challenged advertisement: “Oh man, no way. Are you kidding?” For years advertising agencies have seemed to fly blissfully under the FTC’s radar, but the FTC’s settlement with Nissan North America, Inc. (“Nissan”) and its advertising agency, TBWA Worldwide, Inc. (“TBWA”) may serve as a surprising reminder that advertising agencies may be liable for false and misleading representations in their advertising.

A quick history review – way back in 1949 the FTC actually dismissed a case against an ad agency “in the exercise of its sound discretion,” finding that the agency had acted under the direction of the advertiser, “with whom rested final authority and responsibility.”  But by 1960 the worm had turned and the Commission entered into a consent order with an advertising agency.  Since then the FTC has generally looked to agencies when the issue relates to claims rather than things such as the quality and quantity of scientific substantiation.  (for more on this topic, click here.)

Although enforcement actions against traditional advertising agencies have been infrequent at times, there are several examples of FTC consent agreements involving agencies.   Notably, in 1992, Volvo entered into a consent agreement for deceptive advertising related to its monster truck demonstration.  In the Volvo case, the FTC fined Volvo and its agency, Scali, McCabe, Sloves, $150,000 each for the advertisement. The FTC has been particularly active of late protecting consumers in any way possible from fraud and deception. In the current environment, it seems as if almost anyone can be liable for deceptive advertising.  The NAD has also been active in the area of product demonstrations.  For example, the NAD recently held that product demonstrations cannot be enhanced by artificial means, either digitally or physically. As we noted, even a clear disclaimer cannot always cure deficiencies in product demonstrations.  In the Nissan case, the FTC found the disclaimer used in the advertisement to be inadequate.

So what did the FTC believe went wrong here?  In 2011, TBWA produced an advertisement that featured a Nissan Frontier pickup truck pushing a dune buggy up a sand dune. The advertisement was shot as a product demonstration as seen by a bystander’s mobile phone. However, according to the FTC’s complaint the “advertisement did not accurately represent the performance of an actual, unaltered Nissan Frontier pickup truck under the depicted conditions.” In reality, the sand dune was made to appear steeper than it was, and the dune buggy and truck were dragged up the sand dune by cables. The FTC claimed that TBWA was liable because it produced the advertisement and knew or should have known that the representation set forth in the ad was false and misleading.

The Commission unanimously approved the settlements. Under these settlements, Nissan and NSAB are prohibited from misrepresenting “any quality or feature of pickup trucks through the depiction of a test, experiment, or demonstration.”  The Order permits production techniques such as special effects, provided that they do not misrepresent a material quality or fact. The agreements will be subject to pubic comment for 30 days, before the Commission decides whether to make the proposed settlements final.

Is TBWA the first of many advertising agencies the FTC will target or the unfortunate recipient of an isolated FTC warning to agencies to be diligent in ensuring accurate advertising? Only time will tell. Regardless, with the flurry of recent FTC actions, any party participating at any state in marketing using product demonstrations should take steps to ensure that the advertising depicts realistic uses of the product. (or adequately discloses that it does not.)  Unrealistic shock advertising can get the target audience’s attention, but just might attract the FTC as well.