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ABA Section of Antitrust Law
Consumer Protection Update
January 2013
Presented by
Womble Carlyle Sandridge & Rice, LLP
Carol Brani
Richard J. Caira, Jr.
Jocelyn A. Fina
• FTC Developments
• State AG Developments
• Private Litigation
• Lanham Act Litigation
• National Advertising Division Actions
FTC Developments
Resolution of Google Investigations
On January 3, the Federal Trade Commission:
• Closed its investigation into Google’s alleged anti-competitive
business practices harmful to the online search advertising industry
without taking action.
• Released for public comment proposed consent order with Motorola
Mobility LLC that would resolve and settle allegations of unfair
competition and unfair acts/practices relating to Motorola’s licensing
of SEPs for smartphones, gaming consoles and wireless LAN
standards.
Google – Enforcement Background
• Online Search Conduct
 Dominance
 Search Bias
 Advertiser Restrictions
• SEPs (Standard Essential Patents)
 Motorola Acquisition - Scope of Patent Portfolio
 Standard- Setting Process/SSOs - Commitments to
FRAND (fair, reasonable and non-discriminatory)
 Sought injunctions and ITC exclusion orders against
willing licensees, harmed competition
Google – What’s Next?
• Search: Voluntary Sanctions (Letter from
Google) vs. Consent Order (Enforceable
Settlement)
• SEPs: Terms of Proposed Consent Order
• Status of EU Investigation & Competition
Concerns
• Implications for Search
• Implications for SEPs
Retailers: Textile Enforcement News
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Also on January 3, Sears ($475K), Amazon ($450K), Macy’s ($250K)
and Leon Max, Inc. (Max Studio brand)($80K) agreed to pay penalties
totaling $1.26MM for allegedly labeling rayon apparel as made from
bamboo.
• Each retailer ignored warning letters from the FTC delivered in 2010.
• Labels failed to comply with the Textile Act and Textile Rules
• In addition to fines, 5 years of compliance monitoring, including
ongoing notice and reporting requirements relating to any change in
ownership/control of defendant or any entity it controls and other
topics.
 Finally, for Retailers that import textile, wool and fur products: Note
the FTC’s 1/3 Enforcement Policy Statement regarding the Textile
Fiber Products Identification Act, the Wool Products Labeling Act &
the Fur Products Labeling Act.
Enforcement Policy
Statement
The FTC will not initiate an enforcement action for falsely marketing a
textile, wool, or fur product if the retailer:
(1) cannot legally obtain a continuing or separate guaranty;
(2) does not embellish or misrepresent claims the manufacturer
provides; and
(3) does not market the product as a private label product.
However: if the retailer knew or should have known that the marketing
claim was false, the FTC enforcement policy does not apply.
Consumer Mortgage Assistance Scam – The
Freedom Companies
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On January 8th, the FTC announced a settlement with 8 defendants -Freedom Companies Marketing, Inc. , its 2 principals and 5 other
companies controlled by the same individuals – relating to a mortgage
assistance scam that targeted Spanish-speaking US homeowners who
were behind in their mortgage payments or facing foreclosure.
The defendants, based in the Dominican Republic, falsely claimed to be
affiliated with or approved by lenders or the federal gov’t, promised to
dramatically lower homeowner’s monthly mortgage payments in exchange
for upfront fees. They collected more than $2MM in fees over a 3-year
period, but failed to provide the promised services in violation of the FTC
Act and the Mortgage Assistance Relief Services Rules (the “MARS Rule”).
Settlement: Bars defendants from (a) marketing mortgage assistance relief
products or services, or (b) making misleading claims about any product,
service, plan, or program.
First FCRA Case Involving a Mobile
App
Filiquarian Publishing, Choice Level LLC and their CEO,
Joshua Linsk settled claims that they violated the FCRA
(Fair Credit Reporting Act) by operating as a consumer
reporting agency but not ensuring that the information
they sold was accurate or would be used only for legal
purposes. Their mobile app sold criminal record reports.
•http://www.ftc.gov/os/caselist/1123195/index.shtm
POM Wonderful – Unsupported
Health Claims
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On January 10, 2013, the Commission issued its final order in the POM
Wonderful advertising matter, upheld 2012 ruling by Chief Administrative Law
Judge D. Michael Chappell that POM violated the FTC Act by making false and
deceptive claims in 19 ads that its juice and dietary supplement products aid in the
prevention and treatment of heart disease, prostate cancer and erectile dysfunction.
