FILED

U.S. COURT OF APPEALS

ELEVENTH CIRCUIT

JUNE 22, 2007

THOMAS K. KAHN

CLERK

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

________________________

No. 06-14726

________________________

D. C. Docket No. 06-00394-CV-CAP-1

PHOENIX OF BROWARD, INC., 

on behalf of Itself and Similarly 

Situated Burger King Franchisees, 

1101 S. Rogers Circle, Suite 10, 

Boca Raton, Florida 33487, 

Plaintiff-Appellant, 

versus 

MCDONALD’S CORPORATION, 

One McDonald Plaza, Oak Brook, 

Illinois 60523, 

Defendant-Appellee. 

________________________

Appeal from the United States District Court

for the Northern District of Georgia

_________________________

(June 22, 2007)
 Honorable Arthur L. Alarcon, United States Circuit Judge for the Ninth Circuit, sitting *

by designation.

2

Before PRYOR, KRAVITCH and ALARCON, Circuit Judges. *

KRAVITCH, Circuit Judge:

The primary issue in this appeal is the proper test for determining whether a

party has prudential standing to bring a false advertising claim under § 43(a) of the

Lanham Act, 15 U.S.C. § 1125(a). Phoenix of Broward, Inc. (“Phoenix”) appeals

the district court’s dismissal of its false advertising claim against McDonald’s

Corporation (“McDonald’s”) for lack of prudential standing. For the reasons that

follow, we adopt the test for prudential standing set forth in Conte Bros.

Automotive, Inc. v. Quaker State-Slick 50, Inc., 165 F.3d 221, 225 (3d Cir. 1998),

and affirm the district court’s dismissal.

I. BACKGROUND

Burger King Corporation (“Burger King”) owns, operates, and franchises

fast food restaurants throughout the world. Today, there are approximately 11,000

Burger King restaurants worldwide. Appellant Phoenix is a licensed Burger King

franchisee that owns and operates a Burger King franchise in Fort Lauderdale,

Florida. McDonald’s, like Burger King, owns, operates, and franchises fast food

restaurants throughout the world, and there are approximately 30,000 McDonald’s

restaurants worldwide. As competitors in the fast food industry, both McDonald’s
3

and Burger King have employed a variety of marketing and promotional strategies

to attract customers, generate sales, and ensure customer loyalty.

From 1995 to August 2001, McDonald’s offered customers the opportunity

to participate in various promotional games such as “Monopoly Games at

McDonald’s,” “The Deluxe Monopoly Game,” “Who Wants to be a Millionaire,”

and “Hatch, Match and Win.” Each of the promotional games featured low-value,

mid-value, and high-value prizes. The low-value prizes included low-dollar cash

awards and food and beverage items, while the high-value prizes included

automobiles and cash awards of up to $1 million dollars. In general, customers

could win the $1 million grand prize in one of two ways—by obtaining one of the

rare $1 million, instant-winner game pieces or by collecting and matching a

combination of certain other game pieces. 

McDonald’s conducted an extensive advertising and marketing campaign for

each of the games it offered. In these advertisements, McDonald’s represented that

all customers who participated in the games had a fair and equal opportunity to win

the offered prizes. The advertisements also represented the specific odds of

winning certain prizes, including the high-value prizes. 

In approximately April 2000, the Federal Bureau of Investigation (“FBI”)

began investigating the promotional games. While the games were still underway,
4

the FBI informed McDonald’s that there were problems with the random

distribution of its game pieces. In spite of this alleged knowledge, McDonald’s

continued to advertise that customers had a fair and equal opportunity to win the

offered prizes, including the high-value prizes. 

On August 21, 2001, the United States Department of Justice (“DOJ”) and

the FBI announced that between 1995 and August 2001, certain of McDonald’s

promotional games had been compromised by a criminal ring led by an employee

of Simon Marketing, Inc. (“Simon”), the company McDonald’s engaged to operate

the promotional games. From approximately 1995 to August 2001, Simon’s

Director of Security, Jerome Jacobson, diverted at least $20 million in high-value

prizes by embezzling winning, high-value game pieces and distributing them to a

network of “winners” who claimed (or recruited others to claim) the prizes from

McDonald’s. The DOJ and FBI announced that eight individuals, including

Jacobson, had been arrested in connection with the scheme. In announcing the

arrests, the U.S. Attorney General stated that the “fraud scheme denied

McDonald’s customers a fair and equal chance of winning.” In a corporate press

release issued after the arrests, McDonald’s Chairman and Chief Executive Officer

described the scheme as “a highly sophisticated inside game of fraud and

deception.”
5

On or about April 5, 2002, Jacobson pleaded guilty to charges of conspiracy

and mail fraud. Approximately 50 other persons either pleaded guilty or were

convicted in connection with the conspiracy. 

Following the disclosure of the scheme, McDonald’s created an independent

task force to review all of its promotional practices, and it introduced additional

security procedures to ensure the integrity of future promotional games. 

Nonetheless, consumers throughout the U.S. filed several class actions against

McDonald’s, alleging consumer fraud, negligence, and unjust enrichment. On

April 19, 2002, McDonald’s settled these class actions by, inter alia, agreeing to

implement a $15 million “Instant Giveaway,” providing class members and the

general public an opportunity to win fifteen $1 million prizes. 

On February 22, 2006, Phoenix filed the instant action against McDonald’s

on behalf of itself and all similarly situated Burger King franchisees (a proposed

class of approximately 1,100 franchisees), alleging false advertising in violation of

§ 43(a) of the Lanham Act. Specifically, Phoenix alleged that McDonald’s

misrepresented that each player in its promotional games had a fair and equal

chance of winning high-value prizes and misrepresented the specific odds of

winning high-value prizes. According to Phoenix, McDonald’s promotional games

were “rigged from approximately 1995-2001,” those games lured customers away
6

from Burger King and yielded an “unnatural” spike in profits for McDonald’s, the

high-value prizes (including the $1 million prizes) were diverted from McDonald’s

customers, and the “advertising campaigns that touted million dollar prizes were

literally false.” Phoenix also alleged that after learning that the games had been

compromised, McDonald’s knowingly and deliberately continued to advertise the

games as though customers had a fair and equal chance of winning.

