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ADVERTISING COMPLIANCE SERVICE

 

 

 

 


BULLETIN #646

 

NOTEWORTHY DEVELOPMENTS IN NAD AND CARU FALSE ADVERTISING CASES


By Jeffrey S. Edelstein*
Manatt Phelps & Phillips, LLP

 

2007 AND 2008

 

In 2007 and 2008, there have been several noteworthy developments in false advertising cases before the National Advertising Division (NAD) and the Children’s Advertising Review Unit (CARU).

 

The NAD developments include an increase in NAD self-initiated challenges, particularly regarding dietary supplement advertising and health and safety claims; an increase in challenges against “environmentally friendly” claims; emphasis on disclosures; greater scrutiny on substantiation testing; and clarification by NAD on what constitutes “national advertising.”

 

The CARU developments include initiating inquiries to Web sites that collect personal information from children under the age of 13; a new referral agreement with the Motion Picture Association of American regarding advertising for films, and the referral of ads for several films; disclosure of material information; and advertising inappropriate products to children.

 

1. DEVELOPMENTS IN NAD CASES

 

NAD was established in 1971 by the Council of Better Business Bureaus, the Association of National Advertisers, the American Association of Advertising Agencies, and the American Advertising Federation. Its rules are established by the National Advertising Review Council (NARC). NAD’s mission is "to review national advertising for truthfulness and accuracy and foster public confidence in the credibility of advertising." http://www.nadreview.org. NAD is responsible for "receiving or initiating, evaluating, investigating, analyzing . . . and holding negotiations with an advertiser, and resolving complaints or questions from any source involving the truth or accuracy of national advertising." NAD Procedures, ¶ 2.1(A).

 

A. TAKING CHARGE: AN INCREASE IN NAD SELF-INITIATED CHALLENGES

 

While most NAD challenges are initiated by competitors, under the NAD Procedures it can initiate challenges on its own as well. In 2007, NAD significantly increased the number of cases it initiated in all categories. The number of self-initiated challenges have been:

 

____________________

*Mr. Edelstein is a Partner in the law firm of Manatt Phelps & Phillips, LLP. He is one of the leading advertising and marketing lawyers in the United States. He represents clients in all areas of advertising and marketing law. Mr. Edelstein has developed a well-earned reputation for the numerous successes he has achieved on behalf of leading companies involved in false advertising challenges before the National Advertising Division (NAD) and the National Advertising Review Board (NARB) of the Council of Better Business Bureaus, the television networks, and the courts.
____________________

 

2008 – 12 (as of April 27, 2008)

 

2007 – 61

 

2006 – 47

 

2005 – 49

 

NAD is most likely to initiate review health and safety claims. Of the 12 cases NAD initiated between January 1, 2008 and April 27, 2008, five were in the Drug/Health/Health Aids category:

 

1 = Food

 

1 = Household Product

 

2 = Miscellaneous

 

Advertising for dietary supplements constitutes the largest share of advertising reviewed as part of NAD’s self-monitoring process. NAD more than tripled the number of self-monitored cases about dietary supplements from 2006 (8 cases) to 2007 (25 cases). The majority of dietary supplement claims that NAD reviews are performance claims. NAD also reviews labeling claims, product packaging claims, and ingredient and nutrition claims.

 

The Center for Responsible Nutrition (CRN) asked NAD for help regulating dietary supplement claims. Starting in September 2006, CRN began giving NAD $500,000 in grants over three years to review dietary supplement advertising. NAD has dedicated one staff member to monitor dietary supplement advertising full-time. CRN has initiated 4 challenges for dietary supplements in the past year:

 

1. The Green Willowtree, LLC/Thyodine, NAD Case Report #4824 (April 2008) — CRN challenged print and Internet advertising that claimed that Thyodine could treat underactive thyroid conditions. Absent scientific support, NAD recommended the advertiser discontinue claims that the dietary supplement could be used as an alternative to medical treatment and prescription medications.

 

2. Biotech Corporation International/Cognivin, NAD Case Report #4821 (April 2008) — CRN challenged print and Internet advertising that claimed that Cognivin helps improve memory and cognitive function. Biotech had testing on certain key ingredients but not on the product itself. NAD recommended that Biotech discontinue its “clinically proven” claims as well as numerous product performance claims. NAD found Biotech had support for limited claims about the benefits of particular ingredients.

 

3. Bioforce USA/Sanhelios Curbita Bladder Caps, NAD Case Report #4738 (October 2008) — CRN challenged print and Internet advertising that claimed that Sanhelios Curbita Bladder Caps enhance bladder function and health. Bioforce refused to participate in the challenge and NAD referred the matter to the FTC and the FDA.

