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This post was written by Steven Getzoff and Adam Snukal.

On Jan. 19, 2010, Weight Watchers International Inc. of New York sued its rival, Jenny Craig, Inc., in the U.S. District Court for the Southern District of New York. The suit alleged that the latter's ads were misleading and deceptive, claiming they reference a comparison study carried out by Jenny Craig between the two companies' competing products--Weight Watchers' current weight-loss program and Jenny Craig's pre-packaged meals system. Apparently, no such study was ever conducted. Weight Watchers' suit asked for injunctive relief and damages. The next day, Jan. 20, 2010, Weight Watchers announced that the court had issued a Temporary Restraining Order (TRO) against Jenny Craig. TROs are generally issued when the court believes the plaintiff's claims would likely succeed on their merits in a preliminary injunction proceeding, and that to do nothing in the interim would unfairly prejudice the plaintiff. The TRO forbids Jenny Craig from broadcasting, publishing or disseminating claims of superiority over the Weight Watchers program. In other words, they cannot use the ads at issue or any other ads containing these claims.

The comparative advertising doctrine allows one party to use the trademarks of another without permission if truthful and verifiable facts presented provide a valid factual comparison that helps consumers decide which product is better. On the other hand, a comparative advertisement that falls short of substantiation and validation, as in the foregoing case, could very well give the harmed party a claim of trademark tarnishment, in addition to deceptive advertising.

One e-columnist claims the lawsuit was and is a waste of time. We wonder, if it were that columnist's trademarks or those of his e-journal that were being exploited by a competitor, would he be so philosophical.

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On July 14, 2009, Andrew Cuomo, the attorney general of New York, settled with Lifestyle Lift, a plastic surgery franchise, for false and deceptive trade practices. The case concerned the growing practice of “astroturfing,” which refers to flooding the Internet with false positive reviews about one’s goods or services. The case is believed to be the first in the nation, and will cost Lifestyle Lift $300,000 in penalties and costs.

According to the New York attorney general’s complaint, Lifestyle Lift asked its employees to create accounts with various Internet message boards and pose as satisfied customers of Lifestyle Lift. In addition, employees were asked to attack legitimate message board posters who criticized Lifestyle Lift, and tried to get those posts removed from message boards. The act of having employees pose as independent consumers, according to the New York attorney general, was fraudulent and deceptive conduct because it could mislead consumers about the product’s effectiveness.

In addition to posting on various Internet message board services, Lifestyle Lift registered and created stand-alone websites, such as MyFaceliftStory.com, which appeared as if they were created by independent and satisfied customers. The sites offered positive narratives about the Lifestyle Lift experience, as well as comments from what appeared to be other consumers about their experiences with Lifestyle Lift. However, these sites were directly controlled by Lifestyle Lift, which either provided all the “user comments” themselves, or closely monitored and edited third-party comments to skew the discussion in favor of Lifestyle Lift. The New York attorney general’s office has provided examples of these narratives here.

Under the settlement, Lifestyle Lift will stop publishing anonymous positive reviews about the company to Internet message boards and other websites, and will pay $300,000 in penalties and costs to the State of New York.

Why This Matters: This case is notable not because of Lifestyle Lift’s messaging about its own products. Clearly the creation of fake “user” experiences can lead to a claim of unfair or deceptive trade practices. Rather, this case matters because of its treatment of Lifestyle Lift’s removal of bad reviews from its own site. Making a company civilly liable for removing third-party content from its website may appear to conflict with the Communications Decency Act of 1996, which shields interactive computer-services providers from liability for removing content from its websites. But in this case, Lifestyle Lift’s conduct makes clear that the “good faith” requirement of the Act could not be met. Going forward, companies that advertise online must watch not only the statements they are making about their product, but also their efforts to control what is said on their websites by third parties, to ensure that any removal does not cross the line between immunized activity and liability.

