A recent Spectrum commercial shows a mummy, the grim reaper, a demon, and a creepy puppet getting ready to play an online game, when their attempts to unwind are thwarted by slow internet speeds. When the puppet asks the demon whether he gets his internet through a fax, the demon responds that it’s all he could get in his place with AT&T. An announcer states that “bad download speeds are evil,” and that “Spectrum downloads speeds are 20X faster than AT&T,” as the same words appear on the end card.

AT&T argued that the commercial conveys a “line claim” – in other words, that consumers will think that Spectrum download speeds are 20X faster than AT&T download speeds on all plans – which isn’t accurate. In fact, AT&T offers plans with higher speeds than the ones Spectrum used for its comparison. Spectrum disagreed that consumers would interpret the commercial as conveying a line claim, arguing that a disclosure in the ad clearly states the basis of the comparison: “Spectrum Internet Gig against AT&T Internet 50.”

Siding with AT&T, NAD noted that the audible parts of the commercial and the end card prominently mention “Spectrum” and “AT&T,” rather than the specific service plans being compared. Although the disclosure did mention the specific plans, a “small print” disclosure was not sufficient to “prevent a broad line claim message from being conveyed.” Accordingly, NAD urged the advertiser to stop making the claim or to more clearly and conspicuously disclose the specific plans being compared.

Usually, when NAD recommends that an advertiser make a clear and conspicuous disclosure, it doesn’t elaborate on what that means. In this case, though, NAD did provide additional detail: “If the 20X Faster Claim is audible, the basis of comparison must also be clearly and conspicuously audible to ensure that consumers who only hear the 20X Faster Claim are informed of the specific service tiers upon which the download speed comparison is based.”

Does this mean that advertisers will always need an audible disclosure to ensure that TV ads don’t convey line claims? Not necessarily. NAD notes that “in reviewing line claims, the question as to whether both visual and audio disclosures are necessary depends on the merits and context of each case . . . .” But the end to that sentence is telling: “disclosing the basis of comparison in both visual and audio formats considerably lessens the potential for consumer confusion.”

This case has lessons for everyone. If you’re an advertiser making comparative claims, make sure that you are clear about exactly what products or services you are comparing so that you lessen the potential for consumer confusion – not to mention the potential for your competitor to argue that consumers are confused. If you’re a monster focused on online gaming, make sure you spring for the faster internet plan. Either way, a little prior planning can save you a lot of frustration later.

On the latest episode of the Ad Law Access podcast, it provides five tips advertisers should keep in mind when creating comparative ads.

Listen on Apple, Spotify, Google Podcasts, Amazon Music, SoundCloud or wherever you get your podcasts.

For more information on these and other topics, visit:

This month, NAD announced a decision involving T-Mobile’s ads for its TVision service. The service currently allows subscribers to watch TV over a wired broadband connection, though T-Mobile plans to offer wireless technology in the future. The decision covers a lot of ground, but we’ll focus on some key points related to product and feature comparisons in this post.

A commercial opens with a shot of a couple flipping through channels, as a T-Mobile spokesperson describes cable TV as “a rat’s nest of devices and wires.” Shots of the couple’s messy entertainment system reinforce that message. In contrast, shots of T-Mobile’s TVision service only show one wire inconspicuously coming out of one device. The challenger argued that because TVision actually requires the same number of wires and pieces of equipment as cable TV service, the claims and images were misleading. NAD agreed.

The challenger also argued that the ad implies that TVision service is wireless, in part, because the single wire is barely noticeable in the shots. NAD shared the concern, noting that T-Mobile is primarily known as a wireless company. The disclosure that “home connectivity and connected set top box [is] required” didn’t help because it didn’t mention a wired connection. Moreover, it wasn’t clear or conspicuous. NAD suggested that T-Mobile could address the issue by showing the wires or more clearly disclosing that three wires are required.

The challenger also took issue with T-Mobile’s claims that cable offers “outdated technology” and a “crappy” interface, especially given that the challenger provides an industry standard interface and an app with additional capabilities. NAD noted that the advertiser provided no information about the interfaces of other companies. Under NAD precedent, claims that denigrate another product must be truthful, accurate, and narrowly drawn. Because that wasn’t the case here, NAD recommended that those claims be discontinued.

