October 27, 2016

Companies Should be Aware of and Seek to Stop Traffic Diversion by Competitors


Unauthorized sales are causing issues for many companies across numerous industries. In highly competitive spaces, such as the beauty or skin care industries, a common but much less talked about an issue affecting many of these same companies is traffic diversion.

Traffic Diversion

In short, companies (or company representatives) will attempt to use the registered trademarks of well-known companies to divert web traffic to other websites. The goal, of course, is exploiting others for their own commercial gains. In other words, competitors (often less-established ones) hijack the goodwill of other companies’ products and brands in order to draw consumers to their own products. This is essentially a “bait and switch.”

Traffic diversion can take on a number of different forms on the internet. One common practice we have seen is for a website to display what appears to be an objective comparison of several products in the same market. However, the purported “Best” or “#1 Recommended” product is actually manufactured or sold by the same individuals or entities operating the website. The recommended product often includes a link to another website where consumers can buy that product.

Similarly, a company might “review” a well-known company’s product. This might consist of arbitrary numeric ratings, suggesting the product is fairly average. Adjacent to or below this review and the ratings, the company will provide an eye-catching graphic and link to the “best” alternative product or the claimed, “approved choice.”

As seen by these two examples, individuals and entities behind misleading product comparisons or reviews are wrongfully using the marks of established competitors to attract eyeballs (and ideally wallets) to their own websites and products.

The Lanham Act

Such traffic diversion can give rise to federal Lanham Act violations. These potential violations include false advertising and misrepresentation of association. The latter is essentially a failure to disclose a material connection to a company or product.

In terms of the former, the Lanham Act expressly prohibits “commercial advertising or promotion” that “misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities.” See 15 U.S.C. § 1125(a)(1)(B).

Moreover, the Federal Trade Commission prohibits deceptive practices and requires that companies make “clear and conspicuous” disclosures when content is actually an advertisement and not unbiased reviews.

In terms of the misrepresentation of association, the Lanham Act prohibits false, misleading and deceptive representations concerning a party’s goods and commercial activities. Specifically, by virtue of 15 U.S.C. § 1125(a)(1)(A), Congress has declared that “[a]ny person who, on or in connection with any goods or services . . . uses . . . any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

Companies affected by product diversion might be well-served trying to persuade the traffic diverters to remove the offending content. If they have strong legal claims and if the harm is substantial enough, the companies can potentially file lawsuits based on the traffic diverter’s illegal activities.

In short, companies working to combat unauthorized sales should also be aware of the harm they might be suffering from online traffic diversion. Congress’s prohibition of false advertising and the misrepresentation of association provides helpful tools for addressing such misuse of a company’s trademarks and providing support should legal action be necessary to remove the traffic-diverting content.