Advertising can be a tricky subject for small businesses. They are often trying to compete with larger, more well-established corporations with superior brand name awareness. Small businesses may feel the need to take on risk in their advertising campaigns to compensate. The Wisconsin Deceptive Trade Practices Act (WDTPA) can be used in business advertising disputes. It forbids false and deceptive advertising and provides for remedies, including attorney’s fees, against offending companies.
A strong business advertising dispute claim under WDTPA could become far more costly for an offending business than simply the cost of the falsely advertised thing. A defendant may be ordered to pay the plaintiff’s reasonable attorneys fees, even if the exposure is moderate. I find it prudent to include claims for attorney’s fees in B2B tort claims whenever possible, including business advertising disputes.
A recent federal case from Wisconsin’s Eastern District, T&M Farms v. CNH Industrial (1), discusses how an individual or a business consumer can bring a successful claim for deceptive advertising and attorneys fees under the WDTPA. The central analysis is whether the advertising is ‘mere puffery’ or communicates a ‘fact’, and whether the offending statement convinced the buyer to purchase. If you believe this analysis may apply to your business or a purchase you recently made, please consider contacting me to discuss. If you feel your advertising may be pushing the line and want to ensure you are properly evaluating risk, it may be prudent to consult with me to evaluate and provide feedback.
Business Advertising Disputes: T&M Farms v. CNH Industrial
T&M Farms and P&J Farms are cotton farms that purchased the “Module Express” cotton-picking machines manufactured by CNH Industrial. They allege the CNH machines fail to perform as expected. They brought a lawsuit in federal court in Milwaukee alleging violation of the WDTPA. CNH and John Deere were competing to be the first to unveil new picker technology that would purportedly revolutionize cotton picking efficiency. CNH wanted to beat John Deere to market. T&M alleged they and unveiled a picker with “inherent flaws, inadequate quality and process control, insufficient testing and troubleshooting, and manufacturing failure, such that it would never operate correctly.”
Wisconsin’s Deceptive Trade Practices Act
The purpose of WDTPA is to protect consumers from untrue, deceptive, or misleading representation. This applies to business advertising disputes. A claim has three elements that a plaintiff must prove:
- The Defendant made a representation to one or more members of the public with the intent to induce an obligation;
- The representation was untrue, deceptive, or misleading; and
- The representation materially induced a pecuniary loss to the Plaintiff.
Evaluate Whether Advertising Statements are Puffery or Fact
The first and third issues are often not in dispute. Advertising is almost always a representation to the public to attract a customer. The second issue necessarily considers what advertising statements are non-actionable “puffery” and which are statements of fact. Puffery is “the exaggerations reasonably to be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be precisely determined.”
CNH is a company that provides expensive heavy machinery in the agriculture industry. The cotton picker at issue cost $500,000. Customers should expect very little exaggeration. Here, the Court believed that CNH’s statements that meet the definition of “puffery” include the following:
- Representations that the machine “has the power to pick in the toughest conditions”;
- It is “the most efficient cotton-harvesting package available”; and
- It is “the most profitable” way to harvest cotton.
The Court also believed some of the alleged statements may be actionable statements of fact. One such statement is that the machine harvests just as effectively on wet or dry ground. The statement implies that the Module Express will not routinely get stuck in the mud. The representation is false if the machine routinely gets stuck in the mud or is useless on wet ground. Another potentially non-puffing statement is the representation that the machine will “create consistent domed [rectangular] modules for excellent weatherability and ginning.” The phrase “excellent weatherability and ginning” is, by itself, a statement of opinion. However, the representation that the picker will create “consistent domed [rectangular] modules” adds a representation of fact that can be proved false. If the modules fall apart as soon as they are deposited in the field and cannot be transported to a gin, then in no sense could the picker be said to be capable of producing “consistent domed [rectangular] modules for excellent weatherability and ginning.”
Separating marketing fact from puffery is not always easy for courts or juries.
Birddogs is a clothing company that sells men’s shorts and pants with built-in underwear. A customer should reasonably expect advertising statements like the below to be “puffery” and not statements of fact. Customers should reasonably expect the pants to have built-in underwear and be of reasonably high quality. They should not reasonably expect them to land you a wealthy sugar mama, provide a legal defense to DUI, or provide the educational equivalent of a MBA in 30 seconds…
I love Birddog pants. However, I would be unreasonable to believe these statements to be true and likely would not have a claim. I also believe Lululemon would not have an actionable claim against Birddogs.
Avoid Business Advertising Disputes with Proper Social Media Marketing
Small businesses may be able to compete effectively with large companies through targeted social media marketing and influencers. It is important to make sure your models and influencers are not making representations that are untrue, deceptive, or misleading.
Here, my friend Ronald (2) and his six-pack (eight-pack?) provide this excellent spot for a New Orleans-based “clean prepared” New Orleans cuisine company. He says that Chomp is the thing that saves his life, keeps him from putting his neighbors in danger, and stops him from attempting to cook. This is classic puffery. Nobody expects a meal prep service to save someone’s life by decreasing the risk of fire, although it very well might do that in Ronald’s case. Also, nobody would be ‘materially induced’ to purchase this food service because of preventing the risk of fire (except Ronald, maybe).
The ad also says that Ronald has been a customer. Words and phrases like “devoted” and “as long as we can remember” are likely puffery. However, stating he “has been a customer” would likely be considered a fact. The ad may be considered false or deceptive if Ronald was never a customer.
It is fitting that a “clean prepared” food service would have an influencer sponsorship with someone who has Ronald-level physique. It may be false or deceptive for Hardees to run the same ad. Chomp and Ronald provide an excellent example of effective social media advertising that would not raise issues under WDTPA.
Evaluate Potential Business Advertising Disputes
Small businesses may find themselves on either side of business advertising disputes. Small businesses may find themselves pressured to make promises regarding their product that cross the line. They may also see a competing business unfairly crossing the line. The CNH case and my social media influencer example provide guidance on where the line may be drawn under the WDTPA.
(1) T&M Farms v. CNH Indus. Am. (E.D. Wis. 2020).