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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 tseligman@fkks.com, or any other member of the Frankfurt Kurnit Advertising, Marketing and Public Relations Group.
Other Advertising Law Alerts
What the Advertising Industry Can Learn from Kim Kardashian’s Settlement with the SEC
On October 3, 2022, the Securities and Exchange Commission (SEC) announced that it entered into a $1.26 million settlement with Kim Kardashian over her social media promotion of the EMAX token without disclosing payment she received from token issuer, EthereumMax. The matter provides important lessons for advertisers. Read more.
October 10 2022
Get Ready for California’s New “Automatic Renewal” Rules
California recently amended its Automatic Purchase Renewals law. The amended statute - effective July 1st -- require marketers to provide consumers of automatic renewal or continuous service offers with more information and easier ways to terminate. Read more.
June 22 2018
“Made in the U.S.A.” Claims Continue to be Scrutinized
In 2016, California amended Section 17533.7 of the California Business and Professions Code ("Section 17533"), liberalizing the standard for selling products labeled "Made in U.S.A" to California consumers. Read more.
June 4 2018
