Legal Applications of Marketing Theory, part 5 (me on puffery)

Rebecca Tushnet, Harvard Law School, On Puffery
Puffery is a concept that purports to be about things
consumers ignore and don’t rely on. It is in fact a concept about things courts
ignore and won’t rule on.  At the moment,
marketing and other empirical work has essentially nothing to say about puffery
in the courts; puffery consists of precisely the elements of advertising for
which courts neither require nor allow empirical evidence of consumer
reaction.   That doesn’t make the
doctrine wrong, but it does mean that explanations for the doctrine should not
be founded in unsupported, mostly unsupportable judicial claims about how
consumers think and what claims they disregard. 
Instead, puffery should be about what kinds of claims are too difficult
to evaluate for their truth in judicial settings.  That’s an epistemological determination that
judges are actually well qualified to make.
Let me back up a bit: In modern advertising law in general,
only factual misstatements are actionable. 
Puffery is an overlay onto the fact/opinion divide: it allows courts to
reject liability for what might look like factual, verifiable claims (such as
the cheapest prices in the universe, or even the cheapest prices in West
Virginia ) because they are too exaggerated or vague to be believed by
reasonable consumers.  The Fifth Circuit
wrote, for example, that “non-actionable ‘puffery’ comes in at least two
possible forms: (1) an exaggerated, blustering, and boasting statement upon
which no reasonable buyer would be justified in relying; or (2) a general claim
of superiority over comparable products that is so vague that it can be
understood as nothing more than a mere expression of opinion.”  The FTC has reasoned similarly. 
Courts think, without evidence, that consumers don’t rely on
puffery.   This conclusion is also
normative, and it has distributional consequences—it is about how consumers
should behave, not about what advertisers should say. As Learned Hand wrote,
“There are some kinds of talk which no sensible man takes seriously, and if he
does he suffers from his own credulity.” 
The influential treatise Prosser & Keeton on the Law of Torts says
that an advertiser has a privilege “to lie his head off, so long as he says
nothing specific.” 
Ivan Preston argues that current puffery doctrine is a
mistaken evolution from nineteenth-century cases involving individual buyers
and sellers that held that buyers couldn’t sue for fraud based on statements
that they could easily have verified or disproved themselves.  When buyers were unable to verify the claims,
however, the law provided them redress. But as the puffery doctrine developed,
he argued, it turned into a rule that consumers treated certain claims as
meaningless and therefore rejected them at the outset.  He argues that this new rule was not only
unconnected to its historical foundation in fraud law, but also was
inappropriate for modern mass advertising where the complexity of factual
claims combined with their sheer volume mean that consumers can’t actually
investigate most of the factual claims they receive.
One Additional piece that has to be understood before the
full scope of the problem is understandable: advertising law, like trademark
law, is probabalistic.  If 25% of
consumers (net of control) are confused or deceived, almost any court would
grant relief.  Deception, that is,
doesn’t need to be universal to be actionable by a competitor, or by the
FTC.  Deception doesn’t even need to be
the most likely outcome for a given target consumer as long as a substantial
number of consumers are likely to be deceived. 
Resulting problems in the law of puffery: First, it is a
problem for the conventional justification of the doctrine that puffery
actually works, in the sense of getting consumers to buy things.  Even the FTC has accepted that puffery works:
C&H Sugar was ordered in 1977 not to call its brand “superior” to or
otherwise different from other granulated sugars without substantiation.  In 1995, it successfully argued that it
shouldn’t be barred from using ads such as “I love C&H the best” or
“C&H tastes best,” which harmed it because its competition was free to make
similar unsubstantiated claims. The FTC granted the modification, because
competing ad campaigns were able to “take advantage of C&H’s inability to
counter claims that … constitute puffery. . . .”  But, of course, if C&H needed puffery to
compete, then puffery was affecting consumer behavior.
If puffery didn’t work, we should probably expect it to be
rare.  Courts occasionally make the point
that advertisers both want to affect consumers and are likely have greater-than-average
insight into what might affect consumers in the sale of their particular
thing.  It seems like the setup to a
joke: why do claims appear in ads?  The
obvious answer seems to be: to get to the sale. 
One thing we might do when advertising claims are challenged in court,
then, would be to presume that a factual claim matters to consumers.  The key questions we should have would be
about whether a significant group of consumers receives a factual message
specific enough to be falsified.  [We could
still recognize that there are parts of ads that aren’t claims as such—for
example, elements of ads that functioned to attract attention, thence to
deliver a factual claim.]  I would
suggest that the concept of unbelievability adds nothing further to the
question of falsifiability—it’s possible that a sufficient exaggeration means
that no falsifiable factual message has been conveyed, but we really don’t know
that at the wholesale level, without looking at the specific exaggeration and
the market.
I want to work through two examples from the FTC to show
what I mean when I suggest that the current conception of puffery as meaning
something about actual consumer perception is not working very well.
