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Part Seven Special Topics and Perspectives
Belch: Advertising and
Promotion, Sixth Edition
VII. Special Topics and
Perspectives
denied.” The court of appeals ruling favoring Papa
John’s was allowed to stand.
Despite being disappointed at losing the case, Pizza
Hut’s general counsel was philosophical about the ruling,
noting that it trapped Papa John’s in a curious
catch 22: If Pizza Hut won, it could describe Papa
John’s advertising as false; but if Papa John’s won, it
would be only because it had successfully argued that
its advertising was mere puffery—not to be believed—
which is exactly what happened. Papa John’s expressed
satisfaction with the case and indicated that it was
glad the matter was over—and for good reason. The
company’s financial reports indicated that it had
spent at least $7 million to cover the legal costs of the
case. Experts noted that it is reasonable to assume
that Pizza Hut incurred similar costs.
21. Regulation of
Advertising and Promotion
© The McGraw−Hill
Companies, 2003
The advertising industry was also relieved that the
Supreme Court had ruled in favor of Papa John’s. The
case had put many executives on edge, as a ruling
against the puffery defense could have prompted
other challenges and a redrawing of the blurry line
separating so-called puffery and outright false advertising.
With this ruling, advertisers are still free to use
words such as good, better, and best and let consumers
determine what they really mean.
Sources: Jim Edwards, “Sour Dough: Pizza Hut v. Papa John’s,”
Brandweek, May 21, 2001, pp. 26–30; Davan Maharaj and Greg Johnson,
“Battle over Pizza Puffery Could Reshape Ad Landscape,” Los
Angeles Times, Apr. 2, 2000, pp. C1, 4; Michael Fumento, “Free-a-the
Papa!” Forbes, Feb. 21, 2000, p. 53; Louise Kramer, “Jury Finds Papa
John’s Ads Misled,” Advertising Age, Nov. 22, 1999, p. 46.
include certain types of information in their ads so that consumers will be aware of all
the consequences, conditions, and limitations associated with the use of a product or
service. The goal of affirmative disclosure is to give consumers sufficient information
to make an informed decision. An ad may be required to define the testing situation,
conditions, or criteria used in making a claim. For example, fuel mileage claims in car
ads are based on Environmental Protection Agency (EPA) ratings since they offer a
uniform standard for making comparisons. Cigarette ads must contain a warning about
the health risks associated with smoking.
An example of an affirmative disclosure ruling is the FTC’s case against Campbell
Soup for making deceptive and unsubstantiated claims. Campbell’s ads, run as part of
its “Soup is good food” campaign, linked the low-fat and -cholesterol content of its
soup with a reduced risk of heart disease. However, the advertising failed to disclose
that the soups are high in sodium, which may increase the risk of heart disease. In a
consent agreement accepted in 1991, Campbell agreed that, for any soup containing
more than 500 milligrams of sodium in an 8-ounce serving, it will disclose the sodium
content in any advertising that directly or by implication mentions heart disease in
connection with the soup. Campbell also agreed it would not imply a connection
between soup and a reduction in heart disease in future advertising. 46
Another area where the Federal Trade Commission is seeking more specificity from
advertisers is in regard to country of origin claims. The FTC has been working with
marketers and trade associations to develop a better definition of what the “Made in the
USA” label means. The 50-year-old definition used until recently required full manufacturing
in the United States, using U.S. labor and parts, with only raw materials from
overseas. 47 Many companies argue that in an increasingly global economy, it is becoming
very difficult to have 100 percent U.S. content and remain price-competitive. However,
the FTC argues that advertising or labeling a product as “Made in the USA” can
provide a company with a competitive advantage. For many products some consumers
do respond to the claim, as they trust the quality of domestic-made products and/or feel
patriotic when they buy American. For example, athletic-shoe maker New Balance is a
company that promotes its commitment to domestic manufacturing and the fact that a
percentage of its products are made in the United States (Exhibit 21-8).
In December 1998 the FTC issued new guidelines for American-made products.
The guidelines spell out what it means by “all or virtually all” in mandating how much
U.S. content a product must have to wear a “Made in USA” label or be advertised as
such. According to the new FTC guidelines, all significant parts and processing that go
into the product must be of U.S. origin and the product should have no or very little
foreign content. Companies do not have to receive the approval of the FTC before
making a “Made in USA” claim. However, the commission does have the authority to
take action against false and unsubstantiated “Made in USA” claims just as it does
with other advertising claims. 48