FTC Doesn’t Win Them All

We’ve noted before that the FTC has been increasingly aggressive in pursuing a perceived wrong doing and has had a fair amount of success in court in those efforts. The FTC, however, does not win them all. Late last year, the FTC suffered a rare denial of a motion for a preliminary injunction involving a company that sold Bitcoin mining machines.

The FTC sued BF Labs and its principals alleging that they deceptively marketed Bitcoin mining machines and failed to deliver many of the machines that were sold. At the FTC’s request, the court issued an ex parte Temporary Restraining Order (“TRO”). After hearing from the defendants, however, the court dissolved the TRO and denied the FTC’s request for a preliminary injunction that would have included an asset freeze and the appointment of a receiver.

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Speed of Action Claims Not Given Lightning Fast Victory at NAD

As our last blog about Attention Deficit Disorder (ADD) claims strove to be focused, we will aim to make this speed of action blog short and sweet.

This has been a popular claim at NAD this year in the over-the-counter (OTC) space. Here, cold medicine giants Pfizer with its Robitussin cold and flu line took on Novartis with its Theraflu product claiming‎ the product “starts to get to work in your body in 5 minutes.” The evidence was clear that the acetaminophen was absorbed into the bloodstream within 5 minutes of taking the product.   The challenger asserted the unsupported implied message was that consumers would begin to experience symptom relief right away.  NAD found the latter.  It is unclear if the words alone would have led to the result. NAD found the imagery in the ads buttressed the quick recovery message (while the advertiser asserted the ad showed a cold ridden person drinking Theraflu, then a stopwatch and “later on,” the person appeared symptom free).

The ad also included a super “refers to the presence of acetaminophen in the bloodstream.” The poor disclosure has had a touch season (cite to operation full disclosure blog) for which it is unclear if there is a meaningful road to recovery.  NAD found it contradicted the main message and was also not sufficiently prominent. NAD added some commentary on this worth sharing. In its view, “consumers do not scrutinize commercials, and particularly supers, the way NAD attorneys do, and a consumer cannot (and likely would not) pause to read the super which would be the best way to read and understand it.”

Wishing you and yours speedy relief from any of winter’s ailments!

Searching for Low Risk? NAD Clarifies Rules for Paid Search

SEO letters and a computer mouse

It appears to be search engine marketing month, first the FTC and now the NAD has also weighed in with a case of first impression over use of ad copy in paid search results. Like collecting postcards from our travels, we similarly have memories of NAD lessons in the online travel agency wars, including on sales pricing (click here for an early 2013 decision) and this adds to the set.

When searching for “flights from DC to Hawaii” (one of our personal favorites)‎, companies bid for top placement in the sponsored search results. Favorable placement is based on not just the price the advertiser paid, but also the relevancy of the ad to the search. Ads that get more clicks have a higher relevancy rating. So in response to our query, we might see an ad for “Flights to Hawaii as low as $300. Sign us up!” Expedia challenged that CheapOAir was displaying the lowest price one could get to Hawaii from any airport not specifically from a DC airport.  NAD agreed that this could be misleading to consumers and recommended that in search results listing specific prices CheapOAir display only prices available from DC to Hawaii.   A more general claim of “cheap flights” would be held to lesser requirements.

Also in paid search ads, CheapOAir called out savings “off fees.” Expedia contended that the advertiser had inflated booking fees to the promise of savings and, therefore, was illusory. NAD concluded that it was appropriate to call out these discounts but only with more specificity to make clear the discount was off of booking fees and not fees in general since this could be misunderstood as discounts from airport or other mandatory fees.

So where does this leave an advertiser using a paid search? The Federal Trade Commission (FTC) has previously opined on how to appropriately clarify the hit is an advertisement rather than a native result. Now NAD is weighing in with its view that material terms of an offer promoted in a sponsored search box likely must include all material terms‎ and clicking to find the details may not suffice. Like with banner ads, advertisers should take a hard look at whether their message really is amenable for use in the small real estate of a sponsored search box and seek to either provide a general teaser or find a way to succinctly tell consumers what they need to know before they click onto the site.

Focusing on Wiggle Room in Claims Not Likely to Persuade NAD

Green inchwormMany of us struggle with clarity and focus on how much specificity is best in a claim. If you name a competitor in a superiority claim, you are likely to awaken his/her wrath. But if you use a more vague general superiority claim, you may be taking on a burden to substantiate your claim as to a significant majority of the market. 