Health claims were not supported by competent and reliable evidence.
Both parties had appealed ALJ’s May 21, 2012 ruling. Appeal reviewed by
Commission.
POM Health Claims
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Commission unanimously upheld ALJ’s finding that POM made deceptive,
unsubstantiated claims and increased the number of deceptive ads from 19
to 36.
POM prohibited from making any health claim in its ads for any products
unless the claim is supported by 2 randomized, well-controlled, human
clinical trials. Commission rejected proposed FTC request that FDA preapprove any disease treatment or prevention claims in future ads.
POM has 60 days to file a petition for review of the Commission Opinion
and Final Order with the US Circuit Court of Appeals, has announced it will
appeal. Rejects requiring food manufacturers to meet the same standards
as pharmaceutical manufacturers.
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In the Matter of POM Wonderful LLC and Roll International Corp., companies, and
Stewart A. Resnick, Lynda Rae Resnick, and Matthew Tupper, individually and as
officers of the companies
FTC File No. 082-3122
Other Key Enforcement Actions
Unauthorized Phone Charges. On January 17th, the FTC filed a compliant against American Evoice
Ltd. and a sought a motion for preliminary injunction to shut down its alleged $70MM cramming
business. Billed hundreds of consumers on their phone bills for unauthorized charges.
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The FTC alleged that the defendants violated the Federal Trade Commission Act by:
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unfairly billing consumers for services they did not authorize; and
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deceptively representing that consumers were obligated to pay for the services.
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The FTC also alleged that defendants channeled their illegal proceeds to Bibliologic, and that the
purported non-profit organization has no right to the funds and must disgorge them to the FTC.
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For more details and the compliant, access http://www.ftc.gov/opa/2013/01/evoice.shtm
Data Breach/Privacy Claims. Operator of a leading cord blood bank, Cbr Systems, Inc. settled FTC
charges stemming from a data breach that exposed social security #s, credit/debit card numbers
of 300,000 consumers. Because the data breach resulted from the failure to use reasonable and
appropriate procedures for handling personal information, notwithstanding assurances in its
Privacy Policy, Cbr’s Privacy Policy claims were deceptive as per the FTC.
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For proposed settlement and the complaint, access http://www.ftc.gov/os/caselist/1123120/
State Attorney General Developments
California Issues Privacy On The Go
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On January 10, 2013, CA Attorney General, Kamala D. Harris reached agreement with
six of the largest mobile applications platform companies (Amazon, Apple, Google,
Hewlett-Packard, Microsoft, Research in Motion and Facebook) for best privacy
practices for mobile applications.
These companies agreed to a set of recommended principles designed to improve
privacy protections in the mobile environment and to bring the industry in line with CA
privacy laws, including the California Online Privacy Protection Act.
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Recommends mobile apps that collect personal information to have a privacy policy and to make that privacy
policy available to consumers on the app platform, before they download the app.
Recommends a “surprise minimization” approach; i.e., supplementing the general privacy policy with enhanced
measures to alert users and avoid collecting personally identifiable data from users that are not needed for an
app’s basic functionality.
Report includes recommendations for app developers, app platform providers, mobile
ad networks, operating system developers and mobile carriers.
The recommended practices are designed to urge app developers to be transparent
about their data practices, limit data collection and retention, provide users meaningful
choices and hold all industry actors accountable for privacy.
These recommended practice should be seen as a minimum standard for mobile apps
used throughout the US.
The full text of Privacy on the Go can be found at:
http://oag.ca.gov/sites/all/files/pdfs/privacy/privacy_on_the_go.pdf
Response to Privacy on the Go
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A coalition of seven advertising and marketing industry groups (including, the
American Association of Advertising Agencies, the Association of National
Advertisers, the Direct Marketing Association, the Interactive Advertising Bureau and
the National Business Coalition on E-Commerce and Privacy) responded to Privacy
on the Go, in a letter dated January 10, 2013, which stated that the guidelines extend
beyond existing requirements under California law and Federal law and are “not
grounded in any apparent legal authority.”