McDonald’s moved to dismiss Phoenix’s complaint on the grounds that

Phoenix lacked prudential standing under the Lanham Act and, in the alternative,

that Jacobson’s theft was an intervening cause of Phoenix’s alleged injury. On

August 1, 2006, the district court issued a written order granting McDonald’s

motion and dismissing the action with prejudice. Noting that the Eleventh Circuit

had not addressed the appropriate standard for determining whether a plaintiff has

prudential standing to bring a false advertising claim under § 43(a) of the Lanham

Act, the district court surveyed the case law of other circuits and adopted the fivefactor test set forth by the Third Circuit in Conte Bros., 165 F.3d at 225, finding

that test to be more “persuasive” than the “categorical approach” adopted by

several other circuits. Applying the Conte Bros. test, the district court concluded

that Phoenix did not have prudential standing to bring a false advertisement claim

under the Lanham Act against McDonald’s. Phoenix now appeals.
7

II. DISCUSSION

On appeal, Phoenix argues that the district court erred in dismissing its

complaint against McDonald’s for lack of prudential standing. “We review

standing determinations de novo.” Bochese v. Town of Ponce Inlet, 405 F.3d 964,

975 (11th Cir. 2005). “We review a district court’s grant of a motion to dismiss de

novo, taking as true the facts as they are alleged in the complaint.” Owens v.

Samkle Auto. Inc., 425 F.3d 1318, 1320 (11th Cir. 2005).

“In every federal case, the party bringing the suit must establish standing to

prosecute the action.” Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11,

124 S.Ct. 2301, 2308, 159 L.Ed.2d 98 (2004). As the Supreme Court has

explained, standing jurisprudence is comprised of “two strands: Article III

standing, which enforces the Constitution’s case-or-controversy requirement, and

prudential standing, which embodies judicially self-imposed limits on the exercise

of federal jurisdiction.” Id. at 11-12, 124 S.Ct. at 2308 (internal quotation marks

and citation omitted).

To demonstrate Article III standing, a plaintiff must allege that (1) he has

suffered an actual or threatened injury, (2) the injury is fairly traceable to the

challenged conduct of the defendant, and (3) the injury is likely to be redressed by

a favorable ruling. Primera Iglesia Bautista Hispana of Boca Raton, Inc. v.
8

Broward County, 450 F.3d 1295, 1304 (11th Cir. 2006). 

McDonald’s does not dispute that the allegations in Phoenix’s complaint

satisfy these constitutional standing requirements. Because the issue of

constitutional standing is jurisdictional, however, we address it here. See Steel Co.

v. Citizens for a Better Env’t, 523 U.S. 83, 91-93, 118 S.Ct. 1003, 1011, 140

L.Ed.2d 210 (1998) (stating that the question of Article III standing is

jurisdictional and should be addressed before issues of prudential and statutory

standing); Conte Bros., 165 F.3d at 225. 

In its complaint, Phoenix alleges that “[a]s a direct and proximate result of

McDonald’s false . . . advertising and unfair competition, customers were diverted

from Phoenix and its Affiliated Franchisees, who accordingly not only lost profits

due, inter alia, to reduced sales, but also incurred costs in connection with common

counteractive efforts to retain those customers.” Although Phoenix does not allege

that McDonald’s or any of its employees participated in the theft that led to the

compromising of the high-value games (allegedly rendering McDonald’s

advertisements false), Phoenix does allege that after McDonald’s learned that the

high-value games had been compromised, it knowingly and deliberately advertised

that customers had a fair and equal opportunity to win high-value prizes. These

allegations satisfy the first two prongs of the constitutional standing
9

inquiry—Phoenix alleges that it has suffered an actual injury that is fairly traceable

to McDonald’s alleged misconduct. See Primera Iglesia, 450 F.3d at 1304. In

relief, Phoenix requests, among other things, “actual damages, in amounts to be

demonstrated at trial for the harms directly and proximately caused by McDonald’s

false . . . advertising” and “other damages incurred,” including “advertising costs

incurred to respond to the fixed promotional games.” If granted, this relief would

redress the injuries alleged and thus satisfies the third prong of the standing

inquiry. See id. Based on the allegations in the complaint, we conclude that

Phoenix has satisfied the requirements of constitutional standing. 

Even where constitutional standing exists, however, prudential

considerations may preclude standing. Wooden v. Bd. of Regents of Univ. Sys. of

Ga., 247 F.3d 1262, 1273 n.12 (11th Cir. 2001). We therefore turn to the issue of

prudential standing.

A. Whether Prudential Standing Doctrine Applies to the Lanham Act

We must first determine whether Congress intended to abrogate prudential

standing doctrine in passing § 43(a) of the Lanham Act. Section 43(a) provides:

(1) Any person who, on or in connection with any goods or services,

or any container for goods, uses in commerce any word, term, name,

symbol, or device, or any combination thereof, or any false

designation of origin, false or misleading description of fact, or false

or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive
10

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,

or

(B) in commercial advertising or promotion, misrepresents the

nature, characteristics, qualities, or geographic origin of his or her

or another person’s goods, services, or commercial activities,

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.

15 U.S.C. § 1125(a) (emphasis added).

The issue of whether prudential standing doctrine applies to § 43(a) of the

Lanham Act is one of first impression in this circuit. The Third and Fifth Circuits

have addressed this question, and both have held that Congress did not abrogate

prudential limitations on the standing of plaintiffs to bring suit under § 43(a). See

Conte Bros., 165 F.3d at 227-230; Procter & Gamble Co. v. Amway Corp., 242

F.3d 539, 561-62 (5th Cir. 2001). We agree.

