I'm sure that their lawyers would argue that. I think that a reasonable person comparing screen sizes would be interested in area, not diagonal length.
edit: Not to say that it is unreasonable to think of screen size as area, but I think it is also reasonable to think in diagonal length, since that is the way monitors and TVs are generally advertised.
No one really reports screen area. I can tell you the diagonal off the top of my head of most hero phones, but I couldn't tell you the screen area. In general the same could be said for TVs and Monitors.
It's a hard explanation to give to most people: "Yes, our diagonal is larger, but due to the aspect ratio, the total area available for the screen is actually smaller." We get this on HN, but I guarantee that this would not make things substantially less complex for most people.
That said, they should have asterisk'ed it.
You never know, with Microsoft.
Man, they are silly adverts but funny anyway.
period.
"Common people" falling for that is a real problem with elementary school level education, far more than false advertising is. And arguing that it is a problem of neither makes one part of it (you didn't quite argue this but some people itt do).
(I was going to jokingly point out that the "best" diagonal length would be that of a thin one-pixel strip, equal to its width, but at least on HN we're all clever people and saw that coming a mile away)