The key part of soft advertising is control over brand image. Here they have none whatsoever. Jack Daniel’s wants to control, their brand association as much as possible. They might not want their brand associated (however unconsciously) with a to-be torn up piece of plastic.

Jack Daniel’s isn’t getting advertising from the dog toy. No one is familiar with Bad Spaniels but not Jack Daniel’s. The company is profiting off of Jack Daniel’s brand and the company is upset it might dilute the quality of their brand