What does it mean when the National Advertising Division refers a case to the Federal Trade Commission? At this year’s NAD Annual Conference, Mary K. Engle, the associate director of the FTC’s Division of Advertising Practices, and NAD director Laura Brett sorted fact from fiction about NAD referrals and shared their perspectives from both sides of the process. Read on to learn more about the referral process and the key takeaways from their discussion.

To start, Ms. Brett acknowledged that in an ideal world, parties would voluntarily participate in and comply with the NAD review process, which would eliminate the need for referrals to the FTC. Although referrals constitute a small percentage of the work the NAD does, Ms. Brett views referrals as a failure of the self-regulatory process. Ms. Brett went on to explain that referrals arise from one of two main scenarios: (1) failure to file a substantive written response or (2) failure to comply with a NAD or NARB decision. That latter category can be further broken down into situations where (a) the advertiser has not agreed to comply with a decision, or (b) the advertiser has not complied by failing to make a bona fide attempt to bring its advertising into compliance with NAD/NARB recommendations after a reasonable amount of time. Once a decision has been made to refer the case to the FTC, the NAD packages up the case file and sends it to the Advertising Practices Division (the “Division”).

Continue Reading Demystifying the NAD Referral Process

It seems like we (and the NAD) can’t get enough of “best.” In a recent case, the National Advertising Division (NAD) ruled that the advertiser, Mahindra USA, Inc., could not claim its products were superior without reasonable evidence.

Deere & Company, Inc. challenged Mahindra’s tractor advertisements as unsubstantiated superiority claims. Mahindra’s ads included “Best” claims such as: best-selling, best value, best warranty, best performance, “toughest tractors,” and superior engine oil. Additionally, Mahindra advertised consumer testimonials that expressed disappointment in the quality of John Deere tractors compared to Mahindra tractors.

Of course, context is king and “Best” advertisements can either be substantive claims, or considered mere “puffery.” (See here for a discussion on NAD and “best” claims). For some of the challenges in this case, Mahindra conceded its ads were substantive claims and argued that they were factually supported. For instance, Mahindra argued its best-selling claims were based on unbiased data. NAD agreed that a reasonable basis existed for the claims (although additional disclosures were necessary). For the majority of the challenged advertisements, however, Mahindra argued its statements were puffery. NAD rejected this defense in all but one instance and recommended discontinuation of the ads.

Continue Reading Recent NAD Decision Largely Rejects Puffery Defenses and Consumer Testimonials that Disparage Competition

Do you have the best wireless provider? If so, best in what sense—the best contract, the best devices, the best connectivity, the best value? That was the issue NAD recently addressed when it recommended that T-Mobile discontinue its “Best Unlimited Network” claim. AT&T challenged T-Mobile’s tagline in a recent NAD case, arguing that it was an unqualified superiority claim that T-Mobile couldn’t substantiate.

Now, the advertising world is no stranger to the word “best,” which we discussed in an earlier post on The Absolute Best Puffery Panel Ever. The problem arises when “best” is meant as a measurable claim, including its use here in connection with the phrase “unlimited network.” As NAD pointed out in this T-Mobile decision, wireless service providers should be able to tout the advantages that their innovations provide, but their claims must be substantiated to avoid misleading consumers. NAD reiterated in the T-Mobile decision that broad superiority claims (like “best” or “largest”) must be supported by reliable market data.

Continue Reading Simply the Best, Better Than all the Rest: Superiority Claims and Substantiation

video projectorMany of you are no doubt familiar with ANSI testing, which is often touted as the gold standard in assessing product performance. However, other types of third-party tests exist, even if they have not risen to the level of being an “industry standard.” A recent NAD decision sheds some light on when and how advertisers can use such tests in their advertising.

Epson America, Inc. was challenged by Texas Instruments, Inc. (TI) for advertising its 3-chip 3LCD projectors as superior to TI’s 1-chip DLP imagers. 3LCD and 1-chip DLP are the two leading types of projectors and compete based on a number of attributes. TI alleged that Epson improperly relied upon Color Light Output (CLO) as a measure of brightness performance. (CLO is a relatively new method of assessing the brightness of individual colors which can then be compared to the overall lumens, or white brightness of a projector. (Still with us?)). TI also alleged that Epson made overall image superiority claims even though it only tested specific performance attributes. Finally, TI also alleged that Epson inadequately disclosed its affiliation with native advertising websites.

Continue Reading NAD Okays Use of Non-Industry Standard Test

ticket stubsWhen a widespread industry practice comes under regulatory scrutiny, companies that end up in the crosshairs sometimes fall back on the “everyone does it” defense. This argument has an intuitive appeal in the consumer-protection context—consumers are presumably aware of practices that are common across an entire industry, the thinking goes, and they make purchasing decisions with knowledge of these practices.

The online ticket reseller StubHub recently tried this approach at NAD. It didn’t go over so well.

NAD launched an inquiry into StubHub’s fee-disclosure practices to determine whether consumers were being misled about the total cost of tickets sold on the site because StubHub does not disclose the service fees when it initially displays the ticket price. StubHub discloses the fees, which can range from 24% to 29% of the ticket cost, only at the time of checkout, after the consumer has already made the decision to buy the tickets. NAD was concerned that consumers do their comparative shopping when they see the initial price display—not at the time of checkout, when the true cost of the ticket is revealed—and thus are misled into believing that the StubHub tickets are cheaper than they are.

Continue Reading “Everyone Does It” Doesn’t Fly at NAD

handshakeA notable Venable alum stopped by the NAD conference last Tuesday morning to give the room an insider’s view into the Office of Attorney General in the District of Columbia. After a moving moment of silence for the victims of hurricanes, the recent mass shooting in Las Vegas, and his mother who had recently had a stroke, Attorney General Racine gave the room an overview of the goings-on and priorities of his office as well as his thoughts on the priorities of AG offices around the country.

