Store-Brand “Compare To” Statements Could Be False Advertising

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

“Compare To” statements by a manufacturer of store brand joint care dietary supplements (Perrigo Company) were not mere puffery and could constitute false advertising under the Lanham Act and New York law, the federal district court in Central Islip New York has ruled.

The statements could convey a false message of equivalence in formulation and efficacy as compared to branded Rexall Sundown Osteo Bi-Flex products, in the court’s view.

Perrigo countered with false advertising claims against Rexall Sundown, one of which survived summary judgment review.

Product Equivalence Message

Most of Perrigo’s “Compare To” statements invited a comparison of the products’ ingredients, according to the court. The competing products were likely to be shelved near each other in stores, making it more likely that a consumer would understand the Perrigo Products to be equivalent to the national brand.

Much of the text on the side and rear panels of the Perrigo Products matched the prior packaging for Osteo Bi-Flex. Perrigo’s sponsored website stated that a comparison of the active ingredients might reveal that the only differences between the two products were the inactive ingredients, such as the colors etc. and the price.

A consumer survey commissioned by Rexall Sundown raised genuine issues of fact as to whether the “Compare To” statements created a false message of product equivalence in terms of ingredients and/or efficacy that was likely to deceive consumers, the court found.

In addition, a leading U.S. specialist in the field plant-derived drugs stated that the store brand Perrigo products and Rexall Sundown's Osteo Bi-Flex were “significantly different,” based on the higher ratio of an anti-inflammatory ingredient in Osteo Bi-Flex.

Materiality

To prove false advertising, Rexall Sundown was required to demonstrate that a false or misleading representation involved an inherent or material quality of the product. A rational trier of fact could conclude that the disputed issues related to core ingredients and/or efficacy of the supplement, according to the court. In addition, the manner in which the Compare To statements were conveyed—in prominent highlighting and in close proximity to product performance claims—contributed to their materiality.

National Brand’s Ingredient Concentration Advertising

Perrigo raised a disputed issues of fact as to whether Rexall Sundown falsely advertised the key ingredient of its Osteo Bi-Flex products as “10 times more concentrated,” the court held. A consumer survey commissioned by Perrigo concluded that the “10 times more concentrated” claim caused a meaningful proportion of prospective consumers to think that Osteo Bi-Flex provided greater performance benefits than, or was superior to, other products.

Injury and causation could be presumed from comparative superiority claims, the court noted. Perrigo created a triable issue as to whether it was “obvious” that Rexall Sundown's claim targeted Perrigo products and, thus, that injury should be presumed.

Fatal Delay

Perrigo was barred from challenging other claims that Rexall Sundown had featured on packaging and in advertising since the late 1990s.

Perrigo contended that it had no reason to know that the claims were false until the National Advertising Division issued a decision regarding the claims in 2007 (CCH Advertising Law Guide ¶62,608). However, under the doctrine of laches, the court found Perrigo’s delay in bringing suit both inexcusable and prejudicial, in light of Rexall-Sundown's substantial investments in its packaging and advertising.

The September 10 opinion in Rexall Sundown v. Perrigo Co. will be reported in CCH Advertising Law Guide and CCH Trade Regulation Reports.