New York Times on the Rise in Unfair Competition Claims: Challenging Competitors' Advertising Is Increasingly an Important Part of an Overall Marketing Strategy

Stephanie Clifford wrote over the weekend in the New York Times about what’s behind the increase in unfair competition claims. Ms. Clifford reports:

The number of complaints over ads from competitors filed with the National Advertising Division of the Council of Better Business Bureaus, the industry’s main self-regulatory program for national ads, is on track to set a record this year. There have been 82 formal complaints so far in 2009, after last year’s record of 84 challenges, a sharp increase from 62 in 2007 and 52 in 2006.

Among a discussion of what it means to file an NAD complaint versus court action and why both seem to be increasing is this salient quote from Linda A. Goldstein at Manatt, Phelps & Phillips, LLP: “How brands will deal with their competitors’ advertisements is an increasingly important component of the overall marketing strategy.”

Comment On Recent New York Times E. Coli and Beef Article: How Retailers Can Protect Themselves

Co-Authored By Guest Blogger Scott Hansen

According to its website, last Sunday’s New York Times article on E. coli and beef is among the most widely read pieces published by the newspaper this week. The article tells the story of a 22-year-old Minnesota dance instructor who was left paralyzed after being infected with a strain of E. coli in an “Angus Beef Pattie” she ate in fall of 2007. The article traces the story of her burger, points out the many limitations in the current system, and calls eating beef a “gamble.”

While the article is clearly targeted at meat producers and processors, food retailers selling beef products, such as grocery stores and restaurants, are also at risk. This piece is a reminder of the need for retailers to take steps to ensure proper systems and procedures for tracing food to its source (according to yesterday's statement by Secretary Vilsack, retail traceability of ground beef is soon to be a USDA requirement). The Times lauds Costco, which it says is one of the few big producers that tests trimmings for E. coli before grinding.

Retailers should also be mindful of the utility of supplier agreements sufficiently tailored to limit liability or to procure insurance coverage. The greater protections afforded by well-drafted supplier agreements and carefully placed insurance are the best way to mitigate exposure.

Some may choose strong indemnification provisions and additional insured provisions. Another route, not yet the prevailing trend in the industry but perhaps in the near future, involves wrap-up insurance covering the entire supply chain, accompanied by covenants of cooperation between members of the supply chain.

Wrap-up insurance/covenants of cooperation approach has the advantage of potentially avoiding expensive and reputation-damaging litigation between members of the supply chain. Wrap-up insurance is also more likely to result in sufficient coverage to protect the retailer or restaurant chain.

No matter the path chosen, thoughtful placement of insurance coverage and confidence in supply chain contracts can help a food company weather the storm of a food-borne illness outbreak.