sealEveryone loves an award.  It is one thing when a marketer promotes its own product but to be able to back promises with a seal, a certificate, or other third-party recognition of greatness gives extra confidence to consumers that this is a product they can really trust.  There has been much talk recently about dos and don’ts with use of seals.  ‎The FTC has brought multiple cases when companies offering seals allegedly fail to research and properly certify the companies it does business with to ensure compliance with the articulated award standards, including in cases involving green seals and Made in USA.  Last week we wrote about a similar case involving the TRUSTe COPPA safe harbor seal. NAD recently examined use of seals from a different angle, considering whether by use of a seal a marketer was conveying an overly broad promise about its product. The case reminds us of principles the FTC articulated in its Green Guides that a marketer is responsible to define and explain what a seal means to its consumers unless it is patently clear from the seal itself. Like many things we advertising lawyers do, this is often easier said than done!
Continue Reading Is It Safe To Use Seals to Promote Your Product? NAD Says Foo to FuHu

While many focus important questions such as whether or not to brine the turkey and whether to cook the stuffing inside or outside of the bird, many of our clients focus on bigger issues of whether the holiday sales season will put the company in the red or the black.  What used to be just a push for Black Friday, and then extended to include Cyber Monday, now includes pre-Black Friday and specials through December.  In this busy shopping season, retailers are trying to drive traffic, sell merchandise, and clear out winter inventory in anticipation of the coming year.  Shoppers are looking for a bargain and that perfect gift.  Sunday papers, email inboxes, and television commercials all boldly proclaim the greatest sales of the year, and consumers definitely take notice.  With fast moving inventory and quickly changing stock levels, there are times when a retailer might run out of certain items.  Retailers in this position need to pay careful attention to consumer protection laws.

In 2011, as part of its systematic review of all of the agency’s rules and guides, the FTC opened a public note and comment period for the Retail Food Store Advertising and Marketing Practices Rule, better known as the “Unavailability Rule,” to consider whether the rule should be expanded to cover other retailers.  On November 19, 2014, the Commission decided to keep the Rule unchanged.  This means that the Unavailability Rule still only applies to retail food stores. Still, other retailers would be wise to take this Rule’s guidance to heart.
Continue Reading The Unavailability Rule: After the Turkey and Stuffing, Avoiding the Bait-and-Switch?

3-DPrinting3-D printing is one of the most disruptive technologies to penetrate the market place.  While it is currently and extensively used for prototype design, medical devices and creating novelty items, it has the potential for dramatically changing our way of life.

As new technologies emerge and business models come online, we often see a lag in the law and the activities of business and the consumer.  Let’s fast forward a few years while you can still go to your favorite online store, order and pay for your product; but, instead of it being shipped to you, you will be able to download a file(s) and print out your “purchase(s).”

The whole way we “buy” products could change once we are able to download or stream digital files and print them ourselves.  In fact, we would no longer buy anything – we would, in all likelihood, licensing software files and products from the vendor.

When we buy something, we generally have the right to resell it and use it as we see fit.  This is true even with products that are protected by copyright based on the limits of the copyright owner controlling secondary sales under the First Sale Doctrine.  The copyright owner gets to decide who makes the first sale then the person who acquired the lawful copy can resell it (e.g. used CDs, VCR tapes, DVDs, books, etc.).  However, the First Sale Doctrine does not apply to licensed goods.  So, when we license a 3-D file and print out the product, one should not be confused to think they actually own the file or resulting product, it is being licensed.  How do we know if we are buying something and own it or are merely licensing it?  The answer it seems depends on what the vendor calls the transaction.

Continue Reading 3-D Printing – The End of Shopping As We Know It

It is almost football season and the FTC tries to stay seasonal; around this time in 2012, it announced a settlement with football mouthguard manufacturer Brain-Pad regarding unsubstantiated concussion prevention claims.  Subsequently, the FTC has sent warning letters to other manufacturers of sporting equipment regarding concussion prevention claims.  This year, however, the FTC has called a different play.  On August 21, the FTC announced that it had sent warning letters to five major retailers regarding the FTC’s concerns regarding concussion protection claims for athletic mouthguards made on the retailers’ websites.  These retailers appear to have been repeating claims that the manufacturers of the products made on their packaging. 
Continue Reading FTC’s Letters to Retailers Regarding Concussion-Related Products Has Us Scratching Our Heads

You feel pretty good heading to work wearing that designer outfit you picked up at a bargain price over the weekend at the local outlet center.  But what if that deal you got wasn’t a deal at all?  Questions have increasingly been raised about the potentially deceptive marketing practices related to the quality and source of products sold by fashion retailers in their outlets or factory stores.  Further, concerns over outlet pricing is not only an American problem.  This past month, the British tabloid Daily Mail conducted its own investigation into outlet retailer practices in England, warning consumers to beware of lower quality merchandise manufactured purely for outlet stores.

Back in the day, outlet stores were a place where manufacturers could sell discontinued products or inventory left over from last season.  However, outlet stores are now big business, growing from an estimated $12 billion in 1997 to $25 billion this year.  Increasingly, national clothing retailers are creating separate, lower-quality product lines to be sold exclusively though their outlets.

