Diamonds Are Forever - Are False Advertising Claims?

Did you know that Turtle Wax is not actually wax? Launched in the mid-1970s, Turtle Wax is actually a nonwax substance containing mineral seal oils and wax emulsions. It could be sold cheaper than products made by its competitor Hot Wax Inc., which produced a product made of genuine carnauba wax, because Turtle Wax is not truly made of wax. Hot Wax Inc. knew of this issue, yet did not sue Turtle Wax until 1997, when it asserted that Turtle Wax deceived the public because it failed to contain any real wax.

Notwithstanding Hot Wax's attempts to justify its delay in bringing suit, the court ultimately dismissed Hot Wax's complaint based on a laches defense. Hot Wax Inc. v. Turtle Wax Inc., 191 F.3d 813 (7th Cir. 1999). The court found that during the 10- to 20-year period Turtle Wax was on the market prior to the suit, Turtle Wax invested significant amounts of time and money in product development and advertising. For that reason, the court dismissed the claim as time-barred, due to the prejudice Turtle Wax would suffer if ordered to change its product positioning. 191 F.3d at 824. This seems like an odd result — false advertising may continue to run, and continue to be false and deceptive, because they have been running so long?

Yes, depending on who brings the action to stop the false claims. While government regulators and self-regulatory bodies are not constrained by a laches defense, it is much more common for a competitor to invest the time, resources and legal fees to bring a Lanham Act claim seeking to stop the publication of false and unsubstantiated advertising claims. Yet competitors are subject to the strictures of the Lanham Act, related state law claims, and the legal defenses under those theories, including laches. And laches is an effective defense to a Lanham Act claim, yet it can also lead to an awkward outcome, that is, the perpetuation of a false advertising claim.

When a company sees its competitor making a false or unsubstantiated claim about its products, it has a number of potential responses, both legal and nonlegal. It can ignore it, assuming that the competitor will not gain any traction with its false claims and it will eventually stop running it. It can engage in counter-advertising, either talking about its own product or tackling the false claim head on, but this may have the counterproductive effect of bringing more awareness and publicity to the competitor's product and its false claim. It may also try to bring proceedings at the National Advertising Division of the Council of Better Business Bureaus, but that forum is a voluntary arbitral forum where the defendant may choose not to participate (the NAD is further discussed below).

It can also bring a federal action. If it chooses this avenue, the primary weapon is the...