When comparing your product to a competitor’s, it’s important to ensure that you accurately describe the differences between the products and show the products in a realistic manner. Be careful about exaggerating the differences. Although there may be instances in which you can argue that consumers won’t take those exaggerations seriously, that can be a hard argument to win at the NAD.​

• California Consumer Privacy Act (CCPA) CCPA was far and away the most popular topic of 2019 and, as mentioned in one of our last posts of the year, “businesses and privacy professionals would do well to catch their breath over the holiday season. Next year is going to need focus and investment to reach the [CCPA] finish line (which, yes, will continue to move because this is privacy law, after all).​” Here are a few CCPA related posts you may want to read if you haven’t already:
  • Broad Range of Implementation Worries Surfaces at CCPA Rulemaking Hearing in LA December 5

• • Be Careful What You Say About the CCPA November 12

• • CCPA Update: California Attorney General Issues Draft Privacy Rules October 11

• • CCPA Update: Legislature Amends the CCPA to Exclude Employee Data, B2B Communications for One Year September 15

• The FTC’s Powers Under Section 13(b) The continuing questions over the extent of the FTC’s enforcement authority to obtain monetary relief under Section 13(b) were a popular topic with Ad Law Access readers. So popular that we created a Section 13(b) sub-blog:
  • Direct Seller Stands Its Ground: Neora Seeks Declaratory Judgment Against the FTC, Challenging the Agency’s Section 13(b) Authority November 5
  • Business As Usual? FTC Practice in the Wake of Shire ViroPharma and Credit Bureau Center October 22
  • A Potential New Fight Over FTC’s 13(b) Authority May 19

Other posts that resonated with readers:

• FTC Releases New Guide for Influencers November 9
• CBD and False Advertising: Lessons Learned From The Food Court August 9
• Nevada and Maine Advance Legislation Addressing the “Sale” of Personal Data June 4
• FDA and FTC Issue Joint Warning Letters to Three Online CBD Marketers April 2
• FTC to Use 6(b) Authority to Examine Tech Companies’ Data Practices March 22
• Taking Stock of the TCPA in 2019: What is an “Autodialer”? March 4
• The Direct Selling Self-Regulatory Council: What it Means for Multi-Level Marketers January 10

AD LAW ACCESS PODCAST

2019 also saw the launch of the Ad Law Access podcast. Top episodes included:

• CCPA Update: Legislature Amends the CCPA to Exclude Employee Data, B2B Communications for One Year
• Privacy Update: The Terms of the Facebook Settlement; CCPA Amendments Advance in Calif. Senate
• Cause Marketing - Commercial Co-Ventures: What You Need to Know Before Getting Started (12:30)
• CCPA Update (Amendments, Draft Regulations, and Classification issues) (12:00)
• Texting 101 - The Hot Button Issues to Consider When Running a Texting Campaign (11:25)
• Challenging Competitors' Claims
• Making it in the USA – When Product Origin and Origin Marketing Claims Matter (13:00)
• Influencers Gone Wrong (10:30)
• Influencers and Endorsers: Understanding the Upfront Legal Requirements (9:10)

Players controlled a cartoon version of Olympic Gold Medalist Usain Bolt, and ran a race to recover gold coins stolen by pirates. When the Bolt avatar touched a Gatorade icon, it would run faster and the “fuel meter” increased. But when the avatar touched a water droplet, it would slow down and the “fuel meter” decreased. There were more overt claims, too. The instructions at the start of the game urged players to “Keep Your Performance Level High By Avoiding Water.”

According to the AG’s complaint, the express and implied claims that Gatorade will increase athletic performance, while water will decrease it, were false and misleading, in violation of California law. And in the press release, the AG went further stating that “making misleading statements aimed at our children is beyond unlawful, it’s morally wrong and a betrayal of trust.”

As part of the settlement, Gatorade will pay $300,000, part of which will be used to fund research or education on water consumption and the nutrition of children and teens. In addition, the settlement requires Gatorade to disclose endorser relationships in any social media posts and prohibits the company from advertising its products in media where children under 12 comprise more than 35 percent of the audience. The settlement also prohibits the company from negatively depicting water in any ad.