The letter states that the industry groups believe that Privacy on the Go “will chill
innovation in the marketplace, cost jobs, harm California’s economy, and deprive
consumers of the benefits of mobile applications, products, and services.”
The groups also noted that the guidelines do not include the perspective or input of
the industry associations and were never presented for public review and comment.
The full text of this letter can be found at:
http://gaia.adage.com/images/bin/pdf/TradeGroupLettertoCA1.10.13.pdf
Maryland AG Forms Internet Privacy Unit
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On January 28, 2013, Maryland Attorney General, Doug Gansler, announced the
formation of a new unit within his office to focus on protecting the privacy of online
users.
The unit will monitor companies to ensure they are in compliance with state and
federal consumer protection laws, including COPPA.
The unit also will examine “weaknesses in online privacy policies” and work alongside
major industry stakeholders and privacy advocates to provide outreach and education
to businesses and consumers to broaden awareness about privacy rights so they are
more equipped to manage online privacy challenges.
Additionally, the unit will pursue enforcement actions “where appropriate” to ensure
consumers’ privacy is protected.
FTC, NY and FL Attorney General File Suit
Against Telemarketing Scheme
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In Federal Trade Commission et al v. Tax Club, Inc. et al, No. 1:13-cv-00210, (S.D.,
New York, filed January 9, 2013), the FTC, New York and Florida filed suit to shut
down an alleged $200 million telemarketing scheme to deceive customers interested
in working at home or setting up Internet businesses.
According to the complaint, the defendants charged customers thousands of dollars
for nonexistent small-business development services, customized tax advice,
personalized business planning and business credit development services.
The complaint alleges that the defendants violated the FTC Act by falsely claiming
affiliation with companies that recently sold customers a business development
product or service, misrepresented the cost of the services or a customer’s earning
potential and falsely claimed to be able to provide individualized business services.
The complaint alleges that the defendants violated the FTC’s Telemarketing and
Consumer Fraud and Abuse Prevention Act by misrepresenting their services and
failing to disclose promptly their identity, the call’s purpose and the nature of their
services.
The complaint also alleges that defendants violated the NY and FL consumer
protection laws.
The federal court signed the order requiring the defendants to stop their deceptive
practices pending further litigation.
Private Litigation
Consumer Class Actions
Brand-Name Drug Manufacture Liable for
Injuries from Generic Drug
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In Wyeth, Inc. v. Weeks, (2013 Ala. LEXIS 2, Jan. 11, 2013), the Alabama Supreme
Court held that a brand-name manufacturer of a pharmaceutical drug could be held
liable for fraud or misrepresentation (by misstatement or omission) based on
statements made in connection with the manufacture or distribution of a brand-name
drug in an action brought by a plaintiff claiming physical injuries from a generic form
of the drug manufactured and distributed by a different company.
Plaintiff became sick after ingesting the generic form of a brand-name drug and
claimed defendant had a duty to warn plaintiff about the risks of using the drug.
The Court stated that a brand-name drug manufacturer “could reasonably foresee
that a physician prescribing a brand-name drug (or a generic drug) to a patient would
rely on the warning drafted by the brand-name manufacturer even if the patient
ultimately consumed the generic version of the drug.”
The Court relied on the US Supreme Court’s decision in PLIVA, Inc. v. Mensing, 131
S. Ct. 2567 (2011), which found that federal regulations prohibit generic
manufacturers from changing warning labels on generic drugs
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Because a generic drug’s label must be the same as the brand-name drug, the court argued:
[I]t is not fundamentally unfair to hold the brand-name manufacturer liable for warnings on a product it did
not produce because the manufacturing process is irrelevant to misrepresentation theories based, not on
manufacturing defects in the product itself, but on information and warning deficiencies, when those
alleged misrepresentations were drafted by the brand-name manufacturer and merely repeated by the
generic manufacturer.
Lack of Standing in Suit Filed Against
Netflix for False Advertising
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In Cullen v. Netflix, Inc., (No. 5:11-CV-01199, January 10, 2013), the US District
Court for the Northern District of California granted defendant’s motion to dismiss
without leave to amend plaintiff’s class action complaint.
Plaintiff alleged defendant made false, deceptive or misrepresentative statements in
a 2011 blog on the Netflix website regarding the percentage of streamed videos that
contained closed captioning subtitles and defendant’s intended efforts in the future to
add more videos with subtitles and closed-captioning that violated CA’s Unfair
Competition Law.