Congress is presumed to incorporate background prudential standing

limitations unless the statute expressly negates such principles. Bennett v. Spear,

520 U.S. 154, 163, 117 S.Ct. 1154, 1162, 137 L.Ed.2d 281 (1997). Although

§ 43(a)’s use of the term “any person” might lead to the conclusion that Congress

intended to negate the background of prudential standing by allowing “any person”

who could achieve Article III standing to bring suit, “the Supreme Court has twice

held that Congress has not expressly abrogated prudential standing doctrine merely
 Section 45 provides in pertinent part:

1

The intent of this chapter is to regulate commerce within the control of Congress

by making actionable the deceptive and misleading use of marks in such

commerce; to protect registered marks used in such commerce from interference

by State, or territorial legislation; to protect persons engaged in such commerce

against unfair competition; to prevent fraud and deception in such commerce by

the use of reproductions, copies, counterfeits, or colorable imitations of registered

marks; and to provide rights and remedies stipulated by treaties and conventions

respecting trademarks, trade names, and unfair competition entered into between

the United States and foreign nations.

15 U.S.C. § 1127 (emphasis added). 

11

by passing a statute the text of which admits a broad interpretation.” Conte Bros.,

165 F.3d at 227. For example, in Associated General Contractors of California,

Inc. v. California State Council of Carpenters, the Supreme Court held that

Congress did not abrogate prudential standing principles when it enacted the

Clayton Act, despite statutory language allowing “[a]ny person who shall be

injured in his business or property” to bring suit under that act. 459 U.S. 519, 535

& n.31, 103 S.Ct. 897, 907 & n.31, 74 L.Ed.2d 723 (1983). And as noted by the

courts in Conte Bros. and Procter & Gamble, language contained in § 45 of the

Lanham Act “makes clear that the focus of the [Lanham Act] is on anti-competitive

conduct in a commercial context,” so that conferring standing to the full extent 1

implied by the plain language of § 43(a) would give standing to parties that have

not had their competitive or commercial interests affected by the defendant’s

conduct. Conte Bros., 165 F.3d at 229; Procter & Gamble, 242 F.3d at 561. 
12

Rather, “[t]he congressionally-stated purpose of the Lanham Act” evinces a

congressional “intent to limit standing to a narrow class of potential plaintiffs

possessing interests the protection of which furthers” that congressionally stated

purpose. Conte Bros., 165 F.3d at 229. 

Accordingly, in light of the text of § 43(a) and the purpose of the Lanham

Act as expressed in § 45, we join the Third and the Fifth Circuits and hold that

Congress did not intend to abrogate prudential standing limitations when it enacted

the Lanham Act. 

B. The Appropriate Test for Prudential Standing Under § 43(a)

Phoenix argues that the district court applied the wrong test to determine

whether Phoenix had prudential standing to bring its false advertising claim against

McDonald’s. According to Phoenix, the district court erred in applying the fivefactor test articulated by the Third Circuit in Conte Bros., and instead, the court

should have applied the “categorical approach” that, according to Phoenix,

“controls in most” of the circuit courts of appeals.

This court has not addressed the appropriate test for determining whether a

plaintiff has prudential standing to bring a false advertising claim under § 43(a) of

the Lanham Act. After surveying the caselaw from other circuits and examining

the parties’ arguments, we join the Third and Fifth Circuits and adopt the test for
 To date, the Third and Fifth Circuits are the only circuits to have adopted the test set 2

forth in Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 165 F.3d 221, 233 (3d Cir.

1998), as the standard for determining whether a plaintiff has prudential standing under § 43(a)

of the Lanham Act. See Am. Ass’n of Orthodontists v. Yellow Book USA, Inc., 434 F.3d 1100,

1104 (8th Cir. 2006).

 In announcing this standard, the Third Circuit adopted the test for standing under the 3

Sherman Act articulated by the Supreme Court in Associated General Contractors of California,

Inc. v. California State Council of Carpenters, 459 U.S. 519, 103 S.Ct. 897, 74 L.Ed.2d 723

(1983). Conte Bros., 165 F.3d at 233.

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prudential standing articulated in Conte Bros. We therefore hold that to determine 2

whether a party has prudential standing to bring a false advertising claim under

§ 43(a) of the Lanham Act, a court should consider and weigh the following

factors:

(1) The nature of the plaintiff’s alleged injury: Is the injury of a type

that Congress sought to redress in providing a private remedy for

violations of the [Lanham Act]?

(2) The directness or indirectness of the asserted injury.

(3) The proximity or remoteness of the party to the alleged injurious

conduct.

(4) The speculativeness of the damages claim.

(5) The risk of duplicative damages or complexity in apportioning

damages.

Conte Bros., 165 F.3d at 233 (internal quotation marks and citations omitted);3

Procter & Gamble, 242 F.3d at 562 (adopting the Conte Bros. test for determining

prudential standing under the Lanham Act). We believe that this test “provides

appropriate flexibility in application to address factually disparate scenarios that

may arise in the future, while at the same time supplying a principled means for
14

addressing standing under . . . § 43(a).” Conte Bros., 165 F.3d at 236. Indeed,

“two prominent commentaries” have endorsed this standard. Procter & Gamble,

242 F.3d at 562 n.51 (citing 4 McCarthy, McCarthy on Trademarks and Unfair

Competition § 27:32 n.1 (4th ed. 1996) (“In the author’s opinion, some limit on the

§ 43(a) standing of persons remote from the directly impacted party should be

applied by analogy to antitrust law, such as use of the criteria listed in Associated

General Contractors . . . .”); Restatement (Third) of Unfair Competition § 3 cmt.f

(1995) (“In determining whether an asserted injury is sufficiently direct to justify

the imposition of liability, the Supreme Court’s analysis of similar issues under

federal antitrust law may offer a useful analogy.”)). And under this standard,

“standing under the Lanham Act does not turn on the label placed on the

relationship between the parties.” Conte Bros., 165 F.3d at 235. 