Companies need to be careful when suggesting that their products will improve performance or that competing products will hinder performance. For another case involving beverages and comparative performance claims, check out this post from 2013.

Initially filed in November 2016, the complaint alleged that NetSpend targets the “unbanked” or “underbanked,” as well as low-income and Spanish-speaking consumers, and deceptively represents that NetSpend cards will be ready for use immediately without any approval process. The complaint suggests that because, “in all cases consumers must contact NetSpend and provide personal identification information to activate the card” (e.g., name, address, birthday and SSN), the claims of “immediate access” are misleading and create false expectations for consumers. The complaint further alleges that NetSpend did not always activate consumer accounts even though consumers sent the requested information and that NetSpend placed blocks on card accounts and made it difficult for consumers to resolve the blocks through poor customer service.

In a dissenting statement, Acting Chair Ohlhausen raised two primary objections. First, Ohlhausen argues that the majority fails to consider the phrase “immediate access” in context, which describes the benefits of NetSpend cards as a direct deposit vehicle that could provide access to funds quicker than other forms of deposits. Ohlhausen reasons that, when considered in context, consumers would understand the claim “immediate access” to mean access to funds on the date when the payer made funds available for transfer to the account, not necessarily the day the consumer opens the account. Second, Ohlhausen asserts that, even assuming the claims were deceptive, the $53 million monetary relief “is not sufficiently related to that claim” because there was insufficient evidence to conclude that consumers abandoned funds because of NetSpend’s allegedly deceptive advertising.

Commissioner McSweeny also issued a statement that responded to the Acting Chair’s arguments, noting that “[t]hese claims were not limited to situations involving direct deposit” and that “[m]any NetSpend card users load funds onto their cards at the time of purchase or otherwise have funds deposited before activation.” McSweeny also noted that some consumers allegedly never received their funds even after they provided the information requested by NetSpend to verify their identity.

The case is notable both substantively – as one of few cases addressing representations for prepaid access cards, and procedurally – since it could not be entered if the vote took place today given the conflicting views of the two current Commissioners. (The settlement announcement was delayed because Commissioner McSweeny did not vote to support the settlement until March 8, about a month after then-Commissioner Ramirez had voted in favor of the settlement.)

In July 2013, Dyson launched a campaign advertising that its DC41 vacuum had “twice the suction of any other vacuum.” One year later, SharkNinja released its Shark Powered Lift-Away vacuum and contacted Dyson to let them know the claim was no longer accurate. Dyson conceded that, and took steps to remove the claim from the marketplace. SharkNinja, though, claims that Dyson dragged its feet. For example, Dyson didn’t begin stickering over the claim on packages until November 2014, and some claims remained on the market until early 2015.

SharkNinja sued Dyson for false advertising under the Lanham Act. Dyson moved for summary judgment, arguing that an advertiser can’t be held liable if it uses “commercially reasonable efforts” to remove claims from the market once they become stale. The court disagreed, holding that the law doesn’t exempt a company from liability just because it takes steps to remove a claim after learning that it’s no longer true. Instead, the court held that “an advertiser that puts a claim into the marketplace bears all of the risk of the claim being false or becoming stale.” As a result, the court denied Dyson’s motion.

The decision suggests that an advertiser can be liable the moment a claim can’t be substantiated, even though the claim was previously true. It doesn’t seem to matter to the court how fast an advertiser moves to change a claim, once it becomes stale. The creates a strong disincentive for any company to make a comparative claim, especially on packages or in stores, where the claim cannot be changed quickly.

We’ll be watching this case closely to see if Dyson appeals and the appellate court takes a more measured approach.

The D.C. Circuit Held that POM’s Advertising was Deceptive

The Court’s opinion discusses the research that POM Wonderful conducted regarding heart disease, prostate cancer, and erectile dysfunction and how the studies were used to support the advertising. In this analysis, the Court was critical of POM’s selective use of favorable small-scale studies in advertising while disregarding other, larger, unfavorable or inconclusive studies. The Court also noted certain inconsistencies in POM’s arguments regarding the inability to conduct RCTs on certain food products, such as the hurdles of blinding and expense, both of which POM overcame to perform its own research. The Court gave appropriate deference to the agency as an expert in determining whether an advertisement is deceptive and substantively upheld the Commission’s conclusion that POM’s advertising was deceptive.

