South-Western Legal Studies in Business

Corrections to False Advertising Held Adequate
Description Appeals court upheld the determination of a trial court that the change made by a company ordered to correct its advertising, by giving greater prominence to certain terms, was adequate, despite the complaint of competitors that the correction was not sufficiently conspicuous.
Topic Consumer Protection
Key Words Advertising; False Advertising; Disclosures; Lanham Act; Injunction
C A S E   S U M M A R Y
Facts A federal court held that H&R Block Tax Services willfully engaged in a "false and misleading advertising campaign" that limited the ability of JTH Tax, Inc. d/b/a Liberty Tax Service, and its franchisees, to compete for customers. Block advertised "Instant Money" in relation to anticipated income tax refunds. The ads focused on refunds, not the fact that the "Instant Money" was in fact a loan from Block. The court ordered Block to "clearly and prominently" disclose that such advertised products were in fact loans. Later, JTH filed civil contempt motions, alleging that Block was in violation of the court order because its "Instant Money" ads now used much smaller type and less color for the term "loan" than for the terms "refund," "check today" and "instant money." The district court rejected the motion, holding that the court order only required Block to present its loans in such terms that a reasonable person would notice and understand them. JTH appealed.

Affirmed. The district court did not abuse its discretion by construing the term "prominent" in its prior order to mean the same as "conspicuous." The primary purpose of the order was to make sure that Block complied with IRS rules about refund anticipation loans so that customers would understand that they were agreeing to a loan, not simply assigning their refund to Block. The court had the discretion to review the advertisements and determine if the size and coloring of the relevant words met the requirement that the loan aspect of the transaction was sufficiently prominent as to meet its previous order.

Citation JTH Tax, Inc. v. H&R Block, 359 F.3d 699 (4th Cir., 2004)

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