Antitrust Law Daily Wrap Up, FALSE ADVERTISING—WDNY: Extra Inserts in Newspaper Sample Advertising Did Not Support Lanham Act False Advertising Claim, (Jan 29, 2013)

By Tobias J. Gillett, J.D., LLM.

A Buffalo, New York newspaper has failed to establish Lanham Act false advertising claims against a competitor based on allegedly misleading sample advertising material because the presence of more inserts in the sample material than the competitor could ordinarily produce did not constitute a “representation of fact” for Lanham Act purposes, the federal district court in Buffalo has ruled (The Buffalo News, Inc. v. Metro Group, Inc., January 26, 2013, Skretny, W.).

The Buffalo News, Inc. represents the largest daily newspaper by circulation in the Buffalo, New York area. Buffalo News competes with Metro Group, Inc., a publisher of a number of weekly and bi-weekly local community newspapers in the region.

Both newspaper companies earn revenue through the sale of advertising inserts in their respective publications. According to Buffalo News’s complaint, the value of an insert package depends on the numbers of inserts in the package and the name recognition of the advertisers.

Buffalo News alleged that Metro collaborated with a marketing company, ADS Media Group, Inc., to solicit advertisers for inserts to be included in Metro’s newspapers. Buffalo News claimed that promotional material ADS and Metro distributed to potential clients included samples that contained “more inserts, from more nationally recognized retailers, than Metro is typically able to produce.” Buffalo News alleged that this practice misled the clients into believing that certain advertisers had “agreed to participate when they have not,” causing them to purchase inserts from Metro rather than Buffalo News.

Buffalo News filed suit against Metro and ADS, alleging violations of the Lanham Act’s prohibition on false advertising and New York law. Metro and ADS filed motions to dismiss.

The court granted the motions to dismiss, concluding that Buffalo News had failed to state a Lanham Act claim. To bring a Lanham Act false advertising claim, a plaintiff must demonstrate, among other things, that “the defendant has made a false or misleading statement.” Such a statement can be either “literally false” or “likely to mislead or confuse consumers.”

The court concluded that Buffalo News had not identified any “statements” or “representations of fact” that Metro or ADS had made. The court declined “to stretch the scope of the Lanham Act by suggesting that the mere inclusion of more inserts than [Metro and ADS] are ‘typically’ able to provide is an implicit, misleading statement of fact.” The court viewed the marketing material as simply samples, with no further implication intended. Since Metro and ADS had not engaged in “the type of conduct that the Lanham Act prohibits,” the court dismissed Buffalo News’s Lanham Act claim.

As the Lanham Act claim was the sole basis for federal jurisdiction over the case, the court declined to exercise its supplemental jurisdiction over Buffalo News’s state law claims, and therefore dismissed the complaint.

The case is No. 12-CV-808S.

Attorneys: Mitchell J. Banas, Jr. (Jaeckle Fleischmann & Mugel, LLP) for The Buffalo News, Inc. Kacey E. Houston (Nixon Peabody LLP) for Metro Group, Inc. Brian D. Gwitt (Damon Morey LLP) for ADS Media Group, Inc.

Companies: The Buffalo News, Inc.; Metro Group, Inc.; ADS Media Group, Inc.

Cases: Advertising NewYorkNews