All About Advertising Law - Venable LLP

Booking To The NAD: Competitors File Back-To-Back Lookalike Complaints In Pricing Claims Challenges

 A common complaint about the NAD process is that there are no counter claims and the entire process is focused on the Advertiser being required to provide adequate substantiation to support its claims as opposed to a Lanham Act challenge where typically the burden of proving an ad is false or misleading falls on the Plaintiff or Challenger.  Or maybe not.  Just after Expedia filed a challenge to the pricing advertising practices of Booking.com, the Amsterdam-based travel site, a first time participant at NAD, filed its own similar challenge.  And NAD issued separate decisions on the same day.  A bold move for Booking.com but certainly available if an Advertiser feels it is being questioned about practices the Challenger is also employing (insert favorite expression re pot and kettle black or stones and glass houses) and does not want to proceed merely on the defensive (assuming one has adequate resources to both challenge and defend simultaneously within NAD's tight scheduled timeframe).  In this case both travel sites were offering “strike-through” pricing where an alleged full price is crossed out and the discounted price offered by the travel site is shown.  NAD recommended that both discount online travel shops include clear disclosures so consumers understand exactly how those “original” struck through prices were calculated and whether there are inventory limits on the availability of the low priced rooms. NAD also recommended that the high strikethrough price should not be an outlier rate.  NAD did not like how Booking.com calculated their savings – looking at the second-highest rate paid by another guest for a similar room within a 45 day period before or after the customer’s planned stay, concluding that even if accurate the fluctuation in hotel pricing between up to two seasons can be so significant that the purported higher strike through price may not be consumer relevant. 

 The cases also serve as reminder lessons on what NAD expects for companies making “up to” savings claims.  For claims like "Save Up to 50%," the Advertiser must be able to demonstrate that at least 10% of its rooms in each advertised city were available at the highest discount rate.  The "Up To" claims cannot be outliers.  Further NAD suggested that when advertising “from” prices ("rooms from $99/night”) that such claims be modified or discontinued when there are no more rooms available at the low “from” price.  While the complexity of online travel sales has some unique
elements, the discussion on "Up To" and "From" pricing claims are equally relevant to any retailer advertising a sale.  One other side point regarding sale claims is that NAD noted Expedia had offered a 50% Winter Sale but had used the discount call out near its statement of how many hotel rooms it offered.  NAD suggested this juxtaposition implied that the sale was on its entire inventory.  Probably not a big deal as the sale had ended but something to consider to separate a sales promise from discussions of the breadth of store inventory unless a sale is store-wide. 

 An interesting twist in the case is that Booking.com challenged Expedia’s use of “Expedia Special Rate.”  Expedia asserted it had been using this term for 8 years without challenge. The NAD said that passage of time was no defense and that at any time a claim can be assessed for whether it is false or misleading.  In this case, Booking.com asserted the claim meant that Expedia offered better pricing than other competing websites when often the pricing for all travel sites was the same.  Expedia explained that this term meant many things including that it contracts directly with the
hotels and can offer rates that will not be lower elsewhere and that Expedia customers are guaranteed a certain number of rooms at this rate.  NAD decided that one reasonable interpretation of the term “special rate” was that it offered a lower rate than available at other websites so counseled Expedia to disclose what it meant by a "Special Rate." It may be surprising to some that a claim of “special” would be interpreted as “more special” relative to other discount travel agents so this is certainly an area to watch and see what NAD does in future. 

 

Amy Mudge  and Randy Shaheen

Twitter "Advertising" Disclosures An Issue In The UK As Well

There has been a great deal of discussion in the US about the need for, and manner of, disclosure in tweets by celebrities and others that are paid for in some fashion by advertisers.  Not surprisingly, the British are wrestling with the same issue as evidenced by the discussion below of a recent decision by the Advertising Standards Authority (ASA) which is a self-regulatory body that adjudicates complaints against advertisements brought by competitors and others on the basis of the Code of Advertising Practice (CAP).

A complaint was brought in respect of two tweets for Nike posted in January 2012 on the official Twitter accounts of the Nike sponsored footballers, Wayne Rooney and Jack Wilshere.  The complainant queried whether the tweets were, as required by the CAP Code, obviously identifiable as marketing communications.  The tweets read “My resolution - to start the year as a champion, and finish it as a champion…#makeitcount gonike.me/makeitcount” (for Wayne Rooney) and “In 2012, I will come back for my club – and be ready for my country." #makeitcount.gonike.me /Makeitcount” (for Jack Wilshere). 

