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Gonzalo E. Mon

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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.

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.

Last week, Carl’s Jr. announced that in honor of Steven Spielberg’s new movie, Ready Player One, they would change the name of their Charbroiled Sliders to “SpielBurgers.” They tweeted: “@StevenSpielberg hasn’t signed off yet, but we’re pretty sure he’ll be down with it.”

In fact, Spielberg was not down with it. He posted a video on Twitter politely declining the honor: “It’s recently come to my attention that Carl’s Jr. wants to rename their Charbroiled Sliders ‘SpielBurgers.’ And they’re pretty good, but I’m passing. Cease and desist. You can’t do it. Sorry, guys.”

Carl’s Jr. took the rejection well, focusing on the positive: “OMG Spielberg likes our Charbroiled Sliders!” Although this was probably a successful campaign for the company, it could have easily turned out worse. As we’ve noted before, some celebrities respond to the unauthorized use of their names less politely. For example, when a clothing company played on Don Henley’s name and encouraged people to “Don a Henley,” the famous musician filed a lawsuit against them.

Some celebrities are willing to play along with these stunts. For example, Mark Hamill tweeted that he was “completely open to the idea of “HAMILLBURGERS” #NoShameNoGain.” But, if you guess wrong, gambling on whether a celebrity is going to be OK with your use of their name can be very costly.

For a more in-depth analysis of these issues, check out Part I, Part II, and Part III of a series on Right of Publicity claims on Drye Wit.

The Wall Street Journal recently published an article discussing a growing practice among retailers who use third-party services to identify fraudulent returns. These services will inform retailers when they think a return is fraudulent, and some retailers will reject returns based on this information, notwithstanding what is in their return policies. The article presents an example of consumer who was surprised when a retailer rejected his return and then referred him to the third-party service.

Although retailers generally have broad discretion about how to structure their return policies, there are some legal boundaries. For example, some states have specific requirements about what must be in a return policy and how it must be disclosed. More broadly, federal and state consumer protection laws generally require that retailers clearly disclose material terms prior to a purchase. This arguably includes terms of a return policy, including any exceptions under that policy.

Third-party services that help detect return fraud can provide significant benefits for retailers. (According to the article, less fraud can also benefit consumers because retailers can offer more generous policies.) But retailers should use care when relying on these services. If a customer complies with a retailer’s return policy, and the retailer rejects the return based on information from a third-party, the retailer is likely to face complaints. Simply pointing a finger at the third-party is unlikely to help.

One key question in any consumer complaint – or worse, AG investigation or law suit – will be whether the retailer acted in accordance with its policies and whether those policies were adequately disclosed. Articles such as the one in the Wall Street Journal often serve as food for thought for class action attorneys, so if you are using (or thinking about using) a third-party service to identify fraudulent returns, now might be a good time to take a look at your policy.

The Grim Reaper, a mummy, a mad scientist, and a werewolf are riding together on a train after work. No, that’s not the start of a joke, but it is the start of a funny commercial for Spectrum TV. The four characters talk about their weekend plans, as a light rain pelts the train’s windows. When the Grim Reaper laments that his kids are upset because the “satellite dish went out in the rain . . . again,” the mummy asks: “How can they sell something that doesn’t always work in the rain?” The mad scientist observes: “It’s gonna rain eventually, right?” The commercial ends with the following words on the screen: “TV that cuts out in the rain is evil. Spectrum is Reliable.” Then: “Satellite TV Bad. Spectrum Good.”

DirecTV challenged the commercial before the NAD, arguing that it falsely disparaged satellite TV as being highly unreliable in rainy weather. In its defense, Spectrum provided a survey that asked satellite customers about their TV service and experience with weather-related outages. Spectrum argued that the survey demonstrated that “rain fade” is not a rare occurrence for satellite TV subscribers, that it occurs often enough to be a significant issue with satellite service, and that it is a source of frustration for subscribers, if they experience an outage.

The companies argued about how consumers would interpret the commercial. Spectrum argued that the commercial conveyed a narrow message that satellite TV doesn’t always work in the rain, and that outages can frustrate customers, two things that were proven by the survey. DirecTV, however, argued that consumers were likely interpret the commercial to more broadly suggest that satellite TV is highly unreliable, and that outages can occur with even light rain. The NAD generally sided with DirecTV, finding that statements like the “satellite dish went out in the rain . . . again” combined with phrases like “Satellite TV Bad” could convey a broader message about the unreliability of satellite TV.

The NAD determined that although the evidence submitted by Spectrum would support claims that occasional outages due to rain can be a problem, the evidence didn’t support the broader implied claims that satellite TV service is highly unreliable, in general, and that it doesn’t work in bad weather. Although the NAD “has also long recognized that humor can be an effective and creative way for advertisers to highlight the differences between products,” it cautioned that “humor and hyperbole do not relieve an advertiser of its obligation to support messages that their advertisements might reasonably convey – especially when the advertising disparages a competitor’s product.”

The case illustrates at least three key points. First, although we often vilify them, it’s important to remember that monsters can have the same types of problems as the rest of us. Second, advertisers are responsible for all reasonable interpretations of their claims, even if they didn’t intend to communicate some of them. And third, advertisers need to ensure that their claims are closely tailored to their substantiation. Even though a competitor’s product may have a problem or your product may perform better than theirs, you still need to make sure that you don’t inadvertently exaggerate the extent of the problem or the gap in performance.

As consumers get ready to watch the 2018 Winter Olympic Games, some companies are getting ready to capitalize on the public enthusiasm. Many marketers want to incorporate Olympics-related themes – ranging from overt mentions of the Olympics to more subtle sports references – in their ads in order to associate their brands with the attention that is being paid to the games.  Although this makes sense from a marketing perspective, it can also pose some legal risks.

The Ted Stevens Olympic & Amateur Sports Act gives the United States Olympic Committee (or “USOC”) exclusive rights to use certain words, like “Olympic,” and symbols, like the interlocking rings. The Act also prohibits use of any word, symbol, or combination thereof that “tending to cause confusion or mistake, to deceive, or to falsely suggest a connection with” the user of the marks and the Olympics. Other countries – including South Korea – have similar laws.

Some companies pay a lot of money for the right to use these marks, so if you use them without permission, you could get a letter (or worse) from an official sponsor or a group like the USOC. The USOC has even tried stop companies from using marks in hashtags. For example, in 2016, the USOC’s chief marketing officer wrote that companies could not use hashtags such as #Rio2016 or #TeamUSA.” According to some press reports, the USOC sent letters to various companies reiterating this position.

Feel free to cheer Team USA on from your personal social media accounts this summer. But remember that what may be called “patriotic” when done from your personal account could be called “infringement” when done from a business account.