With respect to investigations, General Racine confirmed what the crowd had long suspected. With speculation that the new administration may be less active when it comes to enforcement actions related to consumer protection, General Racine said that “the states are not going to back down.” General Racine has been and continues to be in regular communication with his counterparts in other states (on both sides of the aisle) working to bring about enforcement actions to protect consumers. At least one example where states are taking a leading role is a major investigation into resort fees and drip pricing where the federal government was once an active participant but has since taken more of a background role. The 50 states involved have stepped up and are actively pursuing the investigation.

Continue Reading Here Come the States—An Insider’s Look into the D.C. AG’s Office

consumer protectionAs we previously blogged, the National Advertising Division held its 2017 Annual Conference in New York City last week. Kicking off the event was Mary Engle, the FTC’s Associate Director of Advertising Practices, who gave the keynote address on behalf of Tom Pahl, the FTC’s Acting Director of the Bureau of Consumer Protection. Tom has generously been very active in speaking at many industry conferences, but he unfortunately fell ill and had to miss this year’s NAD conference. Mary’s delivery of the address as “Tom” added a bit of levity to what was otherwise a very substantive set of remarks.

The remarks, delivered to a ballroom of advertising lawyers and industry players, were focused primarily on explaining the ways in which the FTC is implementing Acting Chairman Maureen Ohlhausen’s positive consumer protection agenda. Mary identified three key elements of this agenda.

Continue Reading NAD Annual Conference 2017 – FTC Priorities Keynote Address

The Venable team had a great start to our week last week attending the NAD Annual Conference in New York City. For those who were not able to attend, we will fill you in on some of the highlights with this week’s blog posts. The conference started with a bang with its move to new Battery Park digs for some additional space. The hotel was home Sunday night not just to incoming advertising lawyers at firms and in-house, but also to many of the golfers in town for the 2017 Presidents Cup. Many in our bar used to meet for a quiet drink in the lounge on Sunday night to catch up before the event kickoff. In contrast to the big leather chairs and soundless TV of the old bar, the new hotel featured a (stunning) rooftop bar with thumping club music, gleaming young millennial guests, and offering $25 cocktail popsicles. Change can be hard. But this is an exciting year of change at NAD and should be embraced.

In August, NAD announced the selection of its new director, Laura Brett, who replaces Andrea Levine after a 20-year tenure. Laura is known to all who participate in the self-regulatory process as a staff lawyer at NAD since 2012 and frequent speaker at advertising conferences. She brought as monitoring cases many of NAD’s early assessments of native advertising and influencer campaigns in an effort to give industry compliance tools before the FTC issued its statements or to provide additional guidance. She has also authored some of the most important cases in the last few years looking at use of crowd sourced data and online reviews. She came to NAD an experienced attorney with both law firm experience and public service in local politics. If you have had occasion to meet Laura, you know her as being thoughtful and measured, always listening before she speaks, and approaching each challenge with an open mind. In other words, exactly the kind of person meant to lead the helm of advertising self-regulation. It was with great excitement that attendees of the conference waited eagerly for the last panel in which Laura made her directorial debut headlining the session on NAD process and coordination with the FTC. Joining Laura for this session was Devin Domond, who is Chief of Staff for the FTC’s Division of Advertising Practices and is responsible for the day-to-day coordination with the NAD.

Continue Reading New Director Discusses Her Plans For “Making NAD Even Better”

spaghetti with tomato sauceWe love to eat! Maybe this is why we blog about taste claims and substantiation a lot! See here and here. And since at least one of us is always on a diet, when we indulge we like to pick the best tasting options. A competitive taste superiority message is incredibly powerful, and as such developing the necessary substantiation is exacting and expensive. Dollars to (better) tasting doughnuts, your less delicious competitor will be watching your back and seeking to test the quality of that evidence. Every year multiple challenges involving taste preference claims and the testing that supports them land on NAD’s plate to assess. One just this week actually involved dueling taste tests and considered the important question of who are the right people to test? We blogged about this before here in a case involving cereal looking at the right age range of people to test – buyers or eaters of the product. NAD’s general mantra is “taste tests should sample consumers who customarily use the products being compared.” The most recent case involving pasta sauce delved more specifically into this question of the appropriate testing universe.
Continue Reading Follow NAD’s Recipe to Support a Taste Preference Claim

mascaraI love a good mascara case. And it’s been too long. The last time NAD looked at mascara, it was monitoring challenges over whether celebrities in mascara ads were merely spokesmodels or product demonstrations and concluded the latter. (See here and here and an earlier blog I wrote on this topic.) NAD recommended clear disclosure if the model used lash inserts or other enhancements beyond the mascara to plump and lengthen her lashes. This week came a case involving mascara that NAD found could not be cured with a disclaimer. Rather, a #1 selling claim must be supported with reliable and most recent data.

In this case, Benefit enjoyed the top spot in the prestige mascara category three years running with its They’re Real Mascara, until the latter part of 2016 and this year, when it was bested by Too Faced’s Better Than Sex Mascara. (Whether the latter name is a performance claim and whether it is supported are questions for another challenge!) Benefit promoted at point-of-sale and on the web that it was the best-selling prestige mascara in the US and the best-selling for three years, using a disclaimer identifying the source as the NPD Group dollar sales from July 2013-2016. Too Faced asserted that notwithstanding the source disclosure, readers would understand the claim to be based on current data, and its brand was the best-selling in dollars and units for 2016 full year and 2017. Benefit said the ads taken as a whole made clear the claims were based on past glories.

Continue Reading NAD Lashes Out Over Use of Stale Market Share Data for a Best-Selling Claim