The Federal Trade Commission has long supported advertising industry self-regulation as a means of promoting truthfulness and accuracy in advertising. One of the key aspects of this success has been threat of referral to the FTC: Advertisers that refuse to participate in the self-regulatory process or refuse to comply with recommendations after participating are referred to the appropriate government entity, usually the FTC’s Division of Advertising Practices, which will review the claims at issue. Over the years, the specter of a National Advertising Division referral to the FTC has prompted most advertisers to participate in the self-regulatory process and comply with the final decision.

Law360 published the article “NAD Referrals To FTC: How Big Is That Stick?,” co-authored by partner John Villafranco and senior associate Donnelly McDowell.  The article provides an analysis of recent NAD cases that suggests referrals to the FTC are on the rise over the past two years and discusses advertiser commitment to the self-regulatory process. Are advertisers turning their back on self-regulation and rolling the dice at the FTC? And are they doing so based on an assessment of the risk that a referral could result in a major FTC investigation or enforcement action?

To read the article, please click here.

Last Friday, our friend August Horvath of Foley Hoag presented at an Advertising Self-Regulatory Council (ASRC) conference on consumer perception surveys.  Among the many interesting observations made by August were the following:

  • Over a 5+ year period, June 2013 to present, only 36 cases or 8 percent of total NAD cases, included reference to a consumer perception survey.   I would have expected it to be slightly higher.
  • 42 surveys were submitted in support of the challenger and 10 were submitted by the advertiser.  This distribution makes sense, given that the challenger has the time to design and field a survey prior to filing, whereas the advertiser must submit its response in accordance with the briefing schedule.
  • In 28 percent of cases decided, the NAD mentioned “the absence of consumer perception evidence,”  suggesting that NAD would be receptive to more extrinsic evidence as it considers cases involving implied claims.  Of course, this could simply be boilerplate introduction for the case reviewer’s unaided interpretation of the message being conveyed.
  • Where the NAD has rejected a survey, the most-cited reasons have been leading closed-ended questions, issues with the control question or improper control stimulus, and questionable coding of open-ended questions.
  • In assessing surveys, NAD frequently states that (1) the control stimulus should closely resemble the test stimulus, (2) test results from one ad will not be applicable to another ad, even if claims are substantially similar, (3) when testing an ad, it should be presented in the same context as it is viewed in the marketplace. 
  • Surveys that focus on the issue of materiality or whether a claim is puffery are of little use at NAD.   The former is of no surprise, given that materiality does not enter in to an assessment of whether a claim is truthful or accurate, but the finding on puffery was unexpected.  I would have thought there would be more instances where a party attempted to support its assertion that a claim was subjective and incapable of measurement (puffery) with extrinsic evidence.

In addition to August’s presentation, we heard from survey experts Daniel Ennis, Hal Poret, and Joel Steckel, as well as NAD attorrneys Annie Ugurlayan, Hal Hodes, Martin Zwerling, and Kat Dunnigan, who touched on generally accepted survey structure and principles, common flaws, and recent NAD cases involving consumer perception.

One of the issues that frequently comes up in NAD cases is “line claims.” Does an ad convey a claim about a specific product? Or does it convey a claim about an entire line of products? This week, NAD released a decision that explores that issue in the context of a funny commercial by Charter in which a DIRECTV salesman shows up at a homeowner’s door and tries to pitch an offer.

The salesman starts his pitch by offering the “DIRECTV Select Double Play package with no ESPN.” When the homeowner declines, the salesman “sweetens the deal” by offering “no CBS Sports Network, no NBC Sports Network.” From there, the deals get progressively worse until the salesman’s final offer: “What I see is someone who wants to play hardball. OK, batter up! I’ll give you no popular sports channels, the early termination fees, AND I’ll add deeply disappointing AT&T Internet . . . .” The homeowner shuts the door on the salesman mid-pitch.

Although it’s true that DIRECTV’s Select Double Play package does not include any of the popular sports channels mentioned in the spot, DIRECTV argued that the commercial conveys a misleading line claim – in other words, the commercial suggests that no DIRECTV package offers those channels, something which isn’t true. Charter disagreed, and offered a survey in support of its argument that consumers weren’t confused. NAD found that the survey was flawed for a number of reasons, including problems with the survey universe, the control, and some of the questions. Therefore, NAD ignored the survey and stepped into the shoes of a reasonable consumer to determine how they would view the commercial.

