Recently the National Advertising Division (NAD), as part of its routine monitoring program, evaluated whether certain claims made by Petco Animal Supplies, Inc. (Petco) in marketing and advertising materials for its “no artificial ingredients” advertising campaign were adequately substantiated. The NAD determined that Petco presented sufficient evidence to demonstrate that it is “setting a bold new standard for nutrition” and that it “will continue to evaluate and evolve [its] standards and assortment to take pet nutrition to new levels.” However, it recommended that Petco modify certain claims that it was removing “all” artificial ingredients or that there would be “no more artificials” in any of the pet food or treats it carries. The case provides some important guidance on the rules for making claims regarding “no artificial ingredients.”

Petco launched an initiative to remove artificial ingredients from its dog and cat foods and marketed that initiative heavily. Petco had adopted definitions of “Artificial Flavor,” “Artificial Color,” and “Artificial Preservative” that mimicked the FDA’s definitions and language, and expressly disclosed to consumers its definitions of these terms. Specifically, Petco disclosed that its definition of “artificial ingredients” did not include “synthetic vitamins, minerals and amino acids,” “substances that are derivatives or mimics of national compounds,” and “substances that may fall into categories outside the Petco definition of artificial colors.”Continue Reading Make No Bones About It: NAD Finds Petco Is “Setting a Bold New Standard for Nutrition” but Recommends “No Artificials” and “Better Nutrition” Claims Should Be Discontinued

Guarantees are a common marketing practice and can have two meanings—the marketers guarantees product performance or, perhaps related, the marketer promises the consumer her money back if not satisfied. A recent decision from the National Advertising Division (“NAD”) regarding claims Ava Science, Inc. (“Ava”) made in marketing its Ava Ovulation Bracelet (“the Bracelet”) provides some guidance on this marketing device. NAD reviewed Ava’s “one-year pregnancy guarantee” appearing in its social media marketing and website and determined whether, given the context, a consumer would believe this to be a performance or money back guarantee. NAD found that Ava’s website claims could be interpreted, by a potentially vulnerable audience, to overstate the Bracelet’s benefits.

NAD’s decision addressed the guarantee claims as made in two separate circumstances—Ava’s social media marketing and Ava’s website marketing. Of greatest concern to NAD was the guarantee claim on Ava’s website offering a “one-year guarantee of pregnancy*.” Though the guarantee contained a hyperlink disclosing its conditions, the hyperlink did not appear unless a consumer scrolled over the text. Relying on the FTC’s Dot Com Disclosures Guidance, NAD determined that the embedded hyperlink with specific conditions was not sufficiently “clear or conspicuous.” Further, NAD found the website’s “one-year guarantee of pregnancy” was too closely related “to the performance result—pregnancy—and not to the fact that the ‘guarantee’ is about the refund[.]” Ultimately, NAD recommended that Ava modify its website guarantee to make it obvious that terms exist in a separate hyperlink, and to clarify that it is a money-back, not pregnancy, guarantee.Continue Reading Context is Key: NAD Examines Ava Fertility Bracelet Guarantee Claims

In formulating a health and safety-related claim, advertisers walk a fine line in accurately conveying the results of reliably conducted studies to support their claims. Disclaimers and other qualifying language are limited tools advertisers can use to mitigate the risk of a claims challenge. But as a recent NAD decision shows, just because a study is reliably conducted, does not necessarily mean it is a good fit to support an advertising claim. Thus, basing a claim on a reliably conducted study can still be held to be misleading if the study results do not closely reflect what the average consumer could realistically expect to achieve. What’s more, this recent decision reminds advertisers that a lengthy disclosure may not be sufficient when it fails to disclose a wide variability in observed study results.

On February 25, 2020, the National Advertising Division (NAD) issued a decision and recommendation that Trek Bikes discontinue use of the claim that its WaveCel helmet is “up to 48x more effective than traditional foam helmets in protecting your head from injuries caused by certain cycling accidents.” Although the cited “Bliven Study” demonstrated that the WaveCel helmet in fact outperformed traditional foam helmets for head injury protection in all impact scenarios, the NAD was concerned the claim conveyed the implied message that “People who use the WaveCel Helmet will have little to no risk of experiencing a concussion.”Continue Reading Heads Up! NAD Recommends Discontinuing WaveCel Safety Claim

On December 19, 2019, the National Advertising Division (NAD) closed out the year with an announcement of its plans to “develop a fast-track process to more efficiently handle certain types of online and social media advertising claims.” These claims include insufficient disclosures, such as influencer posts that fail to disclose an influencer’s material connection with

The 2019 National Advertising Division (“NAD”) closed out its Annual Conference with an update from Laura Brett, the Director of the NAD, and Alexander Goldman, an attorney with the NAD. The update focused on three main points: NAD statistics from the past year, NAD practice pointers, and the future of the types of cases being brought at NAD.

