Judge to Settle Feud Between Pizza Chains

Papa John’s International Inc. and Tricon Global Restaurants Inc.’s Pizza Hut unit have agreed to let a federal judge resolve a bitter advertising dispute. The agreement between the feuding chains comes less than two weeks after a Dallas jury ruled that both companies made deceptive claims about each other’s products.

U.S. Magistrate Judge William Sanderson, who oversaw the recent trial, said he would rule on damages before Christmas. After a jury trial that ended Nov. 18, Sanderson indicated that damages might not be awarded because the jury found against both companies.

“We don’t expect there to be significant damages going either way,” Papa John’s spokesman Christopher Sternberg said. However, Pizza Hut Vice President and General Counsel Bob Millen said his company will ask Sanderson to award damages equal to the company’s cost of running ads to combat Papa John’s claims. Millen estimated those costs at $4 million to $12.5 million.

Pizza Hut filed the lawsuit in August 1998 in U.S. District Court in Dallas, contending that Louisville, Ky.-based Papa John’s falsely implied in ads that it uses fresh ingredients and its rivals don’t. The disputed Papa John’s ad campaign ran for about two years.

The jury in Dallas found that Papa John’s “Better Ingredients, Better Pizza” slogan was false and misleading, as were claims about its sauce and dough. At the same time, the jury found that Pizza Hut misled consumers in ads that implied Papa John’s used stale dough in its pizzas.

At issue in the case is the concept of “puffery,” vague claims of superiority that companies often use to promote products. Pizza Hut argued that Papa John’s claims weren’t puffery but were specific statements of fact that the company couldn’t support.

Dallas-based Pizza Hut sought an injunction barring Papa John’s from airing its commercials. Papa John’s filed a counterclaim against Pizza Hut earlier this year.

Pizza Hut, the world’s biggest pizza chain, with 7,200 storefronts, has scrambled in recent years to fend off such upstart competitors as Papa John’s, now the fourth-largest chain, with 1,800 locations.

Papa John’s advertising has tweaked Pizza Hut by featuring Pizza Hut founder Frank Carney in some of its commercials. Carney now operates 70 Papa John’s storefronts. Pizza Hut has countered with advertisements featuring such famous faces as former Soviet President Mikhail S. Gorbachev and new products.

In another development, Ann Arbor, Mich.-based Domino’s Pizza Inc. said Monday that it has awarded its $100-million advertising account to Deutsch, a New York-based advertising agency. Domino’s has 6,384 locations worldwide. J. Walter Thompson will continue to handle the chain’s media-buying services. Don Coleman & Associates will continue to handle African American advertising for Domino’s, and Marti Flores Priesto & Wachtel will continue to produce the chain’s Latino advertising.

Bloomberg News was used in compiling this report.