Phoenix argues that this court should adopt the so-called “categorical

approach” that is applied in the majority of the circuits, as under that approach,

“actual” or “direct” competition is the “exclusive requirement” for determining

prudential standing. To that end, Phoenix argues that the Conte Bros. test was

formulated in order to extend prudential standing under the Lanham Act to parties

who are not in “actual” or “direct” competition. Thus, according to Phoenix, the

Conte Bros. factors “inevitably collapse” into the categorical approach when
 Contrary to Phoenix’s contention, it appears that the Fourth Circuit has not adopted the 4

so-called categorical approach followed in the Seventh, Ninth, and Tenth Circuits. In Made in

the USA Foundation v. Phillips Foods, Inc., the Fourth Circuit stated that “in an earlier case

involving commercial parties, we noted in passing that the Lanham Act is ‘a private remedy [for

a] commercial plaintiff who meets the burden of proving that its commercial interests have been

harmed by a competitor’s false advertising.’” 365 F.3d 278, 281 (4th Cir. 2004) (quoting Mylan

Labs., Inc. v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993)) (emphasis added). And after

examining opinions from the First, Second, Third, Seventh, and Tenth Circuits, the Fourth

Circuit acknowledged that “there might be some marginal differences in the circuits about what

qualifies as a commercial or competitive interest for standing purposes under the Lanham Act”

and determined that “the basic approach of other circuits . . . requires the Lanham Act plaintiff to

be engaged in commercial activity.” Id. at 280-81 (examining Conte Bros., 165 F.3d at 229;

Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 873 (10th Cir. 1995); Dovenmuehle v. Gilldorn

Mortgage Midwest Corp., 871 F.2d 697, 700 (7th Cir. 1989); Berni v. Int’l Gourmet Rests. of

Am., Inc., 838 F.2d 642, 648 (2d Cir. 1988); Camel Hair & Cashmere Inst. of Am., Inc. v.

Associated Dry Goods Corp., 799 F.2d 6, 11-12 (1st Cir. 1986)). The court endorsed this “basic

approach,” and as a result, it concluded that a consumer does not have standing to sue for false

advertising under the Lanham Act. Id. at 281. Thus, rather than adopt the categorical approach

followed by the Seventh, Ninth, and Tenth Circuits, the Fourth Circuit endorsed the “basic

approach” of requiring that the plaintiff be engaged in commercial activity—an approach

followed by all circuits that have addressed the issue. Id.

15

applied to a “direct competitor” alleging a “competitive injury,” and therefore,

direct competitors “invariably satisfy” the Conte Bros. requirements. We address

each argument in turn.

Of the circuits that have not adopted the Conte Bros. test, the Seventh,

Ninth, and Tenth Circuits have come the closest to “categorically” holding that the

plaintiff must be in “actual” or “direct” competition with the defendant and assert a

“competitive injury to establish prudential standing under § 43(a).” See, e.g., Jack 4

Russell Terrier Network of N. Ca. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1037

(9th Cir. 2005) (holding that to establish “standing pursuant to the ‘false

advertising’ prong of § 43(a) of the Lanham Act, a plaintiff must show: (1) a
16

commercial injury based upon a misrepresentation about a product; and (2) that the

injury is ‘competitive,’ or harmful to the plaintiff’s ability to compete with the

defendant” (citation omitted)); Hutchinson v. Pfeil, 211 F.3d 515, 520 (10th Cir.

2000) (holding that the plaintiff lacked standing because his hopes of eventually

obtaining a product to compete with the defendant’s were too remote, and his

inability to compete with the defendant was not a function of the defendant’s

alleged misconduct); Johnny Blastoff, Inc. v. L.A. Rams Football Co., 188 F.3d

427, 438 (7th Cir. 1999) (holding that “a party must demonstrate that it has a

reasonable interest to be protected against conduct violating the Act[,]” by

asserting “a discernable competitive injury” (internal quotations

omitted)); Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 873 (10th Cir. 1995)

(holding that the plaintiff “must be a competitor of the defendant and allege a

competitive injury”); L.S. Heath & Son, Inc. v. AT&T Info. Sys., Inc., 9 F.3d 561,

575 (7th Cir. 1993) (holding that “the plaintiff must assert a discernible

competitive injury”); Waits v. Frito-Lay, Inc., 978 F.2d 1093, 1109 (9th Cir. 1992)

(same).

In contrast to the Seventh, Ninth, and Tenth Circuits, the First and Second

Circuits have applied a less categorical approach to determine standing, wherein

the dispositive issue is not the degree of “competition,” but whether the plaintiff
17

has a “reasonable interest” to be protected against the type of harm that the

Lanham Act is intended to prevent. See, e.g., Ortho Pharm. Corp. v. Cosprophar,

Inc., 32 F.3d 690, 694 (2d Cir. 1994); Camel Hair & Cashmere Inst., Inc. v.

Associated Dry Goods Corp., 799 F.2d 6, 11 (1st Cir. 1986). In Camel Hair, a

trade group of cashmere garment producers filed a Lanham Act suit alleging that a

coat manufacturer had misrepresented the cashmere content of one of its products. 

799 F.2d at 6-8. In discussing the issue of standing, the First Circuit said: “the

plaintiff [must have] a reasonable interest in being protected [against false

advertising]. . . . [I]t is [not enough] for the plaintiff merely to establish a

falsehood in the defendant’s advertising or marketing; the plaintiff must also show

a link or ‘nexus’ between itself and the alleged falsehood.” Id. at 11-12 (emphasis

added). Concluding that the trade group had standing, the First Circuit stated that

“[although] none of the [group’s] members compete with the defendant . . . their

position as manufacturers and vendors of fabric and clothing containing cashmere

gives them a strong interest in preserving cashmere’s reputation as a high quality

fibre.” Id. at 12 (emphasis added). 