One of the factors in determining whether an ad conveys a line claim is whether the ad mentions specific products or whether it refers to the brands as a whole. Here, the commercial started with a specific reference to the DIRECTV Select Double Play package. Although that’s usually helpful, NAD determined that the initial reference was not enough to avoid a line claim. Among other things, NAD focused on the manner in which subsequent “deals” were pitched, and determined that a consumer could “reasonably take away the message that the starting offer is as good as it gets, as DIRECTV has nothing better to offer – indeed, that it has nothing in the way of sports channels to offer the homeowner.” Because Charter couldn’t support that message, NAD recommended that they either modify or stop running the commercial.

If you make a claim that applies only to some products – whether they are a competitor’s products or yours – you need to be careful not to suggest that the claim applies to an entire line of products. There are certain things you can do to help avoid conveying a line claim. For example, it usually helps to focus on specific products, rather than making general brand references. But as this case demonstrates, it’s not always easy to distinguish between line claims and narrower claims. NAD frequently errs on the side of finding a line claim, so it pays to be careful.

As part of its routine monitoring, the NAD requested substantiation for various statements that a BuzzFeed staff member had made about a moisturizer in one of the site’s shopping guides. The NAD’s decision in the case sheds some much-needed light on various issues related to affiliate marketing.

BuzzFeed explained that the shopping guides include product recommendations by its writers, and that the companies mentioned in the guides don’t have any ability to influence the content. In some cases, BuzzFeed may receive compensation if a reader makes a purchase through an “affiliate link.” The writers, however, don’t know whether affiliate links may be available for the products they recommend. Those links are added by a separate group at BuzzFeed after the article is completed. Thus, the decision to recommend a product is not linked to the potential for compensation. Moreover, the potential for compensation is disclosed at the top of each shopping guide: “We hope you love the products we recommend! Just so you know, BuzzFeed may collect a share of sales or other compensation from the links on this page.”

BuzzFeed Links Disclosure

The FTC has noted that publishers who use affiliate links in conjunction with product reviews should clearly disclose their relationship with the companies or retailers whose products are reviewed. Although many companies get tripped up over this issue, BuzzFeed got the disclosure right, and the NAD did not focus on it. Instead, the case focused largely on the issue of whether the shopping guides constitute “national advertising,” as defined by NAD Policy and Procedures. More specifically, “the issue here is whether online publishers using affiliate links can use the aegis of editorial independence to avoid the requirement that it have substantiation for any product claims in the content.” As the line between editorial and commercial content gets increasingly blurred, it isn’t always easy to answer this question.

Ultimately, the NAD determined that the shopping guide did not constitute “national advertising” for a few key reasons. Firsts, the content was created by writers who did not know whether or not the company would receive any affiliate revenue based on purchases of the recommended products. Second, neither the retailers nor the brands mentioned in the guides had any input in what was said about the products. And, third, the links were added to the shopping guide after the content was written. “In sum,” the NAD wrote, “the content was created independently of and prior to the addition of affiliate links to the article.” Thus, the statements in the shopping guide weren’t ads and BuzzFeed wasn’t responsible for substantiating claims about the products that were reviewed.

This decision provides a roadmap for other companies that use affiliate links. Simply calling something “editorial” is not going to be enough to escape scrutiny under advertising laws. Instead, companies must have procedures in place to ensure that there is a clear separation between editorial decisions and revenue and that the companies whose products are being reviewed cannot influence the content. It’s also important to clearly disclose the affiliate relationship, as BuzzFeed did here. The NAD’s decision suggests that if companies get this wrong, they may be required to substantiate any claims they make about the products they review.

Advertisers who lose a challenge at the NAD automatically have the right to appeal the decision to the National Advertising Review Board (or “NARB”). Challengers who lose may also request an appeal, but the appeal is not automatic – it must be approved by the NARB Chair. Although appeals from NAD decisions are relatively rare – there have only been six NARB decisions this year compared to almost 60 NAD decisions – they are still an important part of the self-regulatory process.

