The United States Court of Appeals for the Fourth Circuit recently issued an unpublished opinion adopting a three-factor test for determining whether a communication is “commercial advertising or promotion” for purposes of a Lanham Act false advertising claim. It is unclear why this decision was not selected for publication.
The Lanham Act prohibits false or misleading facts, or representations of fact, “in commercial advertising or promotion” that misrepresent the quality of goods or services. Until this decision, neither the Fourth Circuit nor the U.S. Supreme Court had clarified how to determine whether a communicative message constitutes “commercial advertising or promotion.”
The Fourth Circuit now defines “commercial advertising or promotion” as (1) commercial speech; (2) for the purpose of influencing consumers to buy goods or services; (3) that is sufficiently disseminated to the relevant purchasing public to constitute advertising or promotion within that industry. These are referred to as the Gordon & Breach factors—after a Southern District of New York case that relied upon them.
Turning to the facts of the case, Humane Farm Animal Care, Inc., (HFAC) certifies egg producers to use the label “Certified Humane” if the producer’s hens are treated in a specified, humane manner. HFAC is dedicated to promoting the humane treatment of animals, but it is also economically driven. It receives revenue from the sale of its licensees’ eggs—the more egg producers it certifies, the more money it can make.
Handsome Brook Farm, LLC (“Handsome Brook”) is an egg producer. Its cartons represent that its eggs are “American Humane Certified” and USDA “organic”—certifications managed by entities other than HFAC.
Based on information it allegedly learned during an audit of a packing facility, HFAC sent the same damaging email to 36 of the nation’s largest egg retailers, including, among others, Costco, Harris Teeter, Kroger, Target, and Safeway.
In this email, HFAC stated that Handsome Brook lacked up-to-date certifications, was mislabeling its eggs, and had conducted the audit of the packing facility because of a whistleblower complaint it received. The statements were untrue.
HFAC admitted that it sent the email to retailers with whom it had a relationship and who it knew were considering switching to Handsome Brook eggs. The email concluded with a call to action, “I hope you will reconsider changing suppliers.”
With respect to the first Gordon & Breach factor—whether the email was commercial speech or not—the Court considered whether the speech was economically motivated; promoted a specific product; was an advertisement; and was “placed in a commercial context and directed at the providing of services rather than toward an exchange of ideas.”
The email was economically motivated because HFAC hoped to realize an economic gain when sending the email. Because it earns money from the sale of its licensees’ eggs, the more licensees it has, the more money it can make. The more grocery stores sell its licensees’ eggs, the better.
There was a specific product being promoted—HFAC certified eggs.
The email was sent in an economic, commercial context to large grocery store chains for the purpose of promoting HFAC certified eggs.
To complicate the analysis of this first prong, the email was comprised of both commercial and non-commercial speech. The non-commercial speech was a warning to retailers that Handsome Brook’s eggs may bear misleading labels.
When a message communicates both commercial and noncommercial speech, it is treated like commercial speech “unless the commercial and non-commercial messages are ‘inextricably intertwined’.” Riley v. Nat’l Fed. of the Blind of N.C., Inc.
Here, the speech was not inextricably intertwined. HFAC could notify grocery stores about Handsome Brook’s inadequacies without also promoting its own certification. Because the two concepts could be separated intellectually, they were not “inextricably intertwined.”
Promotion of a good
Turning to the second Gordon & Breach factor—promotion of a good—for the reasons just stated, HFACs’ email promoted Certified Humane eggs over those licensed by other organizations.
Dissemination to the relevant purchasing public
Finally, the third factor—dissemination of the message to the relevant purchasing public. Was the email part of an organized campaign to penetrate the relevant market? Without a doubt, this was not a classic advertising campaign—I’ll know it when I see it. Emails to a few people wouldn’t normally be considered an ad campaign, but there are exceptions every rule, and we think the Court got it right here.
Under the circumstances, the email was sufficiently disseminated to the relevant buyers in the industry. It went to 36 retailers, certainly not all of the grocery chains, but some of the country’s largest. And importantly, all of the recipients had indicated they were considering switching to Handsome Brook eggs. It also contained a commercial call to action: “I hope you will reconsider changing suppliers.”
Under these circumstances, the Court correctly concluded that the email was an attempt to penetrate the relevant market.
Because HFAC’s email satisfied all three Gordon & Breach factors, it was considered “commercial advertising or promotion” within the meaning of the Lanham Act.
If you have, or are accused of, a false advertising claim with a non-traditional ad, contact Jim Astrachan at firstname.lastname@example.org.