The D.C. Circuit Held that the Commission Could Not Justify the Two-Study Standard

The Court’s broad deference to the Commission makes its dissent regarding the two-study standard particularly striking. The Court accepted that a robust RCT is necessary to support a disease reduction claim. However, using a Central Hudson First Amendment analysis, the Court found that the Commission failed to justify the requirement of two studies for all disease claims that POM might make in the future.

First, the Court rejected the Commission's reliance on precedent involving the two-study standard, noting that the key case cited - Thompson Medical Co., 104 F.T.C. 648 (1984) - involved comparative claims on OTC analgesics and that the nature of the product and the claims necessitated two studies. The Court also rejected the FTC's reference to recent consent orders involving two studies on the basis that those were not litigated matters and that the provisions in those orders are limited to specific disease claims, not all disease claims, as in the case with the POM Order.

The Court further rejected the FTC’s argument that expert testimony supported the FTC's position that two studies are necessary to see if the result can be replicated. It pointed out that it seems possible that, for some diseases, a single trial could be sufficiently robust as to meet the competent and reliable scientific evidence standard.

Finally, the court rejected the FTC's argument that the two-study standard is necessary because of the petitioners' propensity toward misrepresenting their evidence. The Court noted that the definition of "competent and reliable scientific evidence" requires the petitioners to rely on the "entire body of evidence." Therefore, there is no justification for an additional RCT.

Potential Implications for Industry

This decision has several potential implications for advertisers, as noted below:

• The discussion relative to the science and POM's selective use of it in advertising along with the company's decision to ignore unfavorable or inconclusive scientific results underscores the importance of considering the total body of evidence when determining whether claims are substantiated. Importantly, the Court found no compelling reason to reject the Commission's position that qualifiers such as “promising,” “initial,” and “preliminary” were not sufficient to convey the limited nature of the evidence, particularly when the specific results are characterized in unequivocally positive terms.

• This decision reaffirms the importance of non-RCT evidence in the analysis of the “total body of evidence.” In rejecting the two-study standard, the Commission surmises that a single clinical trial combined with observational research may be sufficient to support certain disease claims. The Court cites to FTC guidance, including the FTC’s Dietary Supplements: An Advertising Guide for Industry, as support for this position. This validation of the importance of non-RCT evidence and the Supplement Guide is welcome news, particularly for the dietary supplement industry.

• Recent consent orders suggest that the FTC had pivoted away from blanket application of the two RCT standard as early as last June. Commissioner Ohlhausen’s concurrance in the POM case suggested that the two-study standard was potentially up for debate. Later orders appeared to continue the discussion (GeneLink, L’Occitane Inc.) In June 2014, the i-Health, Inc./Martek Biosciences order involving memory improvement claims did not include the two-study standard but did include a data retention provision relative to the clinical study supporting the product claims.

• Prior to the D.C. Circuit’s opinion, Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, stated that the FTC intended to seek the two-study standard for matters in which the respondent misrepresented their substantiation. This decision does not change the types of claims that are attractive enforcement targets. It may cause the agency to reconsider certain enforcement positions, however. In light of the Court’s opinion, the FTC may have to limit its use of the two-study standard to only those instances where the claim or the product would necessitate two studies to comply with the “competent and reliable scientific evidence” standard.

• Weight loss claims might be the exception. Even Commissioner Ohlhausen seems to have less of a problem when it comes to weight loss, primarily because relatively short trials are possible. She's also noted that, in some cases, there has been evidence of fraud while conducting weight loss trials, which weighs in favor of requiring replication (i.e., two trials).

• This decision may also cause the FTC to reconsider its blanket application of the data retention requirement, particularly where it is not tightly tethered to the underlying facts of the case.