Despite the use of the Nike URL and campaign strap line, the Advertising Standards Authority (“ASA”) thought that the use of ‘Nike’ was not sufficiently prominent and that consumers would not have been aware of Nike’s “make it count” campaign.  The ASA therefore decided that “there was nothing obvious in the tweets to indicate that they were Nike marketing communications”.   The ASA therefore upheld the complaint.

Take away tip:  It is important that a marketing communication is obviously identifiable as such.  The ASA suggested that the inclusion of “#ad” may be a suitable indicator to ensure that tweets are obviously identifiable as marketing communications.

For the full ASA adjudication click here.  

Redd Solicitors LLP

 

Daniel Chapter One Gets A Do-Over

It's been a busy couple of months for the FTC in court.  There've been some highs and some lows for the agency and over the next few blogs we'd like to catch you up on what's been going on.  We'll start with what seems like mostly a win for the agency.

Back in 2010 the FTC entered an order against Daniel Chapter One which prohibited the company from making various cancer and tumor related claims for its dietary supplements (and other products).  In March 2011 the FTC (through the Department of Justice) asked a federal district court to find the company in contempt of the order.  In June 2011 the court agreed and entered an injunction requiring the company to obey the Commission's order.  Last month the same court found that the company had still not come into compliance with the order.  The court held that it has broad discretion to fashion contempt remedies and that monetary sanctions can be imposed to coerce compliance and compensate for losses.  Although it noted that monetary sanctions to coerce compliance were appropriate in this case the court also held that a "coercive, civil contempt penalty is one that is 'avoidable through obedience.'"  Thus, the court gave Daniel Chapter One two weeks to purge its contempt and avoid escalating monetary fines and ultimately imprisonment.  (sort of like when you tell your kids "I'm going to count to 10 and if you haven't done what I already asked you to do then no access to your smart phone for the rest of the day.")  Perhaps not surprisingly, the Company filed the requisite notice with the court that it had purged its complaint and all appears well for now. 

We, at least, have not seen many opportunities in federal court for clients to "purge" their contempt and we certainly wouldn't advise companies to count on that opportunity but it will be interesting to see whether other courts begin to emulate the ruling in this matter.

Randy Shaheen and Amy Mudge

 

Fast Track to the FTC: Continuing a Claim with New Support After NAD Recommends Discontinuing

An adverse NAD decision recommending that a claim be modified or even permanently discontinued is really the beginning not the end for marketers and their lawyers.  Those simple little words "the Advertiser is disappointed in and disagrees with the NAD's decision but in the spirit of self-regulation will take the recommendations into account in future advertising" may well be one of the best examples of easier said than done. 

Last month, the NAD referred a razor company to the FTC after a second compliance challenge.  Schick's ads for its Hydro razors featured "water burst imagery" for example a frisbee exploding into water when a man catches it.  The NAD found that while it was substantiated that the razor and its water-activated gel hydrates skin during shaving, the images conveyed an unsupported claim that the razor provided ongoing post-shaving hydration.  (The issue apparently was the context --- that the water bursting happened nowhere near a razor or a bathroom so perhaps an exploding towel or shaving cream can or bathroom pipes would have been ok, well at least from a legal perspective if not a marketing lens.)   There was no consumer perception evidence in the record.  NAD "stepped into the shoes of a reasonable consumer" and determined a promise of continued hydration after shaving was one possible takeaway message.  Schick did a few things after the decision.  It changed the claim from "hydrates your skin as you shave" to hydrates your skin throughout each shave" in a super.   And they conducted consumer perception evidence showing consumers took away no claim from these images. 

NAD did not accept the evidence and said it has made its conclusions.  Further, a use of the super would have contradicted the message (that the survey evidence showed did not exist).  NAD expressed disappointment in the lack of compliance and referred the matter to the FTC.  This is a very interesting situation and one that could prompt a lot of debate.  On the one hand, if the survey was well conducted and robust and showed NAD got it wrong (which can happen, even among advertising experts) shouldn't that be sufficient to allow similar claims (here on a next generation product, not the specific product at issue in the challenge)?  On the other hand, accepting new evidence after rendering a decision could invite real gamesmanship in the self-regulatory process -- incenting companies not to test consumer understanding of claims during an NAD challenge but to do so only after the fact if there is an adverse decision.  And it could turn compliance reviews into repeat challenges.  Probably not issues we are going to resolve neatly in this blog.