This week, the Advertising Self-Regulatory Council announced that it would raise NARB filing fees from $15,000 to $20,000 to better defray the costs of each appeal. This increase is effective for any advertiser appeal filed after September 5, 2018, and any challenger appeal approved after the same date.

Advertisers who want to tout the comparative advantages of their products have a number of options for framing those comparisons. For example, they can compare their products to specific products, they can compare their products to defined categories of products, or they can more vaguely compare their products to “regular,” “ordinary,” or “other” products. Although many companies think that making a vague comparison is a safer option, a new NAD decision demonstrates that it’s usually not the case.

Telebrands advertised its Atomic Beam flashlight by making various comparisons to “regular” and “ordinary” flashlights. For example, a TV commercial Atomic Beamcompares the brightness of the Atomic Beam to a “regular” flashlight with a “feeble” light output. And a chart on the company’s website compares the Atomic Beam to “ordinary” flashlights across five attributes, with the Atomic Beam coming out on top. Although some of ads don’t specify what a “regular” or “ordinary” flashlight is, others explain that “the comparison is based on a base model LED flashlight of a major manufacturer.”

Energizer argued that the ads were misleading, for a number of reasons. For example, the company argued that because the basis of comparison is not clear, reasonable consumers will interpret “ordinary” flashlights broadly to mean all flashlights priced similarly to the Atomic Beam. In reality, Telebrands had only tested against one flashlight and, although some of the comparisons may have been true against that specific flashlight, the comparisons were not true against many popular flashlights in the same price range.

The NAD agreed that the ads were misleading, noting that one message reasonably conveyed by the ads is that the Atomic Beam “is brighter and more durable than most flashlights, with features not found in most flashlights. Another reasonable takeaway is that ‘ordinary’ and ‘regular’ are a reference to the best-selling flashlights, or to flashlights sold at similar or lesser price points than the Atomic Beam.” Tests that compared the Atomic Beam to a single flashlight that was neither very popular nor very typical in terms of performance were not sufficient to support the broad claims.

As this decision demonstrates, vague comparisons often create more problems than they solve because they could be read to apply to many products. Not only does that increase your substantiation obligations, it increases the number of competitors who might want to challenge you.

Yesterday, we posted an interview with Laura Brett, the Director of the NAD, in which Brett discussed various issues, including how the NAD is evolving, how Brett sees herself as different from her predecessor, and how the NAD decides cases. Today, we’ll take a brief look at one of those cases that involves a perennial topic at the NAD – product testing.

DKB Household USA advertised that its Zyliss SwiftDry Salad Spinner “removes 25% more water than other salad spinners.” In response to a challenge brought by one of its competitors, DKB produced an independent third-party test that compared the performance of various salad spinners. The NAD was concerned by three key aspects of the test and the results:

First, the test was conducted on “simulated salad leaves” – cloths and sponges – rather than on actual greens. The NAD has consistently held that the most reliable measure of a product’s performance is demonstrated by tests that evaluate the product in the same manner the product is directed to be used by consumers. Although there may be reasons to deviate from that standard, the NAD was not convinced that DKB’s reasons were valid, in this case.

Second, DKB did not present a statistical significance of the test results. The NAD has consistently held that results should be statistically significant,  generally at the 95% confidence level. In this case, there was a small sample size and wide variations in the test results. “In the case of comparative performance claims, small sample sizes may not reliably demonstrate the claimed performance of the product.”  Accordingly, the NAD was “especially concerned that the test involved only five trials of each product.”

Third, DKB only tested its salad spinner against products sold by two competitors (including the challenger). The NAD noted that in order to support a broad superiority claim, “an advertiser must test a variety of competing products that comprise all or a substantial portion of competitive products the market.” In this case, there was no evidence in the record that the products tested comprised all or a substantial portion of competitive products.

Although there’s nothing groundbreaking in this case, it neatly encapsulates three key principles advertises should know: (1) products should generally be tested in a way that mirrors consumer use; (2) results must be statistically significant; and (3) to support an unqualified superiority claim, an advertiser must at least test against a substantial portion of competitive products.

Laura Brett became the director of the National Advertising Division in August 2017. Law360 published a Q&A session with special counsel Jennifer Fried and Laura Brett that provides insight into the NAD, what we can expect in the upcoming years, Laura’s approach as the NAD director, recent noteworthy cases, the NAD’s deliberative process, and much more. To read the interview, please click here.