As the Federal Trade Commission’s Guide Concerning Use of the Word “Free” and Similar Representations (“Free Guides”) points out, “free” offers typically require that consumers purchase one product at the regular price in order to receive a second product or service free of cost, and consumers typically believe that they are purchasing one product at regular price and paying nothing for the second. To prevent deception, the Free Guides therefore prohibit sellers from advertising a product or service as “free,” but then recovering the cost of the “free” product or service by marking up the price of the product that must be purchased.

Although the court’s decision might not sync completely with the FTC’s Free Guides, for companies already using or considering a “free shipping anytime” model, the decision could give them some comfort.

The complaint alleged that Overstock made false and misleading price comparisons to products’ “advertised retail price” (“ARP”), in violation of California’s False Advertising Law and Unfair Competition Law. Specifically, the state alleged that Overstock exaggerated the Overstock discount by referencing the highest price found for the ARP or constructing an ARP using a formula that applied an arbitrary multiplier to Overstock’s wholesale cost. Additionally, the company allegedly failed to disclose that some ARPs were based on the retail price of a similar, but non-identical, product. The court concluded that comparisons to ARPs identified as “list prices” and based on a formula or the price of a different, non-identical product were false and misleading representations, and every such ARP was an untrue statement because those ARPs did not actually exist. The court dismissed Overstock's argument that its pricing strategy caused no consumer harm because customers always received the lowest price available on the internet, ruling that harm is presumed when an ad is demonstrated to be false, deceptive, or misleading.

Pursuant to the tentative ruling, Overstock is enjoined from: (1) posting an ARP without verifying the reference price and documenting that verification; (2) using ARPs based on a formula, multiplier, or other method that would set the ARP on any basis other than the actual price offered at the time the advertisement is first placed; (3) using ARPs based on a similar but non-identical product, without disclosing the basis of the ARP; and (4) using the highest price found to set ARPs without regard to whether that price reflects a substantial volume of recent sales, without disclosing the basis of the ARP. Additionally, if the ARP is indicated by an unmodified term like “compare,” it must reflect a good faith effort to determine the prevailing market price. No ARP may remain posted for longer than 90 days past the date on which the ARP was validated, and that date must be noted on the product page or by hyperlink to “ARP.” Determining that it was impossible to discern how many California consumers saw the advertisements at issue or were harmed by them, the court imposed a daily civil penalty, totaling $6,819,000. The court considered that the “seriousness of the misconduct” was moderate, mitigated in part by the fact that Overstock’s prices were lower than its competitors’ and that the conduct did not affect all product categories. However, the court also found that the violations were “numerous” and “persistent” and that Overstock’s conduct was willful and inconsistent with FTC guidance or “what prudent counsel would have advised.”

Retailers and manufacturers often struggle with how to advertise the value or savings associated with a particular price and should keep this case in mind when making any comparison to a list price, competitor’s price, or the company’s own previous price because it demonstrates the aggressive posture that regulators are taking. This case is one of several we continue to watch.

Many of the ads claimed that the LED bulbs were more efficient than, and could save consumers money over, traditional bulbs. In its complaint, the FTC alleges that, in many instances, the company’s LED bulbs: (a) produced significantly less output than a typical incandescent bulb at the wattage represented in the ads; (b) produced significantly less lumens of light than the company represented in its ads; and (c) lasted less than the number of hours the company represented in its ads. The FTC is seeking a permanent injunction to stop the company’s allegedly illegal conduct, as well as monetary redress for consumers who bought the deceptively labeled products.

Advertisers must ensure they have adequate testing to support performance claims. In addition, when making comparative claims, advertisers must ensure that they make apples-to-apples comparisons, or else disclose the material differences between the products being compared.

A new article in IP Litigator, “The Law of Comparative Advertising in the United States,” provides an overview, including the treatment of comparative advertising claims by the Federal Trade Commission and the National Advertising Division of the Council of Better Business Bureaus, Inc., and a discussion of some of the particular proof and burden-shifting issues triggered when comparative advertising claims are challenged under the Lanham Act. The article then provides practical guidance to in-house attorneys and outside counsel on strategies for challenging comparative advertising claims made by a competitor when the client contends that the claims cannot be substantiated.