So what is an advertiser to do?  In the face of an adverse decision, an appeal of course is always an option if you believe the NAD just got it wrong and the claims at issue are really core to the brand and the product.  Running the same claims with new support is a risky proposition as the Schick
referral indicates.  If you can find room to modify the claim to take into account the NAD's concerns, it is a best practice to do this not in a disclaimer but amending or clarifying the claim itself.  And at the end of the day, an FTC referral by NAD does not guarantee a full blown investigation because while the FTC takes NAD referrals seriously, it has something the NAD lacks - enforcement discretion to decide what cases to bring. 


Amy Ralph Mudge

.News: ICANN Reveals List Of New gTLD Applications

Despite strong opposition and a temporary interruption in the application process, the Internet Corporation for Assigned Names and Numbers (ICANN) has barreled ahead with the new generic top level domain name (gTLD) program. This expansion of new gTLDs (to the right of the dot) opens up the internet to a plethora of new gTLD domain extensions. ICANN announced that it received over 1900 applications, and at $185,000 in application fees alone ICANN collected over $350 million in fees from applicants for the new gTLDs. Today was the big “Reveal Day” for ICANN which published a list of the applications including the names of the applicants and the proposed new gTLD strings.

Due to the overwhelming number of applications, ICANN will divide the applications into “batches” for its initial evaluation of the applications. The ICANN’s Initial Evaluation will review, among other things, the proposed gTLDs string for similarity to other new gTLD or existing gTLD, the applicant to determine if it has demonstrated the appropriate technical, operational, and financial capabilities to run a registry, and the applicant's proposed registry services to determine DNS stability. The evaluation of the first batch is set to begin on July 12th and end sometime in December 2012 or January 2013; the schedule for subsequent batches has not yet been announced.

Anyone interested in submitting comments for consideration during the evaluation of a particular application will need to do so before August 12th. A formal objection process is also available and open for seven months until about January 2013. During the objection phase, interested parties can raise objections to an applied for gTLD string based on an allegation that the applied for string infringes the existing legal rights, that the string would create confusion with another applied for gTLD or existing gTLD, that the string is contrary to the public interest, or that the string is against the interests of a particularly community.

In addition to the many well known brands that applied for new gTLDs, several of the generic name gTLD strings have multiple parties applying for them including .love, .music, .news, and .shop. These multiple applications will be managed in a separate process where attempts to resolve the contention will begin and could end in an auction for the string.

The new gTLDs will present extra burdens on brand owners to protect and enforce their brands. Brand owners should review the Reveal Day list to confirm that none of the proposed gTLD applications violate any of its existing trademark rights, consider registering its trademarks in ICANN’s Trademark Clearinghouse when available for purposes of objection to domain names in the new gTLDs, and monitor the new extensions when they go live in or around 2013 for potentially infringing domain names.

Jacqueline Levasseur Patt

Ferris Bueller's Teacher Gets The Day (And More Off): Sues Over Endorsement Contract

A quick update on the endorsement contract wars.  We previously blogged about a judge's refusal to dismiss a breach of contract case involving a professional football players loss of an endorsement contract after making some controversial tweets about the death of Osama bin Laden.  The judge in that case held that the Company needed to make a factual showing that the public had actually been offended or shocked by the endorser's conduct.  Now a California court has weighed in on the issue in a case involving Ferris Bueller's economics teacher a/k/a Ben Stein.  The actor/lawyer/economist/public commentator had argued that the printer company Kyocera breached its endorsement agreement with him after learning of his views that global warming is not a man-made phenomenon.  The court found that Kyocera had a first amendment right to not associate itself with Stein and his alleged views on global warming. 

The court did not address the recent North Carolina case but the Stein case serves to illustrate how difficult the standard proposed by that court -- objectively measuring the effect of the endorser's statements on the public -- would likely be to administer.  Public opinion polls show that the American public is pretty closely divided over whether global warming is a natural or man-made phenomena so it may be difficult to know which way Stein's alleged views cut.  However, perhaps people on one side of the debate versus the other are more likely to "punish" a company for its views (or the views of its spokespersons) or perhaps the views of people who buy printers skew in one direction or the other.  And the list of issues and possible questions goes on from there.

The judge permitted one claim to go forward - the allegation that Kyocera replaced Ben Stein with a look-alike infringing his right to publicity.  (and, if true, no doubt undercutting Kyocera's argument that it was worried about the public's reaction to Ben Stein's views (or those of his alleged look-alike) to global warming. 