Statistics

First, competitor challenges are trending toward a one third growth for 2019 as compared to 2018, while simultaneously decreasing the time to decision on challenges from 113 days on average to 100 days. Needless to say, the NAD is committed to promptly moving cases through the process. Ms. Brett made a point to bestow some well-deserved praise on her team for their hard work throughout the last year.

Major product categories subject to NAD challenges continue to be: appliances/consumer electronics/household products, drugs and dietary supplements, food and beverage, and telecom/entertainment. Whereas some categories are noticeably absent from NAD proceedings including automobiles, clothing and cosmetics, industrial products/office supplies, and travel/lodging. In addition, Mr. Goldman made the point that there remains a noticeable lack of service-based challenges at NAD despite services accounting for a large part of the U.S. economy.Continue Reading An NAD Update

The National Advertising Division (“NAD”) held its Annual Conference in New York yesterday. Andrew Smith, the head of the Bureau of Consumer Protection for the FTC, delivered the keynote address and provided attendees with an excellent overview of the past year’s landmark decisions in FTC jurisprudence. For those who frequent this blog, it comes as no surprise that the hottest discussions focused on the recent trend among courts to question the FTC’s broad interpretation of its enforcement authority under Section 13(b), concentrating on rulings in the Shire ViroPharma decision from the Third Circuit, the LabMD decision from the Eleventh Circuit, and the recent Seventh Circuit decision in Credit Bureau Center.

In Shire ViroPharma, the Third Circuit ruled that, pursuant to the plain language of Section 13(b), to obtain an injunction under Section 13(b), the FTC must plead facts sufficient to show that a defendant “is” violating or “is about to” violate the law. Essentially, the Shire decision means that the FTC cannot use Section 13(b) to address wholly concluded past harm—a profound finding that could dramatically affect how the FTC pursues cases. For more analysis, see our past blogs on both the district court‘s and Third Circuit’s opinions. The FTC chose not to seek Supreme Court review of the Shire ViroPharma decision and instead appears to be trying to limit that case to its facts.Continue Reading Mr. Smith Goes to New York: Takeaways from the Keynote Address of the FTC’s Director of the Bureau of Consumer Protection at the NAD Annual Conference

The National Advertising Division Annual Conference kicked off with Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection, as the keynote speaker. Near the close of his remarks, Director Smith announced that the FTC will hold a workshop on the Children’s Online Privacy Protection Act (“COPPA”). For a refresher, COPPA is designed to protect the privacy of children by establishing certain requirements for websites that market to children. The FTC operates under the assumption that if children are the target demographic for a website, the website must assume that the person accessing the website is a child, and proper consent must be obtained. This assumption exists even if the website did not start with children as the target audience.

To illustrate this point, Director Smith discussed TikTok, a social media app that allows users to create and share short-form videos, which purchased Musical.ly, an app that allowed its users to post videos of themselves lip synching to songs. Musical.ly originally marketed to adults. However, as the website grew in popularity, it became clear that children used the website and that Musical.ly knew that children used the website. On February 27, 2019, the FTC brought a Complaint against Musical.ly alleging that Musical.ly collected information about children, but did not obtain the required parental consent to collect that information. In fact, child predators began using the website to obtain the location of children, though luckily, no child was hurt. As a result, TikTok agreed to pay $5.7 million to settle the FTC allegations.Continue Reading A Morning Cup of COPPA From the NAD Annual Conference

Last September, the National Advertising Division (NAD) published a decision assessing whether the editorial content surrounding an affiliate link constituted “national advertising” requiring substantiation. At issue were two statements in a BuzzFeed “shopping guide,” in which the author tested and recommended various skincare products. The NAD reviewed BuzzFeed’s internal procedures with respect to the editorial content and the affiliate link, and determined that the content did not constitute “national advertising” and was therefore outside the NAD’s jurisdiction.

But how would the FTC treat editorial content surrounding an affiliate link? The NAD acknowledged that the “FTC . . . does not directly address whether the act of placing an affiliate link next to content about the related product renders the content ‘advertising’ that requires substantiation.” The FTC recently ended its silence. In her remarks at the NAD West Coast Conference earlier this month, Mary K. Engle, the associate director of the FTC’s Division of Advertising Practices, indicated that the FTC would follow the same analysis the NAD conducted to determine whether “advertising” includes the editorial content surrounding an affiliate link.Continue Reading FTC Hints It’s Feeling the Buzz

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