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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

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This post also appears on Ahead of the Curve, the definitive law blog for navigating the automotive supply chain, from Warner Norcross + Judd LLP.

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Automotive suppliers and manufacturers around the world are getting in on the virtual and augmented reality bandwagon. The CEO of Jaguar Land Rover North America, for example, recently <a href="http://autoweek.com/article/car-news/jlr-has-its-eyes-virtual-reality" target="_blank" rel="noreferrer noopener">revealed</a> that the company sees a major role in the near future for virtual reality experiences in its dealerships. Wearing a head-mounted display such as Google Cardboard, customers would be able to experience various vehicle interiors and color combinations in three dimensions without needing to see a physical vehicle. Toyota, Infiniti and Mitsubishi have all <a href="http://adage.com/article/cmo-strategy/virtual-reality-auto-marketing-s-sleeping-giant/304995/" target="_blank" rel="noreferrer noopener">announced</a> similar plans. Joe Richards, director of research and market intelligence for Cox Automotive, has reportedly <a href="http://adage.com/article/cmo-strategy/virtual-reality-auto-marketing-s-sleeping-giant/304995/">called</a> virtual reality a “sleeping giant that could significantly improve car shopping and dealer experiences.”

Augmented (or “mixed”) reality—which superimposes virtual imagery onto real-world environments as recently popularized by the Pokemon Go craze—is also a hotbed for advertising innovation. For years now, Cadillac and many other automotive brands have offered mobile AR apps that create interactive, 3-D digital models of their vehicles. Recent innovations in smart eyewear, however, are poised to make such experiences orders of magnitude more immersive. Volvo, for example, has demonstrated an <a href="http://www.volvocars.com/intl/about/our-stories/human-innovations/pilot-projects-umbrella/hololens" target="_blank" rel="noreferrer noopener">app </a>for the Microsoft Hololens—a cutting-edge piece of wearable AR hardware—that delivers an entire holographic showroom to users wherever they are. Similarly, the consulting firm Valorem created a Hololens experience called “<a href="http://hololens.reality.news/news/proof-concept-holotire-app-shows-much-people-are-going-love-shopping-mixed-reality-0174093/" target="_blank" rel="noreferrer noopener">HoloTire</a>,” which offers shoppers the ability to inspect a life-sized hologram of a car tire from every angle, and even to initiate animated product demonstrations with such voice commands as “Hey tire, show me your treads!”

These use cases make clear the power of virtual and augmented media for communicating information to potential buyers. With that great power, however, comes the great responsibility of ensuring that the digital representations of a product faithfully convey the product’s actual features. If VR/AR demonstrations materially mislead or misinform the consumer about a product’s features, the advertiser could find itself liable for false advertising.

The primary legal authority creating the right to sue for such actions is the Lanham Act, 15 U.S.C. §§1101 et seq. – the same statute that regulates the use of trademarks. In particular, Section 43(a)(1)(b) of the Act (15 U.S.C. §1125) creates a cause of action against anyone who uses a “false or misleading description of fact, or false or misleading representation of fact ... in commercial advertising or promotion [that] misrepresents the nature, characteristics, qualities, or geographic origin of ... goods, services, or commercial activities.” False advertising claims may be filed by a regulatory agency or by a private party whose interests may be negatively affected by the challenged activity. The Federal Trade Commission, for example, has wide latitude to take action against marketing techniques that it deems misleading or deceptive, even if they are not explicitly prohibited by law. Most states also have consumer protection statutes or common law theories that offer similar or even greater protections.

It’s easy to imagine how a plaintiff could characterize automotive VR or AR content as false advertising. The simplest way for potentially misleading advertising to occur in these media is by mistake. Virtual and augmented reality tools are still an emerging technology. Even the most cutting-edge AR and VR devices, such as the Hololens, remain in the developmental stage and are still prohibitively expensive for most consumers. More accessible devices, such as the wearable mounts that enable VR experiences on mobile phones, deliver impressive, but less-precise, experiences. As sophisticated as all of these devices are, moreover, they have inherent limitations on how realistic they make virtual images appear.

Consequently, some over-ambitious AR or VR content creators may try to convey more data than they are able to effectively render, resulting in imprecise output. That, in turn, might end up conveying information that is false and has a material impact on a consumer. In one recent case, for example, a company was found to have misrepresented the size of its product by packaging it in an overly large container. In Re: Mccormick &amp; Company, Inc., Pepper Products Marketing &amp; Sales Practices Litigation, 2016 WL 6078250, No. 15-cv-2188 (D.D.C. Oct. 17, 2016). Under certain circumstances, a consumer might argue that an augmented or virtual image represented an automotive product as unrealistically (and misleadingly) small or large in a way that affected their purchasing decision.

An advertiser might also take unfortunate shortcuts during the complex task of creating virtual imagery for advertisements. For example, in 2012, British regulators banned L’Oreal from running ads containing two photos of Julia Roberts and Christy Turlington. L’Oreal’s marketers had digitally enhanced both photos to the point that it could not prove to the regulators’ satisfaction that the advertised makeup products were able to produce results like the ones shown. Fashion companies are likewise lambasted on a regular basis for altering photos of clothing models to give them physical features so extreme as to be anatomically impossible. The difficulty of precise 3D rendering – not to mention the same commercial and societal pressures that lend to these photo alterations – could likewise result in augmented ads that are similarly unrealistic. In the automotive realm, for example, a digital artist may leave out or oversimplify important features when rendering a product, in ways that misleads consumers into believing things about the product that are not accurate.

By definition, digitally enhancing physical reality is a fundamental element of what VR and AR do. These types of situations, therefore, are ones that marketers could very easily get themselves into if they are not careful. Whenever there is the potential that images might be argued to be confusing to customers, it is always a good idea to run that content by trained lawyers before publishing it.

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Brian D. Wassom

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Virtual Reality Could Expose Automotive Companies to New Claims of False Advertising

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Virtual Reality Could Expose Automotive Companies to New Claims of False Advertising

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