First, the FTC Endorsement Guides.  If you think that puffery is about
subjectivity and variation among consumers’ understanding and that reasonable
consumers don’t rely on puffery, the FTC’s approach to endorsements shouldn’t
make sense to you. The FTC takes the position that an endorser has to disclose
connections to an advertiser when they wouldn’t be obvious from context and
when knowledge of the connection would be relevant to the consumer in weighing
the endorsement.  So far, so good. But
the FTC—quite rightly, I think—requires disclosure even when the endorser is
otherwise just offering her opinion: these clothes are so cool! This hair color
looks fabulous on me! Failure to disclose the connection is deceptive where the
audience is likely to believe that the speech is uncompensated opinion.  If the underlying claim is pure immaterial
puffery of the kind on which consumers are irrebuttably presumed not to
rely—and the underlying claim in a social media endorsement is often indeed
exactly that kind of claim—how can it possibly be important to consumers to know
that the endorser is being compensated?
The answer is that consumers, in general, want opinions to
be in some sense authentic, and they care about whether a speaker is getting
paid; her influence will be less if she discloses that payment.  The fact of the financial connection is
itself verifiable, so its absence can be misleading, even if all that gets said
in an endorsement is stuff that consumers weren’t supposed to be relying on as
a matter of law. The endorsement guidelines thus inherently, if covertly,
recognize that puffery does work. 
Because puffery works, it is important to regulate undisclosed
endorsements, whether or not they make other factual claims.  The lack of disclosure gives us a factual
hook of sufficient specificity that the courts and the FTC can handle:
determining whether there was in fact an undisclosed relationship.
Second, the FTC Green Guides. In puffery discussions, courts
often say that vagueness matters: some words or statements are too vague to
have one specific meaning.  That was the
rationale, for example, in a case involving the claim “America’s Favorite
Pasta.”  There are different possible
meanings of vagueness: a statement might be too vague even for an individual to
get a specific message in response to the statement, but the statement might
also have a lot of varying interpretations among heterogeneous consumers, at
least some of which have specific definitions in mind. The AFP court endorsed
the latter view, saying that favorite might mean most-purchased, but it might
also mean that people liked it best but couldn’t often afford it.  Yet if the thought is that different
consumers will fill out words like “favorite” with different meanings, then we
could if we put the empirical work in actually figure out what those meanings
are and whether they’re shared across a substantial number of relevant cases.
Which brings me to the Green Guides: The FTC’s general rule
for advertisers is that they have to substantiate factual claims that are
conveyed to a substantial number of relevant consumers.  FTC, relying on its own research into the
meaning of general environmental benefit claims (“green” and “eco-friendly”),
found that substantial numbers of consumers understood a variety of things from
those claims:
61 %: made from recycled materials;
59 %: recyclable;
54 %: made with renewable materials;
53 %: biodegradable;
48 %: made with renewable energy;
45 %: non-toxic;
40 %: compostable
27 %: no negative environmental impact.
As a result, the FTC said in its Green Guides that
(b) Unqualified general environmental benefit claims …
likely convey that the product, package, or service has specific and
far-reaching environmental benefits and may convey that the item or service has
no negative environmental impact. Because it is highly unlikely that marketers
can substantiate all reasonable interpretations of these claims, marketers
should not make unqualified general environmental benefit claims…..
I think this is a correct treatment of vagueness that has
multiple plausible falsifiable meanings. If a substantial number of consumers
receives a sufficiently specific and false meaning, we should be concerned.
Thinking of puffery as being about consumer comprehension
instead of administrability leads courts into mistakes. Example: In Date v.
Sony Electronics Inc., 2009 WL 435289 (E.D. Mich. 2009), Sony advertised its
television as offering “Full HDTV,” and “1080p” (the best available
technology). The TVs, however, could not display a 1080p signal. Instead, at
best they could display an upconverted 1080i (interlaced) signal from a 1080p
device. The upconversion process results in undesirable artifacts like
feathering that make the viewing experience worse.
Sony argued that its claims were puffery, based on a prior
similar case. In Johnson v. Mitsubishi Digital Electronics America, Inc., 578
F. Supp. 2d 1229 (C.D. Cal. 2008), the court concluded that, although
Mitsubishi designated its television set as a 1080p television set, the phrase
1080p “does not convey a specific claim that is recognizable to the targeted
customer.” The Johnson court thought 1080p only had meaning for engineering
professionals, and that all that the plaintiff wanted was a top-of-the-line set
(top of the line is classic puffery). Because he didn’t understand what 1080p
meant, the claim was puffery to him.
The Date court pointed out that Sony put the term on its
specification sheet addressed to consumers, suggesting that it wasn’t puffery.
But more evident, I would argue, was that 1080p had a specific meaning, and
consumers didn’t need to know its technical requirements in order to be moved
to act by it any more than they need to know how their statins work or why the
drugs are called statins.  If a consumer
receives a message that she thinks is factual, credible and material, even if
she can’t be particularly specific about the details, then she can be harmed if
that message is false.  And it was really
easy to prove that 1080p was false as applied to the Sony TV.  But focusing on consumer understanding leads
to errors like the Mitsubishi court’s.