Court found plaintiff had no standing:
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Plaintiff became a subscriber before the alleged false advertising.
Plaintiff’s argument that false advertising caused plaintiff to maintain his subscription didn’t satisfy causation
element of standing.
Court held plaintiff’s false advertising claims were based on fraud, which must be argued with particularity,
but the only fraud alleged by plaintiff is only a discrepancy between the way the parties calculate the
percentage of online streaming content with closed captions.
Court found plaintiff failed to state claims for which relief could be granted.
Court found language used by defendant in ads was not fraud, deception, or
misrepresentation that would rise to a violation of the CA Unfair Competition Law,
False Advertising Law or Consumer Legal Remedies Act
Plaintiff failed to show that a reasonable consumer would find the ads deceptive.
Court Denies Class Certification in
Skinnygirl Margarita Suit
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In Christopher Rapcinsky v. Skinnygirl Cocktails, LLC (11 Civ. 6546, January 9, 2013)
US District Court for the Southern District of New York denied class certification for
plaintiff because plaintiff’s claims were not typical of those of the putative class.
Plaintiff asserted defendant violated New York General Business Laws and New York
Agriculture and Markets Law by falsely advertising its “Skinnygirl Margarita” is an “allnatural” margarita.
Plaintiff moved to certify a class in Massachusetts and New York.
Court found that because plaintiff purchased the product in Massachusetts, his
purchases were not protected by New York Agriculture and Markets Law and so were
not “typical” of a class asserting claims under New York law.
Plaintiff asserted breach of warranty claim and cause of action for promissory
estoppel, but the Court found that there was no reliance since plaintiff said he would
have bought the product regardless of its price, and his belief with respect to the
naturalness of the margarita was irrelevant since he bought the product to thank his
wife for all she does in the home.
Court Dismisses Florida Natural Orange
Juice Suit Due to Lack of Injury
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In Veal v. Citrus World, Inc. (No. 2:12-CV-801, filed January 8, 2013), The US District
Court for the Northern District of Alabama dismissed a putative class action lawsuit
challenging the labeling of Florida’s Natural Orange Juice as “100% Orange Juice,”
even though the product is “heavily processed, stored, and flavored before reaching
market shelves.”
Plaintiff sued for breach of contract and breach of express warranty.
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Court found plaintiff failed to state an actual injury by purchasing the orange juice or that once he learned
that the juice was not freshly-squeezed , he did not stop purchasing the product.
Court rejected plaintiff’s argument that he suffered any concrete and particularized injury when he did not
receive the benefit for the bargain – plaintiff paid for and received mass produced orange juice.
Court noted that plaintiff did not assert a false advertising or misrepresentation claim.
Court denied plaintiff’s motion to amend the complaint for a fourth time because
“there is nothing in the labeling of Florida Natural orange juice that would in any way
deceive a reasonable consumer into believing that the orange juice in question is
anything but pasteurized orange juice.”
Court stated that if viewed plaintiff counsel’s actions as “shopping for plaintiffs in an
attempt to manufacture a claim.”
“All Natural” Claim Not Preempted
by Federal Regulations
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In Larsen v. Trader Joe’s Co. (No. C 11-05188, filed January 9, 2013), the US District
for the Northern District of California denied defendant’s motion for judgment on the
pleadings for its Fresh Pressed Apple Juice in a nationwide putative class action
lawsuit alleging false advertising with respect to marketing by defendant for “All
Natural” products.
Defendant’s juice is labeled “All Natural Pasteurized” and “100% Juice.” One
ingredient listed on the label of the juice is ascorbic acid, a synthetic form of Vitamin
C.
Defendant argued federal regulations provide that ascorbic acid and vitamin C may
be used synonymously on food labels and preempted plaintiff’s state law claims.
The Court noted that just because the two products are chemically similar or even
identical, this does not mean that they must be labeled identically in all respects. The
Court further acknowledged that there is some value to consumers and the market in
knowing whether ingredients are synthetic or naturally occurring.
The Court stated that defendant made no showing that the lack of an “All Natural”
label would imply or suggest ascorbic acid was inferior in violation of federal
regulations.