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The Children's Advertising Review Unit (CARU) has recommended that the popular Build-A-Bear Workshop modify or discontinue price advertising claims, which the self-regulatory group says may confuse children.

CARU objected to a commercial, which the organization said it spotted through its own monitoring of advertising directed to children, that showed a child at a Build-A-Bear store choosing a stuffed monkey, clothing and accessories. The announcer stated, "You can make a new furry friend starting at $10 and continue the adventure at Buildabear.com." Though the bear initially appeared unclothed, and a large video disclosure stated that animals start at $10, the bear later was shown to be wearing a shirt, shorts, sunglasses and sneakers.

"CARU concluded that a child could reasonably believe that any fully clothed and accessorized animal would cost $10, although the monkey depicted cost $18 and outfitting the animal similar to the one depicted would cost approximately $40," the organization stated.

The advertiser noted that the commercial in question had run its course, but said it would consider CARU's concerns in future advertising.

Read about CARU's decision at caru.org. 

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The U.S. Federal Trade Commission has brought a joint action with the state of Nevada charging 10 related Internet payday lenders and their participants with failing to disclose key loan terms, and using abusive and deceptive collection tactics.

The lenders, based primarily in the United Kingdom, used a series of websites such as www.cash2today4u.com, to promise consumers loans of as much as $500 within 24 hours, the FTC said. The loans were offered without requiring a credit check, proof of income or documentation, the agency said. However, consumers were required to provide their bank account information and social security numbers.

Applicants were told their loan had to be repaid by their next payday, along with fees that ranged from $35 to $80. If the loan was not repaid, it automatically would be extended and an extra fee would be debited from the consumer’s bank account. Consumers were required to provide access to their bank accounts for payment of the fees.

In a complaint filed in the U.S. District Court for the District of Nevada, the FTC alleged that the defendants did not disclose key terms in writing, including the annual percentage rate, the payment schedule, the amount financed, the total number of payments, and late payment fees. Consumers who asked to see the loan terms in writing either were told the transaction was oral, or were told the terms would be sent to them but they never received the requested information.

The FTC said many consumers paid hundreds of dollars above their loan amounts before cutting off access to their bank accounts. The defendants threatened consumers with arrest, lawsuits, property seizure and wage garnishment, the agency said. They called consumers, as well as their coworkers and employers at their workplace; used abusive language; and disclosed the consumers’ purported debts.

The loans extended did not comply with the payday lending laws in many consumer states, and the defendants were not licensed to make consumer loans in those states, the FTC said. The defendants are charged with violating the Truth in Lending Act, using unfair and deceptive tactics under the FTC Act, and other charges.

Why This Matters:  Amid the current economic crisis, regulators are likely to scrutinize lending practices and the marketing practices used by lenders.

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The Children's Advertising Review Unit (CARU) has referred two cases to the Federal Trade Commission because the advertisers failed to substantively respond to its inquiries.

CARU examined advertising for the "Spray Racer," a toy vehicle powered by water and air that is compressed when a child manually pumps a holding tank. CARU questioned whether a TV commercial showing a child pumping once to launch the car at a speed of 272 scale miles per hour was an accurate reflection of the product's performance.

The self-regulatory group asked the advertiser, Summit Products, whether substantial pumping was in fact required to maintain the speed depicted. When the advertiser did not respond, CARU referred the matter to the FTC.

CARU also referred to the FTC a case involving the website www.virtualfamilykingdom.com after the company that operates the site allegedly did not respond to CARU's inquiry regarding apparent failures to comply with the Children's Online Privacy Protection Act of 1998 (COPPA).

Upon reviewing the site, CARU noted that it had an option whereby personal information could be collected from children without first obtaining parental permission, and that the site failed to include offline contact information, as required by COPPA. In addition, the posted privacy policy did not conform to actual practices on the site, CARU claimed.

View a summary of the "Spray Racer" case and of the Virtual Family Kingdom case at caru.org.

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