 

4. Hi-Tech Pharmaceuticals, Inc./Lipodrene, NAD Case Report #4722 (October 2007) — CRN challenged print and Internet advertising that claimed that Lipodrene burns fat, boosts energy, increases metabolism, and inhibits the absorption of dietary fats. Hi-Tech did not respond to NAD’s inquiries and NAD referred the matter to the FTC and the FDA.

 

Another area to watch is anti-aging claims. According to an interview with “The Tan Sheet,” NAD Associate Director David Mallen said that NAD is currently closely watching cosmetic advertising that makes anti-aging claims or offers alternatives to plastic surgery. Cosmetics cases initiated by NAD for the past four years have been:

 

2008 - 2

 

2007 - 11

 

2006 - 5

 

2005 – 9

 

B. AN INCREASE IN NAD CHALLENGES AGAINST “ENVIRONMENT-ALLY FRIENDLY” CLAIMS

 

As more and more companies are recognizing consumers’ desire for earth-friendly products and moving into that market, companies are increasingly touting “environmentally friendly” features in their advertising claims. In turn, more advertising claiming environmental benefits is being challenged to NAD. Panasonic Corporation of North America/Large-Screen Plasma Display Panel Televisions and BornFree LLC/ BornFree Baby Bottles provide two recent examples.

 

In Panasonic Corporation of North America/Large-Screen Plasma Display Panel Televisions, NAD Case Report #4697 (July 2007), Sony challenged Panasonic’s advertising claims, including “Panasonic Plasma panels are environmentally friendly. No Lead. No Mercury. No Worries. Most LCDs have mercury.” Sony contended that while Sony LCDs do contain small amounts of mercury, the TVs comply with U.S. and global standards for hazardous material. Therefore, Sony argued that Panasonic’s claim and its implication that LCD TVs are not “environmentally friendly” is misleading. Sony relied on the FTC’s Environmental Marketing Guides, which state “It is deceptive to misrepresent, directly or by implication, that a product, package or service offers a general environmental benefit.” NAD found that although Panasonic plasma TVs do not contain lead or mercury, plasma TVs use significantly more power than LCDs and, therefore, cannot accurately be characterized as “environmentally friendly.” Referencing the FTC Environmental Marketing Guides, NAD recommended that Panasonic is free to tout that its TVs do not contain lead or mercury but should discontinue making affirmative “environmentally friendly” claims.

 

In BornFree LLC/BornFree Baby Bottles, NAD Case Report #4626 (February 2007), the American Chemistry Council (ACC) challenged BornFree’s advertising claims for its baby bottles, including “BornFree offers baby products that are healthier for your baby and are environmentally friendly.” and “Bottles made with polycarbonate plastic harm the environment.” ACC claimed that BornFree made false health claims that, unlike its bottles, polycarbonate baby bottles are made of Bisphenol A (BPA), which disrupts the hormones of babies. Although the science is split, ACC submitted evidence contradicting the advertiser’s claims. BornFree volunteered to discontinue making its environmentally friendly claim.

 

C. NEW MEDIA — NAD LIKELY TO REVIEW INTERNET VIDEOS POSTED BY ADVERTISERS

 

NAD has been presented with new forms of advertising – reflecting the changing nature of advertising outlets. NAD has changed with the times, agreeing to review advertising in new media forms such as postings on www.YouTube.com.

 

For example, in Halo Technologies, Inc./Ultraviolet “EV-ST” Vacuum, NAD Case Report #4798C (April 2008), the challenger, Bissel Homecare, Inc., brought advertising to NAD’s attention that it believed failed to comply with NAD’s earlier decision regarding claims that the Halo vacuum removed allergens and other microorganisms from carpeting and other flooring surfaces. In an earlier case report, NAD had found that Halo failed to provide adequate substantiation for its health and comparative performance claims and that certain claims should be discontinued and others should be qualified. See Halo Technologies, Inc./ Ultraviolet “EV-ST” Vacuum, NAD Case Report #4798 (February 2008) One of the advertisements brought to NAD’s attention during the compliance challenge was a commercial posted on www.youtube.com. NAD found that the Internet commercial “convey[ed] the same unsupported performance and health benefit claim” and did not comply with NAD’s decision. NAD referred Halo’s advertising to the FTC.

 

In Euro-Pro Operating, LLC/Shark Infinity NV30 & NV 31, NAD Case Report #4703 (July 2007), Dyson challenged advertising claims made by Euro-Pro for its Shark Infinity vacuum that appeared in a variety of media, including an online video on www.break.com. www.break.com is a Web site similar to YouTube that allows third-party users to post videos. Dyson alleged that the “Smashing Vacuums” video, which showed some people smashing vacuum cleaners to pieces in frustration because of loss of suction and others happy with their Shark Infinity vacuum, was falsely disparaging. NAD concluded that Euro-Pro had a reasonable basis for its advertising claims including its superior suction claims. However, the decision was appealed to the National Advertising Review Board, which reversed NAD regarding the superior suction claims. NARB Panel #147 (March 6, 2008).