Court Finds Lack of Injury in Jos. A. Bank
False Promotions Case
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In James Waldron, et al. v. Jos. A. Bank, (Case No. 12-cv-02060, filed January 28,
2013), U.S. District Court, District of New Jersey, the Court dismissed plaintiff’s
claims that the defendant misrepresented the regular pricing of its merchandise since
the merchandise was perpetually on “sale” and never sold at the regular price.
Plaintiff’s argued that if a store’s merchandise is always on sale it’s not actually on
sale, which means the retailer is deceiving customers into believing they are paying a
discounted price.
The Court found that the plaintiffs failed to show any real or immediate threat of injury
as a result of defendant’s advertising.
The Court stated that the plaintiffs failed to prove they lost money due to the retailer’s
advertising practices or any specific unlawful conduct, which are requirements for
claims brought under the New Jersey Consumer Fraud Act.
The Court noted that plaintiffs did not provide “any facts which demonstrate that the
‘sale’ price offered is identical to the true regular price of the merchandise and is thus
a misrepresentation.”
Court Lacks Subject Matter Jurisdiction in
ConAgra Foods Case
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In Wallace, et al. v. ConAgra Foods, Inc. (Case No. 12-01354, filed January 31,
2013), the U.S. District Court, District of Minnesota, dismissed a class action lawsuit
claiming ConAgra Foods deceptively sells Hebrew National meat products as kosher.
The Court held that the Establishment Clause and Free Exercise Clause of the First
Amendment bars the court from deciding the matter since “’kosher’ is intrinsically
religious in nature.
Plaintiffs claimed that ConAgra misled consumers because their meat processing
services do not meet the standards necessary to label Hebrew National products as
kosher.
The Court found plaintiff’s allegations “highly disconcerting” but held that it lacked
subject matter jurisdiction to rule in this case since civil judges are barred from
resolving faith-based disputes. The Court stated that it could not “interpret doctrinal
matters or tenets of faith.”
The Court noted that its decision may leave consumers without a remedy.
Subway “Footlong”
Class Action Lawsuit Filed
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Two Subway customers filed nationwide class-action lawsuits in January against
Subway for fraudulent and deceptive advertising, sales and marketing practices
regarding its “Footlong” subs:
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Nguyen Buren v. Doctor’s Associates, Inc. (Case No. 1:13-cv-00498, N.D. Illinois Eastern Division, filed
January 22, 2013)
Jason Leslie v. Doctor’s Associates, Inc. (Case No. 3:13-cv-00465-FLW-DEA, District of New Jersey, filed
January 23, 2013)
Both customers allege that Subway violated consumer protection statutes in all 50
states because the “Footlong” sandwich that each purchased from Subway was less
than 11 inches long.
The complaints allege that since a “Footlong” sandwich is less than 12 inches,
customers pay more than they should in reliance on Subway’s ads.
The complaints allege that Subway’s advertisements are deceptive and mislead
customers to think they are getting a 12 inch sandwich when they are actually getting
less than 12 inches.
The complaints seek to enjoin Subway from using the allegedly deceptive ads and
request restitution, actual damages, treble damages, punitive damages, attorneys
fees and cost of the suit.
Lanham Act False Advertising Claims/Decisions
Apple Inc. v. Amazon.com Inc.
2013 U.S. Dist. LEXIS 440 (N.D. Cal. Jan. 2, 2013)
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Trademark infringement suit brought against Amazon by Apple for using the
term “APP STORE” (in “Amazon App Store”) on a section of Amazon’s
website where Android apps and Kindle Fire apps were made available
included false advertising claims under the Lanham Act .
During the first week of January, 2013, federal district judge in California
granted Amazon’s motion for partial SJ, and dismissed Apple’s false
advertising claim.
No explicit false statement of fact required under Lanham Act false
advertising claims, but if not false on its face, plaintiff must produce
evidence (usually surveys, market research, etc.) showing that the claim at
issue conveyed a deceptive message. Apple couldn’t produce such
evidence, so claim dismissed. Rest of lawsuit continues.
M-Edge Accessories LLC v. Amazon.com Inc.
