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November 26th, 2012
Contest Did Not Excuse Advertiser Duty to Substantiate Claim
In response to a challenge by International Business Machines Corporation ("IBM"), the National Advertising Division of the Council of Better Business Bureaus ("NAD") reviewed print advertisements produced by Oracle Corporation ("Oracle") stating its Exadata server is "5x Faster Than IBM ... Or you win $10,000,000."
IBM argued these print advertisements, which appeared in The Wall Street Journal and other major newspapers, conveyed the message that the Extradata systems are five times faster than IBM Power systems and that the "contest element" did not negate Oracle's responsibility to substantiate this claim. Oracle argued that the advertisement did not make a performance claim but issued a challenge to consumers. It did not provide any speed performance tests, examples of comparative system speed superiority or any other data to substantiate its claim.
In its decision, the NAD concluded that, "even accounting for the sophisticated target audience, a consumer would be reasonable to take away the message that Oracle's Exadata systems do indeed run five times as fast as IBM's products. The fact that the claim was made in the context of a contest announcement [did] not excuse the advertiser from its obligation to substantiate this message of superior speed." The NAD likened the context of Oracle's claim to a money-back guarantee, stating in its decision that just because an advertiser is providing a money back guarantee does not protect it from having to substantiate whatever claim it is making about its product in its advertising. The NAD went on to state that by offering the $10,000,000, Oracle was displaying the "utmost confidence in the truth in its "5x Faster claim."
This is yet another decision underscoring that claims come in all shapes and sizes. No matter what form the advertising takes, be it a "contest" or a Youtube video that doesn't even mention the product (see link below), the advertiser must still substantiate any claims that it communicates.
Read NAD's review of Youtube video advertising- NAD Reviews Viral Video Advertising
If you have questions about the IBM v. Oracle decision, or about any other advertising law issues, please contact Terri Seligman at (212) 826 5580 or firstname.lastname@example.org, or any other member of the Frankfurt Kurnit Advertising, Marketing and Public Relations Group.
Other Advertising Law Alerts
The Truth Will Set You Free: The FTC Provides New Guidance on Consumer Reviews
Late last year, Congress passed the Consumer Review Protection Act, a law designed to stop businesses from using contracts to prevent customers from posting honest reviews about the business.
March 8 2017
FTC Finds “All Natural” Claim Violated FTC Act
The FTC has issued a Final Order against California Naturel, Inc., a seller and marketer of personal care products, finding that the company's "all natural" claims were false and misleading in violation of the FTC Act.
December 15 2016
FTC Policy Statement Focuses on Homeopathic Health Claims
Last week, the Federal Trade Commission issued its new "Enforcement Policy Statement on Marketing Claims for Over-the-Counter (OTC) Homeopathic Drugs," as well as a staff report on a workshop that the Commission held last year on OTC homeopathic drug advertising.
November 28 2016