Advertising Law Alert: SCOTUS Rules Indirect Competitors May Bring 43(a) False Advertising Action

On March 26, 2014, the Supreme Court of the U.S. ruled unanimously, in an opinion by Justice Scalia, that a company – whether or not it is a direct competitor – has standing to bring a false advertising action under Section 43(a) of the Lanham Act where it alleges that it lost sales and/or had its business reputation damaged as a proximate cause of the defendant’s false or misleading advertising.

Section 43(a)’s cause of action extends to plaintiffs that fall within the zone of interests protected by the Lanham Act and whose injury was proximately caused by a violation of it.

To come within the zone of interests in a Section 43(a) false advertising suit, a plaintiff must allege an injury to a commercial interest in reputation or sales.

A plaintiff suing under Section 43(a) ordinarily must show that its economic or reputational injury flows directly from the deception wrought by the defendant’s advertising; and that occurs when deception of consumers causes them to withhold trade from the plaintiff.