Antitrust Law Daily Wrap Up, ADVERTISING—D. Mass.: Manufacturer enjoined from continuing ad campaign against competitor, (Jul 6, 2015)

By Michael Menzhuber, J.D., LL.M.

The federal district court in Boston issued a preliminary injunction against a comparative advertising campaign by a radon fan manufacturer against its competitor. The court, however, denied the competitor’s request for corrective advertising and required the competitor to post a security bond in the event that the manufacturer was later found to be improvidently enjoined (Spruce Environmental Technologies, Inc. v. Festa Radon Technologies, Co., July 2, 2015, Gorton, N.).

Background. Festa Radon Technologies, Co. marketed its radon mitigation fans through a section in a catalog that contained a comparison of its fans and fans manufactured by Spruce Environmental Technologies, Inc, a direct competitor in the radon mitigation industry. The comparison included: (1) a photograph of a grey Festa fan next to a bright yellow Spruce fan; (2) a claim that its fans had solid motor lead wires while Spruce’s fans had stranded motor lead wires; (3) a claim that Spruce’s fans had generic-no manufacture information; and (4) a claim that its capacitor had factory installed lead wires while Spruce’s capacitor required wires installed during assembly. Also, several images in the catalog portrayed Festa products bearing labels indicating that they were both Home Ventilating Institute (HVI) and Energy Star certified. This comparative advertising campaign also appeared on Festa’s website.

Spruce filed suit, alleging that this was false advertising in violation of the Lanham Act and seeking to enjoin Festa from continuing this advertising campaign. Spruce’s preliminary injunction motion also sought to require Festa to publish corrective advertising.

Preliminary injunction. The court noted that in order to obtain a preliminary injunction a party must establish: (1) a substantial likelihood of success on the merits; (2) a significant risk of irreparable harm if the injunction is withheld; (3) a favorable balance of hardships; and (4) a fit between the injunction and the public interest.

Success on the merits. The court determined that Festa’s description of Spruce’s fan as having “generic-no manufacture information” was not literally false and it was not convinced that Spruce could prove that this description was deceptive. The court also concluded that Festa’s description of the Spruce motor wires and capacitors were not misleading. Finally, the court declined to address the truth or falsity of the claim that Festa used solid motor lead wires while Spruce used stranded motor lead wires because neither party presented any authority on the issue.

However, the court determined that there was still a likelihood that Spruce would succeed on the merits because: (1) the photographs that Festa used of Spruce’s fans were artificially created to be more yellow and, therefore, were misleading and presented an inaccurate comparison of Festa’s and Spruce’s fans; and (2) the images of Festa’s fans bearing HVI and Energy Star certification labeling were of older fans and, currently, Festa’s fans were neither HVI nor Energy Start certified.

Irreparable harm. The court concluded that Spruce would suffer irreparable harm if it did not grant the preliminary injunction. Spruce demonstrated a modicum of irreparable harm to its goodwill and reputation by alleging that it had been contacted by a customer who expressed concern over several aspects of its fans, as depicted in Festa’s advertising.

Balance of equities and public interest. The court agreed with Spruce that any potential harm that Festa might endure from being required to discontinue its advertisement was entirely self-inflicted. However, it concluded that the balance of equities only slightly tipped in Spruce’s favor because the allegedly false representations made by Festa did not appear to be egregious.

The court also agreed that Spruce’s request for a preliminary injunction comported with the public interest in ensuring that businesses did not engage in false and misleading advertising. Festa argued that Spruce had ulterior motives for its lawsuit. The court acknowledged that Spruce’s motive might be relevant later but determined that the consideration of its motive was beyond the scope of its pending motion.

The case is No. 15-11521-NMG

Attorneys: Christopher P. Litterio (Ruberto, Israel & Weiner, PC) for Spruce Environmental Technologies, Inc. Stephen W. Rider (Stephen W. Rider, PC) for Festa Radon Technologies, Co.

Companies: Spruce Environmental Technologies, Inc.; Festa Radon Technologies, Co.

Cases: Advertising MassachusettsNews