 And it can get even hazier and harder to implement when it comes to health claims. As readers of this blog know, the Federal Trade Commission’s (FTC’s) standard for health claim substantiation has never been more exacting. ‎ (See here and here) The NAD opts for the more traditional competent and reliable evidence standard rather than a specific number of clinical studies but that is still not an easy standard to meet.  A recent NAD case involving supplements designed for those with Attention Deficit Disorder (ADD) provides a good lesson that adopting “wiggle room” language is unlikely to reduce that burden.   

ADD-care advertised that its product “may add focus, clarity, and alertness without negative side effects.” It “may offer natural supplement relief safely and quickly,” and the product has ingredients “that have been tested and especially selected and may help relieve hyperactivity, distractibility, impulsiveness and general memory difficulties in both children and adults.”  To keep this blog focused and on task, we will address the use of the word “may” to introduce these claims.   

It is likely appropriate to add “may” to your health claims if your testing and support show that your product ‎has been shown effective for some but not all users.  But “may help” or “can assist” or similar words cannot be used to mean “the product might help you but no promises and we really aren’t even sure.” Occasionally we are told by clients who are surprised that they are being investigated because they responded, “Well, I said it may help.  I never said it would [work].” This is not a winning argument at the FTC or NAD. Why? The FTC in the Windows cases and in connection with the update to the Testimonial Guides suggested “results not typical” disclosure implies U.S. consumers are an optimistic sort who believe they can overachieve. If you promise benefits “up to” a certain amount or show weight loss testimonials of losing 50 pounds, the FTC believes some consumers will see this as a promise and not an aspirational ceiling benefit.  Now bringing back expectations to a reasonable level, in most cases it can be accomplished with a clear disclosure (e.g., average weight loss 1-2 lb/week). But there is still a requirement for any health claim that the product “may” help that the advertiser must have good solid evidence that the product provides such benefits. 

ADD-Care submitted testing, but we are proudly staying on task and focusing simply on the “may help” portion of the decision. NAD summed it up nicely:  “The mere inclusion of words such as ‘helps to’ or ‘may help’ in a product’s performance claims does not relieve the advertiser from providing a reasonable basis for the message that the product will deliver the claimed benefits to consumers. A reasonable takeway from the advertiser’s claims that it ‘helps to’ relieve symptoms is that it implies a consumer will experience some improvement in these symptoms.”

 

The FTC Speaks Softly But Carries a Big Stick – Do Paid Search Terms Go Under the Microscope?

Are paid search terms about to receive a lot more Federal Trade Commission (FTC) attention?  That’s the question you could be asking after the FTC last week announced a settlement with Nourish Life LLC.  Defendants marketed a dietary supplement called Speak that contains among other things omega-3 and omega-6 fatty acids, vitamin E and vitamin K.  According to the FTC, defendants lacked adequate substantiation for the claim that Speak would help children develop and maintain normal speech, including children who suffer from autism and verbal apraxia (a speech disorder).

The FTC’s complaint cites claims made on websites and social media as well as in direct mail, brochures, and displays at medical conferences.  In addition, the complaint makes reference to paid search terms and sponsored links as one of the mechanisms by which the defendants marketed their product.  The paid search terms cited included “toddler speech problems,” “help my child talk,” “autism treatment,” and “verbal apraxia treatment.”

Does this mean that paid search terms and sponsored links are now fair game for FTC scrutiny?  Well like any good lawyer, we think the answer is “it depends.”  Continue Reading

When a Survey Isn’t Asking For Your Opinion: A Time-Sensitive Requirement for Those Doing Business in California

survey

Companies doing business in California must now complete a comprehensive “survey” if selling particular products to consumers within the state.  However, this is not your typical consumer satisfaction survey, but rather a submission of detailed information for each product meeting the requirements discussed below.  The detailed submission must include include information on product formulas and unit sales, and a product label must also be submitted.

Specifically, every company whose name appears on the label of a consumer or commercial product that was sold or supplied for use in California during calendar year 2013 and whose product falls into a category listed on the 2013 Survey Category List (link available here) must comply with CARB regulations by submitting a survey.  Examples of covered product categories include adhesives and sealants, household and institutional products (e.g., cleaners, food-related sprays, garden and lawn care products, office supply products, pool/spa products, shoe and leather care products), personal care products (including topically-applied over-the-counter drugs and pet care products), pesticide products, and vehicle and marine vessel aftermarket products, just to name a few.  Really, chances are pretty good that if you sell a chemically-formulated consumer good, it likely appears on the list.