 

As NAD reviews and evaluates claims made in videos posted on www.youtube.com or other similar Web sites just as other more traditional types advertising, advertisers involved in posting promotional videos online are open to challenges by competitors and NAD investigations.

 

D. EMPHASIS ON DISCLOSURES

 

In recent cases NAD has emphasized the proper use of disclosures. For example, in Mead Johnson Nutritionals/Enfamil LIPIL, NAD Case Report #4822 (April 2008), Abbott Nutrition challenged various health benefit claims regarding infant formula. Two of the challenged claims included disclaimers, but NAD found them both inadequate. The advertiser claimed that “Enfamil LIPIL is the only infant formula shown in independent clinical studies to improve baby’s brain and eye development*.” A footnote stated: “*vs. same routine formula without DHA and ARA. Studied to 18 months.” The advertiser contended that consumers understood the benefits were limited to the first 18 months of an infant’s life.

 

However, NAD found that “the challenged advertising [did] not make clear that the advertised benefits are temporary” and that a “disclosure stating ‘studied at 18 months’ is not sufficient to convey this important message.” In addition, NAD reviewed side-by-side graphs – one showing IQ data from a study of infants who had consumed breast milk and Enfamil and the other for infants who had consumed breast milk and Similac formula, a competing product. The graph included a small disclosure: “These studies are not directly comparable. There have been no head-to-head comparisons of IQ scores of infants fed any of the Enfamil formulas with infants fed any of the Similac formulas.” However, NAD found the disclosure did not remedy the conveyed message that “Enfamil Lipil outperforms Similac with respect to the formulas’ effects on infant IQ,” and recommended the comparison chart be discontinued. 

 

E. GREATER SCRUTINY ON SUBSTANTIATION TESTING – TESTING PRODUCTS VS. TESTING INGREDIENTS

 

Another theme emerging from recent NAD cases is greater NAD scrutiny of substantiation testing.

 

In Preval/Actifade Complete Age-Defying System, NAD Case Report #4747 (November 2007), NAD held that product performance claims based on an FDA monograph or proposed rule should not extend beyond the indications of use listed in the monograph without reliable product testing. The FDA monograph in question permitted marketers to make gradual and temporary skin discoloration fading claims. In evaluating the advertising for the challenged product, NAD determined that the claims in print advertising conveyed messages that overstated the efficacy of the product by implying that the product could completely and permanently eliminate skin discolorations. In reviewing the claims, NAD noted that: “It is well established that actual product testing is the most direct and affirmative means by which to assess the performance capability of a specific product.” Due to the absence of final product testing, NAD concluded that the advertiser could not rely on the active ingredient alone by referring to an FDA monograph. NAD further held that efficacy claims must be closely tailored to reflect the results of the active ingredient trials, and not overstate the product’s benefits by promising permanent results. In concluding that the advertiser failed to adhere to the constraints of the indications of use listed in the monograph, NAD recommended that it discontinue the exaggerated product performance claims.

 

In Renaissance Health Publishing, LLC/Revatrol, NAD Case Report #4677 (May 2007), as part of its ongoing monitoring program, NAD requested substantiation for a number of product efficacy claims made for the Revatrol dietary supplement.  The advertiser submitted clinical trials on the individual resveratrol ingredient. NAD noted that while there was credible scientific evidence demonstrating the benefits of resveratrol consumption, the studies relied upon by the advertiser were limited due to the testing population (mice instead of humans), and because the claims were not adequately qualified to inform consumers that the substantiation was for a key ingredient, and not the product as a whole.  NAD stated that: “The advertiser can discuss the proven benefits of each of the individual antioxidant ingredients in its product as long as it is not conveying a message about the product itself.”  Because the advertiser failed to sufficiently relate its individual ingredient substantiation to the advertising claims, NAD recommended that they be discontinued.

 

F. A SINGLE PRESS RELEASE CAN CONSTITUTE NATIONAL ADVERTISING

 

NAD recently found that a press release can constitute “national advertising” and can alone form the basis for a challenged claim. In Prints Made Easy, Inc./OnLine Graphic Design & Customized Printing Services, NAD Case Report #4833 (April 2008), Vista Print challenged two press releases issued by PrintsMadeEasy regarding its online graphic design and customized printing services. The advertiser argued that NAD did not have jurisdiction because the press releases at issue were not “national advertising” as defined by the NAD Procedures. The NAD Procedures define “national advertising” as:

 

“any paid commercial message, in any medium, if it has the purpose of inducing a sale or other commercial transaction or persuading the audience of the value or usefulness of a company, product or service; if it is disseminated nationally or to a substantial portion of the United States, or is test market advertising prepared for national campaigns; and if the content is controlled by the advertiser.”

