Comcast Told to Stop Ads Dissing DirecTV

By Markets

Comcast got reprimanded by an ad watchdog group. Image source: Getty Images.

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In the 1980s and 1990s, rappers from the East Coast carried on some legendary wars of (mostly) words spread across various tracks.

But if Kool Moe Dee wanted to rap bad things about Busy Bee Starski or Jay-Z wanted to verbally go after DMX, nobody actually verified that their words were true. Starski's mama may well have been of loose morals and DMX possibly enjoyed wearing frilly dresses, but the claims made in rap battles did not have to be verified.

That's not supposed to be how it works in advertising. If Soda Company One runs an ad saying Soda Company Two has twice the sugar in its product, then that claim should be verifiable. Unfortunately, the ad world works under a system where companies can say whatever they want, forcing their rivals to file a complaint with theNational Advertising Division (NAD), a group administered by the Better Business Bureau, which oversees ad claims.

But the NAD is not a court and its decisions are suggestions as the group has no power of enforcement. Still, when the agency makes a finding, advertisers generally listen and that's what Comcast (NASDAQ: CMCSA) has said it will do regarding the group's ruling that its claims about AT&T's (NYSE: T) DirecTV aren't valid.

What was Comcast saying?

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NAD has asked Comcast to stop making unsupported claims about DirecTV that appeared in two separate television commercials. The ads claimed that DirecTV is built on old technology and that Comcast has four times more TV shows and movies on demand than its rival, so DirecTV customers must watch reruns.

In one of the ads title "Reruns," Comcast used the 1980s Wang Chung song "Everybody Have Fun Tonight," changing the lyrics to "Everybody is bored tonight. They're watching reruns tonight," according to the NAD press release.At the cutaway, an actor states: "Yeah, not us... We have X1 from XFINITY." At the close, a voiceover states that consumers can "get four times more TV shows and movies on demand with XFINITY."

The ad watchdog group found that the "four times as much" claimwas not valid as Comcast's set-top box offers 44,072 TV shows and movies on demand, while DIRECTV has 13,869. Comcast has a lot more, but not quite four times, so NAD asked it to drop the claim. Along those lines, NAD ruled that the claim that DirecTV subscribers are "watching reruns tonight" is "puffery and need not be substantiated."

NAD also recommended that Comcast should "discontinue its claim that DirecTV is built on tech, that's old'" and, in future advertising, avoid conveying the unsupported message that DirecTV does not offer voice-controlled search capability."

Does this impact business?

The idea of reviewing ads after they run and politely asking advertisers to change them has very little impact. These commercials already aired and most consumers who were influenced by them -- even if they learn of this ruling -- are not likely to cancel their cable service with Comcast in order to sign up for DIrecTV.

Even though Comcast in the statement it gave as part of the proceedings said that it "accepts NAD's decision... and will take NAD's recommendations into account in developing future advertisements," the company does not actually have to do that.

If the NAD wants to protect consumers, then its rulings need teeth. In addition, advertisers need to be held accountable quickly or forced to publicize when they have made misleading claims. The current system is like your parents waiting a year to send your older sibling a letter declaring that you are not in fact "smelly and ugly" and that he or she should apologize.

Comcast got a bit of a slap on the wrist here, but it does not change its past behavior nor force it to do anything different in the future.

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Daniel Kline has no position in any stocks mentioned. He is a better financial journalist than Jay-Z. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.