2013 U.S. Dist. LEXIS 311 (D. Md. Jan. 2, 2013)
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Amazon produces Kindle e-reader and accessories. M-Edge produces Kindle ereader accessories. After relationship under various agreements soured, Amazon
refrained from providing ample notice of new Kindle version to M-Edge (1 day notice).
M-Edge products still shown on Amazon website in conjunction with Kindle products,
however, with accompanying representation to consumers that M-Edge products
“currently unavailable,” together with displays of competing Kindle accessories.
Suit by M-Edge against Amazon based on numerous claims, including Lanham Act
false advertising claims: (1) statements by Amazon to consumers that M-Edge
products “currently unavailable” and (2) statements to customers (distributors) that
effectively communicate that sale of a Kindle accessory requires approval from
Amazon that hasn’t been given to M-Edge
Under first prong of standard for false advertising claim, Court found both types of
statements may be found to be misleading or false by implication in context, and that
both were made in commercial advertising context – M-Edge made sufficient factual
allegations to present plausible claim that consumers/customers could be found to
have been misled by Amazon, and that M-Edge may have been or will be damaged
Amazon’s motion to dismiss false advertising claims denied
Generac Power Systems, Inc. v. Kohler Co.
2013 U.S. Dist. LEXIS 8422 (E.D. Wis. Jan. 22, 2013)
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Motion for reconsideration brought by Generac after Court denied its motion for preliminary
injunction based on false advertising claim.
Generac alleged that Kohler (competitor in home generator business) included false statements in
a Kohler marketing handbook that Generac generator lacks a low-speed diagnostic exercise.
Court found that marketing handbook constitutes a “commercial advertisement” under Lanham
Act. Also, statement at issue was literally false.
Kohler stated that injunctive relief rendered moot because it stopped circulating the handbook at
issue, the ones at issue disseminated to Kohler dealers were the only ones so disseminated, and
new ones (without the false statement, but with the statement “replacement” for old one) were
being shipped instead.
Court: Generac established likelihood of prevailing on the merits of Lanham Act claim and
irreparable harm therefore presumed.
“It is always in the public’s interest to have the truth rather than falsehoods injected into the stream
of commerce.”
Harm posed to Generac by any existing copies of offending handbook outweighs harm Kohler
may suffer through loss of reputation in its dealer network by informing those dealers why
replacement was provided or directing them to destroy prior version, so motion for reconsideration
granted.
National Advertising Division Actions
Serta, Inc. (iComfort® Sleep System)
Case No. 5530; December 11, 2012
Challenger: Tempur-Pedic Management, Inc.
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Comparative performance claims, superiority claims, establishment claims and implied claims made by Serta
about its iComfort foam mattress lines challenged by Tempur-Pedic
Serta made claims about its foam mattresses being cooler, dissipating heat better, being more breathable, being
more supportive, and providing qualities that enable people to get a deeper, more restful sleep on its foam
mattress, than Tempur-Pedic’s foam mattresses
Serta pointed to tests it performed to substantiate its claims
NAD: Tests fatally flawed, in that Serta did not perform them comparing entire mattresses against entire
mattresses, in real-world circumstances (i.e., with bedding on the mattresses, with real people, etc.); rather, Serta
performed tests on individual components of its mattresses – namely, pieces of the top foam layer only
NAD conclusions and recommendations:
– “An advertiser is responsible for all reasonable interpretations of its claims; not simply the messages it
intended to convey”
– Claims must convey a truthful, accurate and non-misleading message about the performance capabilities of
the products and advertiser’s superior performance claims in comparison to competitor’s products
– If Serta had instead advertised that its memory foam mattresses had certain qualities that Serta intended, or
designed them to have (“monadic general claims”) – like being cool sleeping, having the ability to dissipate
heat well, being breathable, being supportive, etc., then that would have been acceptable
– Serta’s ads implied that its mattresses as a whole, not the simply the individual components, were better
than its competition’s
Fareportal, Inc. (CheapOair.com and CheapOstay.com)
Case No. 5532; December 12, 2012
Challenger: Priceline.com, Inc.
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Fareportal made pricing, discount, sale and implied claims on its website, in banner ads and in Google ads that
flights purchased on its CheapOair.com and CheapOstay.com websites
Save up to 65%; Get an extra $15 off – Hurry – Book now, etc.