In the Second Circuit, a plaintiff bringing a false advertising claim under the

Lanham Act “must demonstrate both (1) a reasonable interest to be protected

against the advertiser’s false or misleading claims, and (2) a reasonable basis for
18

believing that this interest is likely to be damaged by the false or misleading

advertising.” ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 169 (2d Cir. 2007)

(internal quotation marks omitted); accord Societe Des Hotels Meridien v. LaSalle

Hotel Operating P’ship, L.P., 380 F.3d 126, 130 (2d Cir. 2004); Havana Club

Holding, S.A. v. Galleon S.A., 203 F.3d 116, 130 (2d Cir. 2000); PDK Labs, Inc.

v. Friedlander, 103 F.3d 1105, 1111 (2d Cir. 1997). “The reasonable interest prong

of this test includes commercial interests, direct pecuniary interests, and even a

future potential for a commercial or competitive injury[,]” while “the reasonable

basis prong requires the plaintiff to show both likely injury and a causal nexus to

the false advertising.” ITC, 482 F.3d at 169-70 (internal quotation marks omitted)

(emphasis added). And under the Second Circuit’s approach, a plaintiff asserting a

false advertising claim under § 43(a) need not be a “competitor.” See PDK Labs,

103 F.3d at 1111; Ortho, 32 F.3d at 694; Berni v. Int’l Gourmet Rests. of Am.,

Inc., 838 F.2d 642, 648 (2d Cir. 1988). Instead, “where the plaintiff’s products are

not obviously in competition with [the] defendant’s products,” the “plaintiff must

make a more substantial showing of injury and causation.” PDK Labs, 103 F.3d at

1111 (quotation marks omitted).

Thus, contrary to Phoenix’s assertions, the majority of the circuits do not

hold “categorically” that actual or direct competition is the exclusive requirement
 Phoenix further contends that the district court erroneously framed the Conte Bros. test 5

and the “categorical approach” as “opposite sides of a circuit split coin.” Although we agree that

the Conte Bros. test and the categorical approach are not necessarily on opposite sides of a

circuit split, we nonetheless conclude that there is tension between the two approaches with

regards to the degree of actual competition required between the plaintiff and the defendant. 

See, e.g., Am. Ass’n of Orthodontists, 434 F.3d at 1103-04 (recognizing differences between

circuits that “have held, categorically, that false advertising claims not involving misuse of a

trademark are actionable only when brought by competitors of the wrongdoer[,]” and those

circuits that “have adopted a less categorical multi-factor test . . . that focuses judicial

enforcement of the Lanham Act on the protection of commercial interests and the prevention of

competitive harm” (internal quotation marks omitted)).

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for standing to bring a false advertising claim under the Lanham Act. 

5

We also disagree with Phoenix’s assertion that the Third Circuit adopted the

Conte Bros. test to “extend prudential standing” to parties who are not in “direct”

or “actual” competition. In determining the appropriate test for prudential standing

under § 43(a), the Conte Bros. court first noted that the Third Circuit’s previous

cases addressing § 43(a)’s standing requirements “defined the dispositive question

of a party’s prudential standing as whether the party has a reasonable interest to be

protected against false advertising.” Conte Bros., 165 F.3d at 230 (internal

quotation marks omitted) (emphasis added). Although the court had “never

precisely defined the critical term ‘reasonable interest,’” it had “carried forward

this prudential ‘reasonable interest’ requirement and ha[d] grappled with defining

the term with greater precision.” Id. at 230-31. In adopting the five-factor test

discussed above, the court expressly declined to adopt standards conferring

standing only on “direct competitors or their surrogates,” as such standards were
20

“in tension” with language from a previous Third Circuit opinion which implied

that parties “not in direct competition” may nonetheless “have standing to sue if

they have a reasonable interest to be protected against false advertising.” Id. at 232

(citing Serbin v. Ziebart Int’l Corp., 11 F.3d 1163, 1176-77 (3d Cir. 1993))

(internal quotation marks omitted). The court also cited earlier cases from the First

and Second Circuits that recognized standing for Lanham Act plaintiffs who were

not in direct competition with the defendant. Id. at 231-32 (citing PPX Enters.,

Inc. v. Audiofidelity, Inc., 746 F.2d 120 (2d Cir. 1984) (holding that the owner of

royalty streams from a music recording had standing to sue a distributor of falsely

labeled music recordings); Camel Hair, 799 F.2d at 11 (holding that a trade

association of manufacturers of cashmere fibers and fabrics, but not of finished

coats, had standing to sue retailers of coats falsely labeled as containing more

cashmere than they had)). Thus, even before the Conte Bros. decision, the Third

Circuit had implied, and the First and Second Circuits had held expressly, that

parties who are not in “direct” or “actual” competition may nonetheless have

prudential standing to bring false advertising claims under the Lanham Act.

Finally, we disagree with Phoenix’s contention that “direct competitors”

alleging a “competitive” injury “invariably satisfy” the Conte Bros. requirements. 

Rather than blindly accept a plaintiff’s allegation that it is a “competitor” that has
21

suffered a “competitive injury,” the Conte Bros. test is designed to determine

whether the injury alleged is the type of injury that the Lanham Act was designed

to redress—harm to the plaintiff’s “ability to compete” in the marketplace and

erosion of the plaintiff’s “good will and reputation” that has been directly and

proximately caused by the defendant’s false advertising. Id. at 234-36. Moreover,

at least one federal court (in addition to the district court below) has applied the

Conte Bros. test where the plaintiff and defendant were “direct competitors” and

held that the plaintiff lacked prudential standing. See, e.g., KIS, S.A. v. Foto

Fantasy, Inc., 240 F. Supp. 2d 608, 610-11, 616 (N.D. Tex. 2002) (applying the

Conte Bros. test and holding that the plaintiff, a manufacturer and operator of

photo booths, lacked prudential standing to bring a false advertising claim against

the defendant, also a manufacturer and operator of photo booths, even though the

plaintiff and defendant were direct competitors in the photo booth industry). And

even accepting Phoenix’s argument, as stated above, we conclude that the Conte

Bros. test “provides appropriate flexibility in application to address factually

disparate scenarios that may arise in the future, while at the same time supplying a

principled means for addressing standing under” § 43(a) of the Lanham Act. Conte

Bros., 165 F.3d at 236. 

In summary, we hold that to determine whether a plaintiff has prudential
22

standing to bring a false advertising claim under § 43(a) of the Lanham Act, a court

must consider and weigh the five factors articulated in the Conte Bros. opinion. 