Randy Shaheen and Amy Mudge

NAD Tells Ocean Spray To Drink Its Vegetables And That Superior Taste Test Messages Are No Laughing Matter

NAD doesn’t have much of a sense of humor when it comes to taste tests. A recent Ocean Spray commercial featured two cranberry growers who announced they are “doing a taste test” for “Ocean Spray cranberry juice versus vegetable juice.” After tasting the cranberry juice, one grower smiles and says “tasty.” As he is bringing the bottle of vegetable juice to his lips, the other grower states, “Now the vegetable juice . . . with more than 10 times the sodium of cranberry juice. “ The grower holding the vegetable juice bottle then decides not to drink it, pours it out into the bog, and proclaims “We have a winner,” as he raises the bottle of cranberry juice. Although NAD characterized the commercial as “perhaps, tongue-in-cheek,” it determined that the language “We’re conducting a taste test” coupled with the visual of the second grower tasting Ocean spray’s product and then declaring it “tasty” and the “winner” conveyed a superior taste test message requiring substantiation. Although Ocean Spray did have scientific substantiation for its taste test claims (gathered after the ad was aired!), NAD determined that the taste test evidence was “insufficiently reliable” to justify the implied superior taste message. First, the sample population was flawed because it did not include consumers who customarily drink cranberry juice blends and vegetable juice. Second, the study demographics did not accurately reflect the demographics of those who drink vegetable juice. Finally the advertiser did not include a “no preference” option. NAD said that asking the following question was insufficient to indicate that a respondent had no preference: “which one, if either, do you think tasted better—the one you tried first or the one you tried second? “ NAD said that the advertiser should have asked “which one, if either do you think tasted better—the one you tried first, the one you tried second, or neither?” NAD also determined that the visual of the grower dumping the vegetable juice into bog and refusing to taste it, coupled with the language about sodium levels, “reasonably conveyed the potentially misleading message that V8 contains an alarming it not (unhealthy) level of sodium.” Ocean Spray is appealing the decision so NAD will be bogged down with this matter for a while.

Amy Mudge and Randy Shaheen

A Short History Of The FTC’s “In Short: Advertising and Privacy Disclosures in a Digital World” Workshop

Yesterday, the FTC convened a day-long public workshop to discuss updating its “Dot Com Disclosures” guidance on presenting online advertising disclosures. The FTC is considering whether it should overhaul this guidance, which dates to 2000, to address current trends such as social media and mobile advertising. The workshop also included a panel devoted to mobile privacy disclosures. Newly confirmed Commissioner Maureen Ohlhausen kicked off the event by explaining that the FTC does not intend to expand its Section 5 authority, but wants to shed light on how existing legal principles should apply to new technologies. Mary Engle, the head of the FTC’s Advertising Practices Division, told participants that new technology platforms should adapt to existing legal principles, not the other way around. But discussion at the workshop highlighted the challenges of reaching this goal in a way that is technically feasible and does not detract from users’ experience. One obvious challenge is the space limitations of mobile devices and certain social media platforms, which give advertisers less room to provide disclosures. Numerous panelists opined that, despite these limitations, disclosures should still be placed near advertising claims. A few panelists suggested that ad campaigns that require extensive disclosures should not use platforms where such disclosures are not feasible. To cope with space limits, some panelists endorsed the concept of standardized icons, labels, and other shorthand signals that give consumers access to disclosures. The mobile privacy disclosures panel featured several presentations by programs that are developing such offerings. Other panelists, however, expressed concern that these signals may not be understood by consumers, or saw a need for more consumer education to promote understanding. Numerous panelists also advocated for the FTC to retain flexibility for companies and for social media users. Another challenge is the fact that digital content can easily be relocated in cyberspace, potentially losing or altering disclosures in the process. For example, the panel on social media disclosures discussed the challenge of ensuring that disclosures travel with promotional messages when blog content is repurposed or syndicated. Disclosures presented in a sidebar will be lost if the blog is viewed in an RSS feed. Translating webpages from desktop to mobile environment can also affect how consumers see disclosures. The FTC now faces the task of distilling these and other workshop discussions, as well as comments solicited last year, into concrete guidance for the business community. Ms. Engle, the Advertising Practices chief, pledged that the FTC will seek to turn these “shades of gray” into “as many … blacks and whites as we can.” To that end, the FTC will be accepting comments until July 11 and expects to issue its new guidance as early as the fall.

Stu Ingis, Milo Cividanes, Julia Kernochan Tama,  and Michael Signorelli