Discounts based on its competitors’ the least purchased, highest price-category, unrestricted international fares
Dollar amount savings discovered to actually be the amount of booking fees charged in many cases
Offers never expired in reality, as immediately after one expired, Fareportal would advertise essentially the same
savings and to “Hurry now”
Implied claim: websites offer the best and lowest rates, so no reason to comparison shop
NAD recommendations:
– “Well-established that the unqualified term “sale” may be used in advertising only if there is a significant
reduction from the advertiser’s usual and customary price of merchandise offered and the sale is for a
limited period of time. If the sale exceeds 30 days, advertisers should be prepared to substantiate that the
offering is indeed a valid reduction and hasn’t become their regular price.”
– Modify “up to” savings claims to avoid conveying the unsupported message that the comparison is as to its
competitors’ discounted fares and clearly and conspicuously disclose in immediate proximity that the basis is
instead a comparison to applicable classes of domestic and international unrestricted fully refundable
published fares (Fareportal concerned with space for disclaimers in banner ads, however)
– Discontinue advertising routine prices as “sale” prices and that if it wants to do so for limited periods of time,
it should more clearly and conspicuously that the discount is limited to the amount of the booking fee, as well
as the expiration date
– Avoid referencing in close proximity discounts that are automatically applied (“instant savings”) together with
discounts requiring consumers to manually enter promo codes (caused confusion, and consumers possibly
not knowing to enter the promo codes)
– Refrain from using terms such as “hurry,” “book now” and “last minute deal” for promos that don’t
immediately expire
Reynolds Consumer Products (Hefty® Slider Bags)
Case No. 5484C; December 19, 2012 (Compliance Report)
Challenger: S.C. Johnson & Son, Inc.
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Reynolds advertised that its Hefty Slider zipper bag seals were “2X Stronger” than S.C. Johnson’s Ziploc bag
seals in terms of resistance to popping open (comparative performance claims; superiority claims; efficacy claims;
establishment claims; implied claims)
NAD previously decided that insufficient substantiation for “2X stronger” claim, even though sufficient
substantiation for superior performance claim (i.e., “stronger seal” than Ziploc bags) when bags shaken, dropped
or stacked
– Discontinue “2x stronger” claim
– Okay to claim superior performance IF qualified with clear and conspicuous disclaimer in close proximity that
is stronger “when shaken, dropped or stacked”
S.C. Johnson later claimed that Reynolds didn’t comply and actually began expanding use of the “2X stronger”
claim on certain new promotional packaging, on its website and on in-store displays, and that disclaimers not
prominent enough on new packaging
Reynolds agreed to modify new packaging by making “when shaken, dropped or stacked” disclaimers more
prominent (in either the headline or first sentence)
NAD recommendations:
– No further action required on old packaging in light of assurances that it would be discontinued in December,
2012, or on promotional Daytona 500 packaging in light of assurances that it was modified appropriately
– Complimented Reynolds on good faith showing by it by providing artwork for proposed revised new
packaging to S.C. Johnson in September, 2012 – ample opportunity to raise any objections or concerns at
that time prior to Reynolds’ production of the new packaging (and NAD thus disappointed that S.C. Johnson
waited almost 2 months to challenge rather than discuss with Reynolds)
– Appreciates Reynolds’ efforts to modify new packaging; no further action required
Kraft Foods, Inc. (Gevalia Kaffe for Tassimo)
Case No. 5542; January 3, 2013
Challenger: Starbucks Corporation
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Claims made in advertising and on product packaging:
– Express: “NEW! If you like Starbucks ______ Blend, try this!”
– Implied: Each variety of Gevalia Kaffe tastes the same or similar to the Starbucks blend of coffee identified
Background: exclusive agreement in 1998 between Starbucks and Kraft for Starbucks Tassimo pods (ONLY
single cup brewing system offering Starbucks coffee); contract terminated in 2010
Asterisk in each claim: Starbucks is Starbucks trademark; Starbucks coffee not manufactured or distributed by
Kraft
Starbucks supported its challenge with consumer perception survey evidence, found by NAD to be appropriate
NAD recommendations:
– “An advertiser must support all reasonable interpretations of its advertising claims.”