The NAD recently analyzed whether Petmate had adequate substantiation to support claims that certain cat litter pans had “built-in antimicrobial protection” and that they could “inhibit bacteria growth.” Although the decision is most directly relevant to companies that make antimicrobial claims, it also contains information that’s relevant to any company that uses tests to substantiate claims.

There’s a lot going on in this case, but here are five key points from an advertising law perspective:

  • Petmate argued that product testing was not necessary because the Microban ingredient in its litter pans had been tested. The NAD disagreed, noting that just because a product is treated with an EPA registered pesticide does not, by itself, substantiate a product performance claim. Testing on the product is necessary.
  • The NAD reiterated that in order to make a “health-related claim,” such as the antimicrobial claims on the cat litter pans, an advertiser must have “competent and reliable scientific evidence.” This generally requires well-controlled studies with results that are statistically significance at the 95% confidence level.
  • Petmate submitted the results of a test conducted pursuant to an industry standard test designed to assess antimicrobial activity. The NAD was concerned, however, that the standard was designed to assess that activity on textile Although Petmate argued that the test was also valid for plastic materials, such as cat litter pans, the NAD was not convinced.
  • The NAD observed that the tests were conducted by Petmate’s supplier of Microban, the antimicrobial ingredient in its litter pans. Although the NAD prefers independent third-party tests, it will accept in-house testing as long as there is “evidence that adequate controls and safeguards were implemented to prevent bias.” Here, the NAD did not find such evidence.
  • Even if the NAD had accepted the tests, it noted that results must translate into a meaningful benefit for consumers. Here, the NAD found that there was no evidence demonstrating that consumers would perceive a difference due to the inclusion of the antimicrobial agent in the Petmate litter pans.

Keep in mind that if you make antimicrobial claims, you also need to worry about EPA regulations. While companies that manufacture and sell “treated articles” (with only non-public health claims) do not have to obtain independent registrations for products that incorporate an EPA-approved antimicrobial, they do have to comply with the conditions of the registration for the EPA-approved additive, including the types of claims that can be made and the products/materials in which the additive can be used. In addition, EPA regulations restrict how treated articles may be advertised. For example, antimicrobial claims should be printed in type of the same size, style, and color, and “should not be given any greater prominence than any other described product feature.”

For more analysis on EPA-related issues, visit our new Kelley Green Law blog.

The NAD recently announced a decision in which it analyzed whether consumers would interpret claims in two commercials about Perdue’s happy chickens and organic practices to apply to all of the company’s chickens or only some of them. Even if you aren’t trying to measure the satisfaction of your own poultry, the decision includes some valuable insights into the NAD’s views on “line claims.”

One commercial shows Jim Perdue and his sons, each wearing a shirt with a Perdue logo, going about their daily tasks. They talk about “organic free-range chickens” that are “non-GMO, 100% vegetarian-fed, raised with no antibiotics,” as they drive up to a barn with the Perdue Harvestland Organic logo. The general Perdue brand logo appears on screen before flipping to the Perdue Harvestland Organic logo, as a voiceover states: “Perdue. Raising more organic chickens than anyone in America.”

One key question for the NAD was whether the commercial communicated that all Perdue chickens are raised organically (which is not true) or only that Harvestland Organic chickens are raised organically (which is true). Although the advertiser provided a survey demonstrating that consumers only took away the latter, narrower, claim from the commercial, the NAD found flaws in the survey and ultimately determined that consumers could interpret the commercial more broadly.

The NAD noted that the commercial featured numerous “visual and verbal general brand references to Perdue, while presenting only momentary visual references to Harvestland Organic, the sub-brand to which Perdue’s organic claim pertains.” In addition, although “Perdue” was mentioned in the audio, the sub-brand was not. Because of this, “consumers may understand all of Perdue’s chickens to be organic, rather than only the ones it offers through its Harvestland Organic sub-brand.”

If you make a claim that applies only to some of your products, you need to be careful not to suggest it applies to your whole line products. Whether or not your ad will be read to present a “line claim” will depend on various factors, including whether you make general brand references and what products you show. This case demonstrates that the line – no pun intended – between line claims and narrower claims isn’t always very clear, so it pays to be careful.