C. Applying the Conte Bros. Test for Prudential Standing

Phoenix argues that it satisfied the requirements of prudential standing under

the Conte Bros. test. After examining and weighing the Conte Bros. factors, we

conclude otherwise.

1. Type of Injury Alleged

The first factor directs us to determine “whether the alleged injury is of a

type Congress sought to redress in providing a private remedy for violations of the

Lanham Act.” Procter & Gamble, 242 F.3d at 563. As the Conte Bros. court

noted, the focus of § 43(a) is on protecting “commercial interests [that] have been

harmed by a competitor’s false advertising, and in secur[ing] to the business

community the advantages of reputation and good will by preventing their

diversion from those who have created them to those who have not.” Conte Bros.,

165 F.3d at 234 (alterations in original) (citation omitted). 

In its complaint, Phoenix alleges that (1) McDonald’s falsely advertised that

customers who purchased its products had a fair and equal chance to win any of the

prizes offered, including the high-value prizes; (2) during the run of the games,

McDonald’s experienced an “unnatural spike” in its sales while Burger King
 Although the Conte Bros. court held that the “loss of sales” suffered by the plaintiffs in 6

that case did not detract from their “ability to compete” and thus was not the type of injury the

Lanham Act was designed to redress, the court reached this conclusion after determining that the

plaintiff-retailers were not at all in competition with the defendant-manufacturers. Conte Bros.,

165 F.3d at 234. Here, by contrast, Burger King is one of McDonald’s direct competitors in the

fast food industry.

23

experienced a decrease in its sales; and (3) Burger King franchisees incurred

counter-promotion costs in an effort to “lure back customers who frequented

McDonald’s while the fraudulent games were running.” In our view, these

allegations amount to an assertion by Phoenix that its “commercial interests” were

“harmed by a competitor’s false advertising,” and this is the type of harm the

Lanham Act was intended to redress. See id. at 234. 

6

McDonald’s argues that its “conduct was in no way anti-competitive”

because it “was the victim of a criminal fraud scheme” perpetrated by a third party. 

According to McDonald’s, “to the extent any of its advertising was ‘false,’ it was

false solely because of the intervening criminal conduct of Jacobson and his

coconspirators.” We find this argument unavailing, however, because Phoenix

alleges that McDonald’s “knowingly and deliberately continued to advertise” that

its customers had a “fair and equal chance” to win high-value prizes even after

learning that the integrity of its promotional games had been compromised. 

Moreover, “[s]ection 43(a) provides a strict liability tort cause of action.” Vector

Prods., Inc. v. Hartford Fire Ins. Co., 397 F.3d 1316, 1319 (11th Cir. 2005) (“It is 
24

well-settled that no proof of intent or willfulness is required to establish a violation

of Lanham Act § 43(a) for false advertising.”). 

McDonald’s also contends that Phoenix’s alleged injuries are not

competitive in nature because the challenged advertisements “did not tout the

products and services of McDonald’s or disparage the products and services of

Burger King.” We cannot agree. Although the advertisements did not disparage

Burger King or tout some intrinsic quality of McDonald’s goods and services, the

advertisements nonetheless asserted that customers who patronized McDonald’s

restaurants had an opportunity to win prizes, including the high-value prizes that

had been stolen. Moreover, Phoenix alleges that the promotional games were

sometimes “physically attached to McDonald’s products.”

McDonald’s further contends that because Phoenix “has neither alleged nor

suggested that its reputation was adversely affected by McDonald’s advertising,”

this lack of “reputational injury” counsels against prudential standing. Although

McDonald’s is correct in asserting that Phoenix does not allege that its reputation

was harmed by McDonald’s conduct, we cannot say that the lack of alleged

“reputational injury,” in and of itself, directs us to conclude that Phoenix has failed

to allege the type of injury that the Lanham Act was intended to redress. Again,

the Lanham Act is not only designed to protect against unfair erosion of a
25

competitor’s reputation, it is also designed to protect “commercial interests [that]

have been harmed by a competitor’s false advertising,” Conte Bros., 165 F.3d at

234 (alteration in original), and, as stated above, Phoenix alleges such harm. We

therefore conclude that the first factor weighs in favor of prudential standing. 

2. Directness of the Asserted Injury

The second factor requires us to examine the “directness” with which the

defendant’s conduct affected the plaintiff. Phoenix alleges that by falsely

advertising that customers had a fair and equal opportunity to win high-value

prizes, McDonald’s lured customers to its restaurants and away from Burger King

restaurants. According to Phoenix, as a direct result of these false advertisements,

it lost sales and incurred additional promotional expenses in its attempts to lure

back the customers it lost to McDonald’s during the fraudulent promotion. 

On one hand, the causal chain Phoenix alleges is similar to that of the typical

false advertising claim in which a plaintiff alleges that it lost sales and/or market

share as a result of the defendant’s false or misleading representations about some

characteristic of the defendant’s product or services. For example, in Logan v.

Burgers Ozark Country Cured Hams Inc., the Fifth Circuit concluded that the

second Conte Bros. factor counseled in favor of standing where the plaintiff

alleged that the defendant’s “literally false advertising about its own goods
26

influenced its customers to buy its product instead of [the plaintiff’s] product.” 

263 F.3d 447, 461 (5th Cir. 2001). In so concluding, the Logan court stated that

the plaintiff’s ability to license its products “may have been directly affected by

[the defendant’s] false advertising” about the defendant’s products. Id. (emphasis

added). And in Procter & Gamble, the Fifth Circuit stated that the second factor

weighs in favor of standing in cases where “one competitor directly injur[es]

another by making false statements about its own goods and thus influenc[es]

customers to buy its product instead of the competitor’s product.” Logan, 263 F.3d

at 460 (citing Procter & Gamble, 242 F.3d at 563).