This issue has caught the attention of some federal lawmakers.  Earlier this year, four members of Congress called upon the FTC to investigate potentially misleading marketing practices by outlet retailers.  In their letter, the members of Congress noted that they did not take issue with the potentially lower quality of the outlet merchandise.  Nor does it seem should they; after all, many consumers may be more than willing to purchase lower-quality brand-name merchandise at a steep discount.  Instead, the senators voiced concerns about the potential for outlet shoppers to be misled about whether the outlet product lines were ever sold (or intended for sale) at a regular retail store, and whether the products were ever sold at the advertised “retail price” used as reference pricing at the outlet stores.  (Reference pricing, in case you’ve actually never been to an outlet store, occurs when a product’s “retail price” or “list price” is advertised next to the discounted outlet price.)  The letter inquires whether outlet store reference pricing is deceptive when “made for outlet store” merchandise has never been sold at regular retail locations—making the “retail price” impossible to substantiate.

Continue Reading U.S. Senators Tell Retailers to Knock It Off with the Outlet Knock Offs (or At Least Disclose the Differences)

A recent California state court held that, Inc. (“Overstock”) must pay the price for its allegedly deceptive pricing practices.  Seven district attorneys throughout California brought a complaint against Overstock in 2010, alleging five separate violations of state law.  The focus of these claims was that Overstock allegedly made false and misleading statements in reference to the “advertised reference price” (“ARP”) that appeared on its website.  Specifically, the attorneys general stated that Overstock was deceiving consumers about the savings the company promises by routinely fabricating or inflating the prices its competitors reportedly charge, and that where Overstock did examine the competing prices for a certain product, it deliberately lists the highest retail price rather than the price most often encountered.  Last week, the trial court issued an injunction against the online seller, and assessed an approximately $6.8 million civil penalty.

In examining the claims, the court paid special attention to Overstock’s terminology on its website, as well as its pricing policies.  First, it distinguished between Overstock’s use of the term “list price” from its later use of the phrases “compare” and “compare at.”  It also noted that until September 2008, Overstock had no processes or procedures in place to confirm that for any given list price there was in fact at least one instance of a sale at this price.  However, at that point Overstock created a “Pricing Validation Team” to document the sources of ARPs.  Still, Overstock would seek and use as the ARP, the highest street price it could find.
Continue Reading Beyond Compare: Online Retailer Assessed Multi-Million Civil Penalty in California for Allegedly Deceptive Price Comparisons

By some accounts discounting by retailers this holiday season has been even more widespread than usual.  As we have noted previously, however, retailers must be careful not to overpromise the true value of any advertised bargain.  If products are not offered often enough at a “regular” or normal price, then the sale price no longer represents genuine savings.  The increasingly prevalent practice of emailing or texting consumers special promotional codes might also be problematic if they misrepresent to consumers that they are enjoying some type of savings that is not generally available to everyone.

While the FTC long ago concluded that enforcement actions against such practices was potentially counterproductive and discouraged pro-consumer discounting, the same cannot be said for the states.  Many states, such as California and New York (and in some cases counties) continue to enforce their own state pricing laws.  What is even more problematic are the few remaining state laws that emphasize how many items were sold at the regular price rather than simply offered for sale.  A recent article in USA Today highlighted the danger in such a standard.  In noting the prevalence of holiday discounting one retail expert was quoted as saying that the “deal has become the norm” and that such practices “train the consumer to never buy at full price.”  While it is difficult to stock up on some items such as perishables and while some consumers will run out a buy a product regardless of whether or not it’s on sale, if retailers have to wait for consumers to buy a significant number of an item before putting it on sale and consumers are waiting for the retailer to put the item on sale before buying, then a standoff results and consumers are likely the losers.
Continue Reading After Holiday Bargains: Will the State AG Ball Drop?

All About Advertising Law wishes all of its retailers and consumer product company readers a profitable holiday shopping season.  As we ourselves enjoy some quality time with our families (as well as empty our wallets to show how much they mean to us) we wanted to share some tips for maximizing your holiday sales while keeping out of the regulatory and customer complaint fray.

We began thinking about clear and conspicuous disclosures on Thanksgiving Day.  We kid you not.  When visiting a beloved brother and his large brood of daughters we were welcomed to their home with an invitation to visit the art studio of my third- and first-grade nieces, a place where they create their masterpieces and have now decided to profit on their endeavors.  Why give away quality art for the refrigerator when you can sell it?  This generation is learning early.  Tiptoeing into the world of greed, avarice and profit, my nieces decided to offer a doorbuster opening sale.

Avery Discount Sign

Continue Reading Out of the Mouths of Babes: Craft Quality Sale Disclaimers

Back in the day people worried that their real fur might be fake. But it seems that now you also have to worry that your fake fur is actually real. The FTC recently approved final settlement orders with Neiman Marcus, and Eminent Inc., after the retailers allegedly sold real fur products that they advertised as fake fur. The FTC charged the actors in the faux faux fur scandal with violating the Fur Act and the Fur Rules for the mislabeled goods.
Continue Reading Faux Fur Pas