Fighting the Rise of False Advertising by White Label Manufacturers on the Internet | K&L Gates LLP


Due to the rise and dominance of e-commerce markets and the Internet as a sales channel, many US manufacturers face increasing competition from Chinese and international companies that are flooding less alternatives. expensive and white label on the market. However, the use of bogus ads to trick consumers into purchasing these white label alternatives with the (empty) promise of equal or better performance is a growing concern for many of these US-based manufacturers. Such deceptive sales tactics have unfairly cost many manufacturers lost sales and revenues.

Certainly, manufacturers are not powerless in the face of these deceptive practices by entrants to the international market. U.S. Trademark Law prohibits the exact misleading advertising that many manufacturers face from competitors on the Internet. A false federal advertising statement is a quick and ultimately quite profitable way to tackle lost sales to this dishonest competition.

White label products and inflated performance specifications

White label products are generic products produced in series and subsequently personalized for several brands. This personalization often comes in the form of a simple addition of a logo or brand name to the product. In other words, white label products are then “rebranded” and can be resold by many companies to consumers. Because they are generic products, white label products are often cheaper, but they cannot compete with the performance of a well-known branded product. Since white label products are new to the market and their brand names are unknown, they typically compete for a sale purely on price, often offering lower prices than their better-known branded competitors.

However, a recent trend is developing where white label products are advertised at a lower price. and with exaggerated product performance specifications. In seeking to enter the market and build their brands, manufacturers of white label products are deliberately inflating the performance standards of their products. The examples are endless: a white label flashlight with inflated brightness, a white label battery with an exaggerated lifecycle, a white label webcam with overrated image resolution, a white label massage gun with embellished percussions per second, and white-label makeup claiming to be organic. When a white label product costs less and is advertised with fake product specifications, well-known manufacturers cannot compete on such an uneven playing field. To combat this disruption in sales, well-known brands can, and should, turn to the formidable defense offered by US trademark law.

False advertising under trademark law

The United States Trademark Law, also known as the Lanham Act, prohibits misleading advertising and, in particular, “any false appellation of origin, false or misleading description of a fact, or false or misleading representation.[s] in fact, which … in advertising or commercial promotion, distorts the nature, characteristics, [or] qualities… of his or her goods, services or business activities or of those of another person… ”.1

In recent years, the United States Supreme Court has added that the Lanham Act uses, and even relies on, competitors as enforcement mechanisms to detect and reduce false advertising. Recognizing that competitors are the best informed of each other’s representations and advertisements of each other’s products, the Supreme Court explained:

Competitors who manufacture or distribute products have detailed knowledge of how consumers rely on certain sales and marketing strategies. Their knowledge of unfair competition practices can be much more immediate and precise than that of lawmakers and agency regulators…. Lanham Act lawsuits build on this market expertise by empowering private parties to sue competitors to protect their interests on a case-by-case basis..2

For example, the best agent to find out if a flashlight manufacturer has distorted the brightness of their products is, in the end, a competing flashlight manufacturer.

It is important to note that, as the Supreme Court recognized and pointed out, manufacturers do not need to wait for government enforcement of the law, but have standing to bring private legal action for the false advertising from their competitors under Lanham Law. A manufacturer must demonstrate the following to be successful in a false advertising claim: (1) the defendant has made false or misleading representations about its own products (or the products of another); (2) the existence of actual deception, or at least a likelihood of confusion, on the part of consumers of these products; (3) the deception is material or, in other words, likely to influence a consumer’s purchasing decisions; (4) the advertised goods travel in interstate commerce; and (5) a likelihood of harm to the claimant, such as lost sales.3

Additionally, a false advertisement under Lanham Law offers the added benefit of allowing a complainant manufacturer to take the case to federal court and federal judges, which is a more experienced forum for this type of claim. The court would then likely have additional jurisdiction over state law unfair competition complaints, which often offer double or triple damages.

What this means for American manufacturers

Many manufacturers have the false impression that there is not much that can be done to curb the misrepresentation of competitors about their own products in order to gain a competitive advantage. However, recognizing that US trademark law seeks to protect itself against this specific problem, manufacturers are far from helpless in the face of these deceptive practices. Ultimately, a false advertising claim is a cost effective, simple and effective mechanism to protect against false claims of white label products resulting in an uneven playing field. By working with experienced advisors, manufacturers can effectively target and eliminate dishonest competition.

1 15 USC § 1125 (a) (1) (B) (emphasis added).

2 POM Wonderful LLC v Coca-Cola Co., 134 S. Ct. 2228, 2234 (2014) (emphasis added).

3 “To prove a false advertisement under Lanham Law, a plaintiff must show that (1) the defendant made a false or misleading description or representation of a fact in a commercial advertisement relating to his or her own product or that of a other ; (2) the false declaration is significant in that it is likely to influence the purchase decision; (3) the false statement actually misleads or tends to mislead a substantial segment of its audience; (4) the defendant placed the false or misleading statement in interstate commerce; and (5) the plaintiff has been or is likely to be harmed by the misrepresentation, either by direct misappropriation of sales or by a decrease in the goodwill associated with its products. »Manufacturers of cashmere and camel hair. Inst. v. Saks Fifth Ave., 284 F.3d 302, 310-11 (1st Cir. 2002).

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