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Gonzalo E. Mon

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Snapchat’s public relations firm recently filed a lawsuit against an influencer who allegedly failed to comply with the terms of his agreement.

After Luka Sabbat was photographed with Kourtney Kardashian in September, PR Consulting engaged Sabbat to help promote Snap Spectacles on his LukaInstagram account. According to the agreement, Sabbat was required to make four unique posts (each subject to its own requirements), get those posts approved beforehand, send analytics to PR Consulting, and be photographed wearing the Spectacles in public at Paris and Milan Fashion Weeks. In exchange for all of this, PR Consulting agreed to pay $45,000 up front, plus another $15,000 at a later date.

According to the complaint filed in New York earlier this week, Sabbat did not comply with all of these requirements. He didn’t make all of the required posts, didn’t submit them for pre-approval, didn’t send all of the analytics, and wasn’t photographed in either city. Although Sabbat allegedly admitted default, he did not return the up-front payment. The lawsuit seeks the $45,000, plus interest, attorney’s fees, and other damages.

Payment terms are often negotiated in influencer agreements. Influencers obviously want more up-front, while companies prefer the opposite. While the parties usually end up somewhere in the middle, this case illustrates the risks companies face by paying too much before key milestones have been reached. If the influencer breaches the agreement, it can become difficult to get the money back.

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.

Pop quiz: If you purchased a bottle of “One A Day” gummy vitamins, would you: (a) assume that you should take one a day; or (b) check the back of the label to figure out how many you should take? If you answered (a), and didn’t check the back of the label, you might have been surprised. That’s one of the issues in a putative class action pending against Bayer in California.

Despite the name of the product, the back panel of a bottle of “One A Day” gummy vitamins directs consumers to “chew two vitamins daily.” In 2016, a One-A-Day Bottleconsumer filed a putative class action against Bayer, arguing that the name of the product is misleading because it suggests that people only need to take one vitamin per day, when the company recommends otherwise. Bayer disagreed, arguing that consumers carefully read labels to look for nutritional values and, thus, that the disclosure on the back panel prevents the name of the product from being misleading. Although the lower court agreed with Bayer and dismissed the case, last week, a California appellate court reversed the dismissal.

“The front of the product makes no attempt to warn the consumer that a one-a-day jar of gummies is in fact full of two-a-day products.” Instead, consumers have to turn the bottle over to find a direction that they should chew two vitamins daily. (The court worried that this direction appeared “in the smallest lettering on the bottle, an ocular challenge even when the bottle is full-sized and held in good light.”) The product name made things worse. Although consumers may be more likely to look for the directions “if this product were called Gazorninplat Gummies or Every Day Gummies,” that isn’t the case here. “The front label fairly shouts that one per day will be sufficient.”

Although this case is still pending, it illustrates a critical point about disclosures. As the court put it: “You cannot take away in the back fine print what you gave on the front in large conspicuous print.” Lesley Fair at the FTC has made that same point slightly differently: “What the headline giveth, the footnote cannot taketh away.” Either way, keep in mind that there are limits to what you can do with disclosures. Although they can help to prevent a claim from being misleading, they only work if (a) they are presented in a “clear and conspicuous” manner and (b) they clarify, rather than contradict, the claim.

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.

Last week, a California court granted a temporary restraining order against Triangle Media, a company that sells various types of products using “risk free” trials. According to the FTC, though, the trials were very risky, involved hidden charges, and violated various laws.

When consumers clicked on ads for Triangle’s products, they landed on websites promoting “risk free” trials. The order flow and payment screens suggested that consumers just had to pay the cost of shipping, which was typically $4.95 or less. Although the shipping costs were presented in bold, black text that was highlighted in yellow, a small gray-on-white disclosure at the bottom of the page mentioned other costs: “By placing an order you will be enrolled in our membership program. This program will charge $4.95 today and $84.71 for your trial full-size product on the 15th day if you do not call to cancel the membership. You will receive a full-size bottle of the product for $84.71 (S&H included) every 30 days thereafter until you cancel.” Consumers who ordered on their phones had to click on another link to see that disclosure.

