Friday, September 05, 2008

P&G's false advertising claim gets the brush-off

Procter & Gamble Co. v. Ultreo, Inc., -- F. Supp. 2d --, 2008 WL 4066710 (S.D.N.Y.)

Despite an earlier procedural victory in obtaining discovery of Ultreo’s studies, P&G has been as yet unsuccessful in its substantive false advertising claim against Ultreo. P&G’s Oral B line is one of two dominant product lines in the “premium power toothbrush” market, with a 38.2% share. (Philips has 61.2% of the market.) Ultreo is a new entrant. Its toothbrush “combines ultrasound technology with sonic bristle action” and as yet has no market share. The Ultreo’s sonic bristles “remove plaque and create bubbles,” while the brushhead generates ultrasound waves that cause nearby bubbles to oscillate and change size. This is known as cavitation, and lab tests have shown that it can remove plaque from a simulated tooth surface. Ultrasound waves are used to clean jewelry, surgical equipment, and other objects.

Ultreo makes a bunch of ultrasound-based claims that P&G dislikes. First, claims that allegedly suggest that bubbles remove plaque, e.g. “The sonic bristles create bubbles that pulsate at an exact ultrasonic frequency for optimal plaque removal” and “the ultrasound technology creates tiny bubbles that blast away the plaque” along with infomercial images of bubbles pulsating in the mouth. Second, claims that allegedly attribute a cleaning/plaque-removal effect to ultrasound, e.g. “the Ultimate Ultrasound Clean” and comparisons stating that while “[a] power toothbrush scrubs your teeth with brustle action, high speed bristle action ... Ultreo does something else altogether, something more.” Third, claims that Ultreo cleans beyond the reach of the bristles, e.g. that a “transducer in this device emits ultrasound waves, whipping your toothpaste into a pulsating froth of microscopic bubbles that penetrate under the gum-line and between teeth.” Fourth, claims that connect “the feeling of clean” to ultrasound or bubbles. Fifth, failure to disclose that clinical studies do not support Ultreo’s ultrasound claims.

P&G’s basic complaint was that Ultreo relies on in vitro (lab) studies, rather than in vivo studies of the human mouth.

The court found that P&G hadn’t shown a likelihood of irreparable harm and thus couldn’t get a preliminary injunction.

There was no presumption of irreparable harm because (1) there was no comparative advertisement, either explicitly or by obvious implication, (2) there was no public health danger, even though P&G argued that Ultreo’s ads undermined proper oral hygiene, and (3) there’s no presumption of irreparable harm just because a false statement is material, though such circumstances certainly can lead to irreparable harm.

Thus, P&G needed to show a reasonable basis to believe it would be injured. Actual lost sales aren’t required, because that’s virtually impossible to prove—all a plaintiff needs is enough indication of actual injury and causation to show that its injury isn’t speculative.

P&G submitted a study by a consulting firm that anticipated that Ultreo would sell 66,000 toothbrushes, about half of which would substitute for Oral-B purchases. But that study wasn’t based on showing consumers actual Ultreo ads and didn’t distinguish between lost sales from lawful competition and lost sales from false advertising. (If P&G is right about falsity, what non-false reasons does Ultreo proffer to buy its brush instead of others? Aren’t the ultrasound claims at the core of the product promise?) P&G then developed a new theory that any sales in excess of 66,000 would result from false advertising, but the court didn’t buy that either. The study might have been wrong in projecting sales, especially since it didn’t provide consumers with comparative price points or distinguish between sales to dental professionals and retail sales, which differ substantially. The court also expressed concern that it didn’t have enough information about the study sample (it was an internet survey). Thus, the study didn’t provide a logical connection between the alleged falsehood and the harm.

P&G submitted survey evidence to support its claims that consumers were being misled. Dr. Thomas Dupont conducted a survey for litigation, and two other studies assessed the market impact of Ultreo, supporting P&G’s position that Ultreo’s claims for ultrasound and a “beyond the bristles” effect were compelling to dental professionals and consumers. The court, however, found the Dupont survey deeply flawed. It didn’t use a control group to distinguish between preexisting consumer beliefs about ultrasound and bubbles and ad-generated beliefs. Dupont didn’t believe there were any such preexisting beliefs, but he conducted no research on this point, and Ultreo introduced numerous toothbrush and toothpaste ads referring to the cleaning potential of bubbles. Moreover, several survey responses revealed preexisting beliefs.

In addition, the court considered the survey’s “filter questions” to be inappropriately leading: “What does the ultrasound do?” and “What is the benefit of ultrasound?” It also used altered ad materials. And it conflated sonic vibrations with ultrasound; many respondents didn’t perceive that ultrasound alone would clean teeth. As a result, the Dupont survey didn’t show that consumers were being misled. Given that, though other studies found that Ultreo’s ads were effective, P&G failed to show likely harm from the alleged falsity.

Even assuming that P&G had shown harm, the court found that the injury was quantifiable and thus didn’t warrant injunctive relief. Lost sales are compensable with money damage, though lost market share constitutes irreparable harm. (Is anyone willing to explain the difference? Sales generate goodwill, so lost sales cause persistent goodwill loss … no?) P&G didn’t show lost market share or price erosion, and given the “enormous disparity” between P&G and Ultreo in market share and ad spending, it’s unlikely that P&G could show lost market share as a result of competition from Ultreo. And, because Ultreo is substantially more expensive than P&G’s highest-priced product, competition won’t force P&G to drop prices, either.

Furthermore, P&G’s delay weighed against finding irreparable harm. (Practice point: the bigger your company, the faster you have to sue.) Though P&G complained about Ultreo’s ads in March 2007, it waited six more months to sue. The casualness of its response suggested that there was no urgency to stop the allegedly false advertising and thus no irreparable injury. P&G failed to adequately explain the delay, and there was some evidence that the suit was timed to coincide with the American Dental Association’s annual meeting.

Finally, P&G and Philips (the market leader) have both made comparable ad claims, further undermining the claim of irreparable harm. They’ve both used in vitro studies to substantiate claims. The court didn’t make an unclean hands finding, because it didn’t determine whether in vitro-based claims are false. But P&G has used in vitro studies; has extolled “beyond-the-bristles cleaning” shown by lab studies; and regularly makes “feeling of clean” ad claims. The court was unwilling to enjoin a new market entrant from making the same claims that the “giants” have made for years: “Indeed, it seems evident that P & G’s litigation strategy in this case is simply an attempt to keep Ultreo in the starting blocks.” Having benefited from in vitro studies itself, P&G couldn’t claim irreparable harm when a new market entrant took the same position it once did. (I can imagine circumstances in which this would not be true: if, for example, a new cigarette maker started making health claims. But there’s no reason to think the state of scientific knowledge about tooth care has changed so much in a few years.)

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