On the other hand, the causal chain Phoenix alleges is more attenuated than

that alleged in cases like Logan. Phoenix essentially alleges that (1) McDonald’s

advertisements falsely represented that customers had a fair and equal chance to

win one of the “rare” high-value prizes if those customers patronized McDonald’s

restaurants and played its games; (2) as a direct result of the misrepresentation

regarding the high-value prizes, McDonald’s lured customers who would have

eaten at Burger King (as opposed to one of numerous other fast food competitors),

causing Burger King to lose sales; and (3) but for this misrepresentation, these

customers would have eaten at Burger King, even though the chances of winning

one of the “rare” high-value prizes would have been minute had there been no
27

theft, even though only “certain” high-value prizes were stolen, and even though

these customers still had a fair and equal opportunity to win all of the other prizes. 

Accepting Phoenix’s allegations as true, the causal chain linking McDonald’s

alleged misrepresentations about one aspect of its promotional games to a decrease

in Burger King’s sales is tenuous, to say the least.

Taking care not to conflate the prudential standing inquiry with the

“materiality” element Phoenix must establish to succeed on the merits of its claim,

see Johnson & Johnson Vision Care, Inc. v. 1-800 Contacts, Inc., 299 F.3d 1242,

1250 (11th Cir. 2002) (“To succeed on a claim of false advertising, the plaintiff

must establish that the defendant’s deception is likely to influence the purchasing

decision.” (internal quotation marks omitted)), we conclude that the second factor

counsels against prudential standing. 

3. Proximity to the Allegedly Harmful Conduct

The third factor requires us to examine the proximity of the plaintiff to the

allegedly harmful conduct. In examining this factor, we must determine whether

there is an “identifiable class” of persons “whose self-interest would normally

motivate them to vindicate the public interest” by bringing a suit. Conte Bros., 165

F.3d at 234. “The existence of such a class diminishes the justification for

allowing a more remote party . . . to perform the office of a private attorney
28

general.” Joint Stock Soc’y v. UDV N. Am., Inc., 266 F.3d 164, 182 (3d Cir.

2001) (internal quotation marks omitted).

Here, the district court held, and McDonald’s asserts on appeal, that the

consumers who were denied a fair and equal opportunity to win the high-value

prizes as advertised constitute an “identifiable class” of persons whose self-interest

would normally motivate them to sue McDonald’s regarding its false advertising. 

But this can be said about any false advertising claim, as the consumers who were

diverted from the plaintiff’s product to the defendant’s product in reliance on the

defendant’s allegedly false advertisements would always have a natural selfinterest in suing for fraud. As such, if we accept the district court’s and

McDonald’s reasoning, this factor would never counsel in favor of prudential

standing. Moreover, consumers would not be able to vindicate the public interest

via the Lanham Act, as “the several circuits that have dealt with the question are

uniform in their categorical denial of Lanham Act standing to consumers.” Made

in the USA Found. v. Phillips Foods, Inc., 365 F.3d 278, 281 (4th Cir. 2004); see

also Conte Bros., 165 F.3d at 229 (reiterating precedent holding that consumers

lack standing under the Lanham Act and stating that a contrary conclusion would

“ignore the purpose of” the Act); Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir.

1995) (holding that consumers lack standing to bring false advertising claims under
29

the Lanham Act because they cannot allege either a commercial or competitive

injury). 

Furthermore, courts applying the Conte Bros. test have generally considered

whether other commercial entities were the more appropriate parties to vindicate

the competitive harm wrought by the defendant’s alleged misconduct. See, e.g.,

Joint Stock Soc’y, 266 F.3d at 182 (stating that Russian vodka manufacturers that

exported vodka to the U.S. were better suited to bring a false advertising claim

against the defendant and “were more proximate to the claimed injury” than the

plaintiff-manufacturer that did not export its vodka to the U.S.); Conte Bros., 165

F.3d at 235 (concluding that motor-oil manufacturers had a more concrete interest

in preserving the reputation of motor oil than the plaintiffs as retailers of engine

additives); but see Procter & Gamble, 242 F.3d at 563-64 (stating that although

distributors “probably do not have standing to sue under the Lanham Act” because

the Act “does not give consumers standing to sue[,]” distributors “are more

immediate to the injury than is [plaintiff-manufacturer]” and “could vindicate the

public interest . . . by suing for fraud”). As such, consumers “should be irrelevant

to this analysis.” Ford v. NYLCare Health Plans of Gulf Coast, Inc., 301 F.3d 329,

338 (5th Cir. 2002) (Benavides, J., concurring).

Again, Phoenix alleges that as a direct result of McDonald’s false and
30

misleading representations regarding the high-value prizes, McDonald’s lured

customers away from Phoenix and its affiliated franchisees, which, in turn, lost

sales and market share. Accepting these allegations as true, we can think of no

“identifiable class” of persons that is more proximate to the claimed injury than

fast food franchisees such as Phoenix and the putative class it seeks to represent. 

As such, the third factor weighs in favor of prudential standing.

4. Speculative Nature of the Alleged Damages

Under the fourth factor of the Conte Bros. test, we examine the speculative

nature of the plaintiff’s alleged damages. According to Phoenix, its damages are

not “speculative” because it would be “relatively straightforward” to calculate its

damages as “an appropriate share of all profits associated with sales generated by

the fixed promotional games” based on market share. We disagree.

As the district court noted, only “certain” high-value prizes were stolen, and

customers still had a fair and equal opportunity to win one of the relatively

numerous low- and mid-value prizes McDonald’s offered, because those prizes

were unaffected by the theft. Moreover, the fast food market consists of many

competitors, only two of which are McDonald’s and Burger King. In our view, it

requires too much speculation to conclude that an ascertainable percentage of both

the increase in McDonald’s sales and the concomitant decrease in Burger King’s
31

sales during the several-year run of the games is directly attributable to

McDonald’s alleged misrepresentations about the chances of winning high-value

prizes.

Phoenix also argues that at the pleading stage, the focus should be on what

the complaint alleges, not on whether Phoenix may be able to prove the exact

number of customers lured to McDonald’s, because this is a matter for discovery

and expert testimony. Although “general factual allegations of injury resulting

from the defendant’s conduct may suffice” to support standing “[a]t the pleading

stage,” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 2137,

119 L.Ed.2d 351 (1992) (emphasis added), to “presume” that Phoenix’s allegations

“embrace those specific facts that are necessary to support” its claim to an

appropriate share of McDonald’s profits from the compromised games requires too

much conjecture. See id. Even accepting Phoenix’s allegations as true, the

speculative nature of the damages it allegedly incurred as a result of McDonald’s

representations regarding the high-value prizes is inescapable. 