But don’t think you’re off the hook because you didn’t start selling your product until 2014 or 2015; calendar year 2014 and 2015 sales must also be reported in coming months (beginning July 2015 for 2014 data and beginning July 2016 for 2015 data).

For those of you who may have completed previous CARB surveys, please note that this survey is more inclusive than previous CARB surveys (and certainly more so than the last consumer survey you took) and may require a significant amount of time to complete.  After reviewing the Category List, you can visit the pre-survey website located here to help determine if compliance is necessary.  Registration is required before you can submit the survey (you can register here) and can take up to five calendar days to process.  CARB provides a comprehensive set of instructions for registration at this link, and tutorials for survey completion are available at this link.

On January 1, 2015, CARB began accepting survey results, and on March 2, 2015, completed surveys are due.

Good luck and happy surveying!

Compliance Trends for Online Marketers

Looking back 2014 was a year of increased government scrutiny and compliance obligations for lead generators and online marketers, and so, for 2015, advertisers will need to ramp up compliance.  Avoiding banned terms, better use of disclosures, and other web and contact center compliance enhancements – with at least some reports of 66% of website URLs containing a potential compliance violation – should be a priority for the New Year.

At least, that’s what marketing compliance company PerformLine revealed last week in its infographic titled “Compliance Trends to Watch Out for in 2015.”  The infographic is part of its periodic overview of its research on websites and “contact centers” using “banned” compliance terms or missing “required” disclosures.  The infographic shows that 66% of credit monitoring sites, 72% of credit card sites, and 91% of finance sites contain potential compliance violations.  The company didn’t release more detailed breakdowns, but it did pinpoint certain keywords and disclosures as areas of concern.

One area that caught our attention was the identified a lack of required disclosures as one of its “Five Issues Causing Potential Violations.”  As we have written previously, the Federal Trade Commission (FTC) has placed renewed emphasis on clear disclosures in its Dot.com Disclosures Guides, and marketers’ ability to use fine print disclosures may be going the way of the dodo.  However, with high rates of non-compliance across all industries measured, it appears marketers may still be struggling with how to create clear and conspicuous online disclosures without detracting from the marketing message.

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Please don’t, Mister Postman: How to respond when the Postal Service claims that you underpaid postage

You’re sitting in the offices of your on-line business, going through your in-box.  Your mail includes a letter from the U.S. Postal Service.  The letter claims that you owe a six- or seven-figure sum—more than your profits last year—because you didn’t pay enough postage on parcels of merchandise that you mailed to consumers one, two or three years ago.  You have 30 days to appeal—to another Postal Service official—or pay up.  “We appreciate your business,” the letter ends.

You sit there in disbelief.  Your company has a dedicated in-house shipping department.  You’ve faithfully paid the postage on your outgoing parcels with a postage meter for several years—maybe even with a computerized meter and data link that enable the Postal Service to debit your postage instantly from your bank account whenever you mail.  None of the post office employees who deal with your shipping department have ever raised any underpayment issue before.  How are you going to reconstruct what you mailed several years ago?  And, if you owe more postage, how will you ever be able to get your customers to reimburse you?  This seems Kafkaesque.

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Advertising in Cuba? Not Yet, Says Uncle Sam

cubanPresident Obama has created a lot of buzz about opening the Cuban market to Americans, but it is a long way from buzz to profits.  On December 17, 2014, the President and various members of his administration announced sweeping changes in the 50-plus year economic embargo against Cuba.  Normalization of diplomatic relations, increased travel, the ability to use U.S. debit and credit cards, increased commerce, and a number of other changes almost makes one want to break out a Cuban cigar right here in the nation’s capital and start ginning (or rumming, to create a word) up advertisements for the Cuban market.

But that would be premature given what the “buzz” currently allows.  Lighting up the Cubano is still illegal (indeed, even having it in the U.S. is illegal).  Although U.S. law currently allows limited commercial exports to Cuba (mostly agricultural goods and medicines), and the President has proposed expanding trade, a number of major hurdles stand in the way of full scale trade:  Continue Reading

FTC Puts More Governors on Auto Disclosures

That’s perhaps exactly what the FTC tried to avoid by bringing two new auto disclosure enforcement actions late last week.  Both actions seek to enforce existing orders, though in the one instance the parties agreed to settle while in the other the parties will have their day in court.  The FTC has been coming down hard on auto dealers of late and these two cases are no exception.

Both cases focused on the need for and adequacy of disclosures regarding automobile sale, leasing, and rebate offers.  According to the FTC’s complaints, the defendants failed to adequately disclose certain terms and conditions including the following:

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