Bragging Rights

Good Advice

So what can you say about other companies? Here's a brief overview:

  • Naming Brand X: In general, it's okay to use another company's name and trademark in your ad, as long as you're truthful in what you say and can back it up--with a recent scientific study, for instance.
  • Copycats: It's not okay to use the competitor's trademark in your ad or on your product if there's a likelihood of public confusion. If you're trying to show that your product is a less expensive alternative to a brand-name product, be careful. An overwhelming similarity in trade dress (colors, packaging and design) can lead to a court order to stop selling your version. Some courts have allowed obvious "knock-offs" if they're clearly identified as such, for example with a big sticker saying "designer impostor" or a centrally placed disclaimer stating that the other company has nothing to do with yours.
  • Using the language: Suppose your competitor's brand name is a word that could fairly describe your product as well. It's okay to use the word in your advertising, as long as it's not your intent to catch a free ride on the other company's advertising. For instance, the courts allowed a boot company to use the word "safari" to describe the boots it imported from Africa, even though a close competitor had registered the brand name Safari for its boots. However, Beer Nuts Inc. successfully stopped another food company from marketing peanuts under the name Brew Nuts.
  • Cheapest in town: If you compare your prices to those of a competitor, you must reflect the competitor's price accurately and ascertain that the goods are of similar quality.
  • Funny business: If you use another company's name or slogan in your own ad as a parody, be sure there's little likelihood of confusion--and that your parody won't tarnish the other company's image. For example, consider two parodies of Budweiser beer from the 1960s. When a florist appropriated a well-known Budweiser slogan to advertise flowers ("This bud's for you"), a court ruled there was little chance of confusion and the campaign wouldn't hurt the brewer. On the other hand, a court ruled that a chemical company adapting another well-known Budweiser slogan ("Where there's life, there's bugs") confused viewers about the source and added unwholesome connotations to the original slogan.

Because each case is different, the FTC considers false advertising charges on a case-by-case basis. Accordingly, it's often a judgment call whether or not a particular ad is misleading or unfair. Plevan advises business owners to plan ahead. "Read the advertisement before you run it," he says. "What are the claims you're making? What is the proof? In advertising, you can't always be right, but you have to have a good-faith position." The FTC and the courts look for a reasonable basis in fact. "You never want to be in a position where, if you get called on it, you haven't thought it through."

In particular, Plevan says, make sure the employees who would have to support your position agree with the claims in your ad. If several departments are involved, circulate the proposed ad to make sure everyone's on board because you may need their testimony later. Is it true? Is it fair? Do you have enough support? If not, head back to the drawing board.

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This article was originally published in the April 1998 print edition of Entrepreneur with the headline: Bragging Rights.

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