Phoenix also contends that disgorgement of the profits McDonald’s made

during the “fixed” promotion would be an appropriate remedy “if the district

court’s premature fears [regarding the incalculable nature of Phoenix’s damages]

were substantiated.” Disgorgement of “wrongful” profits “initially developed as a
32

remedy to provide a plaintiff relief in equity, to serve as a proxy for damages, or to

deter the wrongdoer from continuing his violations” and “is most appropriate if

damages are otherwise nominal.” BASF Corp. v. Old World Trading Co., 41 F.3d

1081, 1095-96 (7th Cir. 1994). But as the Third Circuit stated in Joint Stock

Soc’y, “[i]f a request for relief that may be sought by any party sufficed under the

fourth factor of the Conte Bros. test, that factor would be essentially meaningless,

and we refuse to undermine the fourth factor in this way.” Joint Stock Soc’y, 266

F.3d at 185. “The aim of [prudential standing] is to determine whether the plaintiff

is ‘a proper party to invoke judicial resolution of the dispute and the exercise of the

court’s remedial powers.’” Conte Bros., 165 F.3d at 225 (quoting Bender v.

Williamsport Area Sch. Dist., 475 U.S. 534, 546 n.8, 106 S.Ct. 1326, 1334 n.8, 89

L.Ed.2d 501 (1986)). Accordingly, Phoenix may not bolster its “case for

prudential standing by relying on forms of monetary relief that [it] would receive

as a vicarious avenger of the general public’s right to be protected against . . . false

advertisements.” Joint Stock Soc’y, 266 F.3d at 185 (internal quotation marks

omitted).

We thus conclude that the fourth factor weighs against prudential standing. 

5. Risk of Duplicative Damages

The fifth and final factor under the Conte Bros. test requires us to assess the
33

risk of duplicative damages or the complexity of apportioning damages. The

district court concluded that this factor weighs against standing. We agree.

If we were to hold that Phoenix has prudential standing to bring the instant

claim, then every fast food competitor of McDonald’s asserting that its sales had

fallen by any amount during the relevant time period would also have prudential

standing to bring such a claim. And if every fast food competitor had standing to

bring such a claim, regardless of the amount in controversy, regardless of the

amount of lost sales or market share directly attributable to the falsity of the

advertisement, and regardless of the impact on the competitor’s goodwill or

reputation (as the advertisements made no mention of any competitor), the impact

on the federal courts would be substantial. Furthermore, apportioning damages

among these competitors would be a highly complex endeavor. 

Phoenix argues that courts applying the Conte Bros. test have assessed the

risk of duplicative damages either by examining “the plaintiff’s position in the

distribution chain relative to the defendant” or by examining “whether the injury is

directly related to the market” in which they compete. But courts applying the

Conte Bros. test also have assessed the risk of duplicative damages by examining

the number of potential claimants in the same position in the distribution chain as

the plaintiff and/or in the same market as the plaintiff. For example, the Third
34

Circuit in Joint Stock Soc’y assessed the fifth factor by noting that if the plaintiffs

were granted prudential standing, false advertising claims could be brought against

the defendant by, inter alia, all vodka manufacturers in the U.S. market and all

vodka manufacturers who, like the plaintiffs, had not entered the U.S. market but

had taken minimal preparatory steps for entry. 266 F.3d at 184-85. Thus, the Joint

Stock Soc’y court considered both the number of potential claimants occupying the

same position in the distribution chain as the plaintiffs (manufacturers) and the

number of potential claimants in the same market as the plaintiffs (manufacturers

who had not entered the U.S. market) to conclude that the fifth factor weighed

against prudential standing. In Logan, the Fifth Circuit determined that the fifth

factor weighed in favor of prudential standing because “Logan appear[ed] to be the

only plaintiff who could bring a Lanham Act false advertising claim against [the

defendant] based on” the challenged advertisements. 263 F.3d at 461. And in

Procter & Gamble, the Fifth Circuit concluded that the fifth factor counseled

against standing for Procter & Gamble in part because “every competitor in the

market could sue” the defendant if Procter & Gamble were allowed standing. 242

F.3d at 564 (emphasis added). 

Accordingly, we conclude that the fifth factor weighs against standing.
35

6. Weighing The Totality of the Factors

To summarize, the first and third Conte Bros. factors weigh in favor of

prudential standing, while the second, fourth, and fifth factors weigh against

prudential standing. Admittedly it is a close question, but we conclude that on

balance, Phoenix does not have prudential standing to bring its claim against

McDonald’s. Although Phoenix and the class it seeks to represent are McDonald’s

“direct competitors,” Phoenix has alleged a competitive harm to their commercial

interests, and there is no identifiable class of persons that is more proximate to the

claimed injury, because of the attenuated link between the alleged injury and

McDonald’s alleged misrepresentations, the speculative nature of the claimed

damages, the potential complexity in apportioning damages, and the significant

risk of duplicative damages, we hold that Phoenix does not have prudential

standing to bring a false advertising claim under the Lanham Act against

McDonald’s. 

In so holding, we say nothing about the outcome of this analysis if, for

example, the facts were such that McDonald’s had falsely advertised the odds of

winning all of its prizes (low-, mid-, and high-value), or if McDonald’s were only

giving away a single prize and falsely represented the odds of winning, as these

hypotheticals present factual scenarios materially different from the facts of this
36

case. Indeed, as stated above, a salient virtue of the Conte Bros. test is that it

provides a flexible yet principled means of determining the existence of prudential

standing for disparate factual scenarios, thereby allowing courts to foreclose

standing on one set of facts while recognizing standing when presented with a

slightly (but materially) different set of facts.

III. CONCLUSION

For the foregoing reasons, we AFFIRM.