Some preliminary thoughts about implications: First, I want
to revisit the difficulty that puffery works: Puffery may be effective in
influencing purchases without being either provable or falsifiable in conventional
judicial terms. Thus, a determination that a claim is pure puffery should
arguably trump evidence that it actually influences consumers—but only if the
reason for finding puffery is the difficulty of proof of truth, rather than
vagueness or multiple possible meanings. And, as I suggested earlier,
exaggeration should be rejected as a separate defense or category of puffery;
the question is always what factual message consumers are likely to receive, if
any.  If the claim is “we’ll save you a
million dollars on car insurance,” we can ask whether a substantial number of
consumers receives a message that they can expect to save a significant amount
compared to other insurers, and whether that message is false.  The lawyers’ fighting would of course shift to
whether the inquiry into falsity was a manageable judicial task from current
disputes over puffery—but at least we’d have better definitions, and courts
forced to consider heterogeneous groups of consumers might even be moved to
look more rigorously for multiple possible meanings in an ad, where
appropriate.
What’s the proper boundary of falsifiability, then?  I think it should have to do with the
difficulty of getting reliable results from consumers, or of figuring out what
the possible specific factual meanings are.
This approach also has implications for judicial treatment
of images. The Second Circuit has said that 
Time Warner Cable, Inc. v. DirecTV, Inc., 497 F.3d 144 (2nd Cir. 2007):
“Unlike words, images cannot be vague or broad.” While one standard definition
of puffery—general claims of superiority that are so vague as to be
meaningless—fits images badly, the other—“an exaggerated, blustering, and
boasting statement upon which no reasonable buyer would be justified in
relying,” could be applied.  This to me
gets it absolutely backwards!  Not all
images have completely transparent meanings; especially in ads, images need to
be interpreted.  So images absolutely
could convey a vague or broad meaning, depending on what the ad was doing. But
the Second Circuit’s abandonment of verifiability and focus on reasonable
reliance led it to judge consumers—and to find them wanting.  In Time Warner Cable, Inc. v. DirecTV, Inc.,
497 F.3d 144 (2nd Cir. 2007), DirecTV ran Internet ads showing unwatchable TV
images contrasted to sharp and clear images. The district court agreed with
Time Warner that DirecTV’s own rationale for running the ads—that consumers
were highly confused about the then newly emerging HD technology and needed to
be educated that both digital equipment and digital signals were required to
experience HD quality—was reason to think that consumers might rely on the ads.
The court of appeals found that the district court clearly erred. The ads were
not even remotely realistic, and the court found it difficult to imagine that
any consumer, no matter how unsophisticated, could be fooled into thinking
cable’s picture quality would be that bad. 
I would suggest that’s a problem of the court’s imagination; a consumer
might know that “ordinarily” her cable wouldn’t be anything near that bad. But
why would a consumer transitioning to HDTV have been confident about what cable
would look like when she attached an analog cable feed to her new HDTV?
A final thought on the role of cost-benefit analysis: One reason
we might reject liability even if a significant number of consumers receives a
false factual message from a claim is that the claim provides benefits to a
different group of consumers, significant in size or in some other way.  That’s not a justification that requires a
puffery defense, nor does a puffery defense obviously help explain what
benefits the nondeceived consumers might be getting—by definition, if the issue
is puffery then they’re not getting specific truthful information, though maybe
they’re getting enjoyment from a cool ad. 
A clearer understanding of puffery could help us when we ask “is there
anything lost to the nondeceived group if we get rid of or reformulate the part
of the message that’s causing the deception?”
Q: more discussion of online reviews by individuals. Their
ability to puff all they want if unaffiliated may be some of their
attraction.  Also compare to gov’t:
cities can puff all they want about how they’re great places to live. If we
regulate puffery in advertising, won’t people be vulnerable to deception by
uncaught puffers?
RT: I don’t think there’s any evidence that the general
advertising regime can teach consumers an appropriate level of
skepticism—credulity seems to vary by demographics.  I want people at least not to be fooled when
they buy TVs.
Q: cheap talk/costly talk in economics: at what point is
information ignorable?
Q: remedies: research suggests you can’t combat puffery
w/facts, only w/anti-puffery: “best pen on earth” has to be fought with “worst
pen on earth.”
RT: similar to Green Guides, where even adding explanation
“green: made with recycled materials” conveys a bunch of other green claims.
Q: endorsement: isn’t the problem that the person who’s
selling is anticipated to puff, but if someone else is puffing, it’s
interpreted as their unbiased opinion to which people can pay attention?
RT: but that still means that there’s actionable information
in the semantic content of the words—to say consumers don’t rely on puffery is
just wrong.  It’s true that the deceptive
part is the failure to disclose, but it then affects whether the puffery is
“credible.”

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