– Tried to determine whether claims merely invited consumers to try a Gevalia blend or an implied claim about
the taste of the Gevalia blend compared to a Starbucks blend
– Determined that survey was appropriate, conducted properly, and that the claims implied that the Gevalia
coffee tasted the same as or better than the Starbucks coffee
– Discontinue or modify claims (Kraft decided to replace claims at issue)
Sea Foam Sales Co. (Motor Treatment/fuel system additive/oil
additive)
Case No. 5540; January 7, 2013
Challenger: ITW Global Brands
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Print and online product performance claims
Helps clean carburetors, fuel injection systems, oil system components, etc., helps reduce emissions, helps
lubricate engine parts, etc.
Sea Foam provided ASTM and lab testing data in support of its claims
NAD evaluated whether such test data met standard of competent and reliable scientific evidence required for
product performance claims
NAD recommendations:
– “Product performance claims must be supported by competent and reliable scientific evidence.”
– Most claims supported and okay
– Small sample sizes and inconsistent testing methods and procedures of field tests insufficiently reliable to
support claims
– Lab testing okay for cleaning claims except for claim indicating that by using Sea Foam, mechanics can
more accurately diagnose problems (recommended that claim be discontinued) and for lubrication and fuel
stabilization claims
Envirocon Technologies, Inc. (Lemi® Shine Performance Booster
and Lemi® Shine Rinse Agent)
Case No. 5543; January 9, 2013
Challenger: NAD
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Envirocon made performance and ingredient claims in print and broadcast advertising and on product packaging
for its Lemi Shine products for use in dishwashers
Express claims: “Only thing that works”; “Outshines the competition” (part of trademark); Natural active
ingredient”; etc.
Implied claim: Products are natural or “green” products.
Advertiser contended that “It’s the only thing that works” claim was puffery (NAD found it not to be – rather, it’s an
objectively provable superiority claim linked to specific performance attributes; no testing data provided to support
claim, either
NAD recommendations:
– “The registration and promotion of a trademark does not obviate the need for the advertiser to have a
reasonable basis to use this trademarked expression when it appears as an advertising claim.”
– Discontinue “It’s the only thing that works”
– Claims included as part of trademark must still be substantiated (in this case: “Outshines the competition” –
should be discontinued, as unsupported superior performance claim
– Modify unqualified “all natural detergent additive” claim to disclose the ingredients (real fruit acids and
natural citrus oils)
Summers Laboratories, Inc. (Triple Paste Medicated Diaper Rash
Ointment)
Press Release; February 1, 2013
Challenger: Johnson & Johnson Consumer Companies, Inc.
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Claim made by Summers for its diaper rash ointment “Recommended by
pediatricians and dermatologists when other treatments fail”
NAD recommended that claim be discontinued on product packaging and elsewhere.
Summers produced survey evidence to support the above claim, but the NAD found
survey flawed by absence of randomized survey population, leading nature of
questions, lack of ability to verify authenticity of responses, and third and final
question asking how respondents would like their monetary incentive paid – as a $1
coupon plus product sample or a $2 coupon with no sample.
Summers asserted that decision was in error and in contrast with prior FTC rulings,
and that its claims were in full compliance with such rulings.
NAD referred matter to the FTC for further review after Summers declined to abide by
NAD’s recommendation to discontinue claim.
Vitamins and Dietary Supplements:
Additional NAD Decisions for Your Review …
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Barlow Herbal Specialties, LLC (LDM-100 dietary supplements)
Case No. 5421C; December 7, 2012 (Compliance Report)
Challenger: NAD, through the Council for Responsible Nutrition
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Proactive Life, LLC (Diabetes Support dietary supplement)
Case No. 5535; December 20, 2012 (advertiser agreed to permanently discontinue all
challenged claims)
Challenger: NAD, through the Council for Responsible Nutrition
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Nature’s Answer, LLC (Bio-Strath dietary supplement)
Case No. 5536; December 20, 2012 (substantively similar to Ampersand case)
Challenger: NAD, through the Council for Responsible Nutrition
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Ampersand Industries, LLC (Trimedisyn Prenatal Vitamin)
Case No. 5539; December 31, 2012 (administratively closed)
Challenger: NAD, through the Council for Responsible Nutrition
Carol Brani (919) 755-8139
[email protected]
Questions?
Richard J. Caira, Jr. (919) 484-2315
[email protected]
Jocelyn A. Fina (919) 484-2330
[email protected]