The FTC alleges that defendants who clicked to start their trials would be directed to a second page which claimed that the order was not complete and suggested that consumers take advantage of another “free trial” of a product that could be paired with the first one. Like the original order page, the only mention of the additional costs appeared in a small gray-on-white disclosure at the bottom of the page. To make matters worse, the FTC alleges that the company made it difficult for consumers who were surprised by the charges to cancel their memberships and obtain refunds.

The FTC filed a complaint against Triangle in California federal court, alleging that the company violated the FTC Act, the Restore Online Shopper’s Confidence Act, the Electronic Fund Transfer Act, and Regulation E. The court temporarily halted the operation, froze the company’s assets, and appointed a temporary receiver over the business.

We’ve covered this type of issue before, so if you read this blog, odds are that you don’t engage in these types of practices. But don’t ignore this case just because your order flows don’t look like Triangle’s. Laws governing free trials can be complicated, and many reputable companies have been hit with lawsuits or regulatory investigations over how they disclose offer terms. If you haven’t looked at your practices recently, now may be a good time to do that, especially given that California’s new rules on automatic renewals have come into effect.

The Advertising Standards Authority of Ireland – similar to the NAD in the US – recently issued a decision regarding a social media influencer that companies on this side of the Atlantic should note.

The case involves social media posts by Rosie Connolly, a fashion, beauty, and lifestyle blogger. Connolly posted pictures with flawless makeup, and mentioned RosieConnollyPostthat she was wearing Rimmel Foundation. The trouble is, Connolly’s face had been filtered and photo-shopped. A consumer complained to the ASA that people “may purchase the Rimmel Foundation thinking they would achieve the same results if they used the product,” when those results may not be likely.

Connolly said that Rimmel had approved the images and, therefore, that the complaint should be addressed to them. Rimmel, in turn, acknowledged that the image had been filtered using a built-in camera feature. The image was not intended to mislead people, but the company removed it because it did not reflect their values as a brand. Moreover, Rimmel said it had taken various steps to avoid future issues with heavily filtered images. For example, the company updated its policy to more explicitly require flagging an influencer’s use of filters/photo-shopping, and promised to monitor posts more strictly.

The ASA “considered that the use of post-production techniques which exaggerated the effects of an advertised product could mislead and they welcomed the steps the advertisers had taken in removing the posts.”

Although cases involving influencers in the US have focused mostly on whether the influencers have property disclosed their relationship to the brands whose products they touted, the FTC has made clear that both influencers and brands can be held liable for any misleading content in influencer posts. Moreover, outside of the influencer context, there are plenty of cases here regarding the use of mockups or enhancements. Accordingly, companies should take steps to ensure that influencer posts are not misleading, not only in their descriptions, but in the photos themselves.

Although we normally try to stay away from celebrity gossip, we can’t ignore the latest controversy over Kanye West’s tweet. No, not that one – the other one.

In 2016, Kanye announced that he would release his album, The Life of Pablo, exclusively on Tidal. He tweeted: “My album will never never never be on Apple. And it will never be for sale… You can only get it on Tidal.” (That’s four “nevers” in 107 characters, if you’re counting.) Fans took that seriously, and rushed to sign up. In just over a month, Tidal’s subscriber base tripled, potentially saving the service from collapse.

Kanye Tweet

Six weeks after Kanye promised the album would never (x4) be available anywhere else, he released it on other services, including Apple Music. Many fans became angry that they’d signed up for Tidal based on Kanye’s promise, and one of them filed a lawsuit. The complaint alleged that the representations of exclusivity in the tweet constituted false advertising and asked the court to grant damages, disgorgement of profits, and restitution.

Last week, a New York court ruled on a motion to dismiss filed by Kanye’s legal team. Although the court dismissed some of the claims, it kept the allegations about the tweet alive. “Regardless of whether or not Mr. West’s argument will persuade a jury at a later stage in the case, the court has little difficulty concluding that the complaint plausibly pleads that Mr. West’s statement that his album would never never never be available on Apple Music or for sale was false.”

It’s too early to tell how this case will turn out, but the case raises at least two important points. The first is that claims made in social media are still subject to advertising laws. Even something as seemingly innocent as a short tweet can lead to liability, if what you say isn’t accurate. The second is that you should be careful about far-reaching promises. Many companies want to advertise that things will always be a certain way. Think carefully about making these promises because some consumers will take you at your word. If the market changes and you want to go back on your promises, those consumers may not be forgiving.

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.

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.