 

NAD Procedures, ¶ 1.1. The advertiser argued that the press releases were not “paid commercial messages” and that it did not “control the content of the releases.” However, NAD found that “the press release is nothing short of a paid commercial message by the advertiser.” NAD reasoned that “there can be no question that the firm issuing the release was under some level of control of the advertiser and was not simply acting without any guidance or approval of the advertiser, and was compensated for their service.” Furthermore, NAD stated, “the press release here is far from genuine.”

 

II. DEVELOPMENTS IN CARU CASES

 

CARU monitors advertising primarily directed to children under 12 of all products for compliance with CARU’s self-regulatory guidelines. CARU also monitors advertising for videos, films, and interactive software to assure that only age-appropriate materials are advertised to children.

 

A. WEB SITES THAT COLLECT PERSONAL INFORMATION FROM CHILDREN

 

CARU continues to be active in initiating inquiries to Web sites that collect personal information from children under the age of 13. This is the basis of many of its recent cases.

 

Although the FTC has stated that Children’s Online Privacy Protection Act (COPPA) is not violated if a general audience or teen-directed Web site age-screens users and blocks children under 13 from participating, CARU has taken a narrower view when interpreting its Advertising Guidelines. CARU has taken the position that a Web site that attracts a significant number of children cannot age-screen and then block children under 13 from using the features on the site.

 

In ECHO MUSIC/www.jonasbrothers.com, CARU Case Report #4844 (May 2008), CARU initiated an inquiry into the official fan Web site for the band The Jonas Brothers. The band is popular with tweens. CARU expressed concern that the Web site (1) posted personal information (full name and e- mail address) on the Web site without obtaining prior verifiable parental consent, (2) collected more information than reasonably necessary to participate in certain activities on the Web site, and (3) included "tip off" language that children had to be older than 13 to register, and therefore its age-screen mechanism was not neutral. The Web site operator took the Web site down while resolving the matter with CARU and modified the site.

 

Similarly, in Lion's Gate Entertainment/www.TheBratzFilm.com, CARU Case Report #4729 (September 2007), CARU stressed the need to use a neutral age-screen mechanism on Web sites that have a reasonable expectation of attracting children under 13, as well as the need to obtain parental consent. CARU has made this finding in numerous cases.

 

In another recent case, Cookie Jar Entertainment, Inc./www.magi-nation.com, CARU Case Report #4858 (June 2008), CARU conducted an inquiry regarding the Magi-Nation Web site, which allows fans of a popular Canadian television series that airs in the U.S. to explore and learn more about the characters and storylines. Visitors to the site can sign up for the Fan Club to receive newsletters and participate in the role-playing adventures of an interactive fantasy game. CARU found that the site’s registration page requested visitors seeking to register for the fan club to enter their e-mail address, first name, and country, and select their birth date on a drop-down menu. If a potential registrant entered a birth date corresponding to an age below 13, a screen appeared asking for a parent’s e-mail address. There was no tracking mechanism to prevent a visitor from clicking the “back” button and entering a new birth date. Visitors seeking to register to participate in the fantasy game were required to enter personal information and select their birth date from a drop-down menu. At no point was any parental contact information collected to participate in the fantasy game, even if the registrant submitted an age below 13. Upon receipt of CARU’s opening letter, the advertiser took steps to revise the registration process to ensure that parents of children under 13 were provide proper notification and the opportunity to opt-out.

 

B. NEW REFERRAL AGREEMENT ON FILM ADVERTISING

 

In March 2008, CARU announced a new referral agreement with the Motion Picture Association of America (MPAA). The agreement will coordinate CARU’s ad monitoring with MPAA ratings and advertising-re- view efforts, helping to ensure that MPAA advertising guidelines are followed by film distributors. If CARU finds that an ad for a film rated PG-13, R, or NC-17 in any medium primarily directed to children under 12 was placed there intentionally, CARU will refer the matter to the MPAA to determine whether the film is appropriate to be advertised to children.

 

During May, June, and July 2008, CARU referred advertising for the following films to the MPAA for further review: Indiana Jones, The Incredible Hulk, Iron Man, Get Smart, and Drillbit Taylor. All of these films were rated PG-13.

 

C. DISCLOSURE OF MATERIAL INFORMATION

 

CARU has long held the policy that in advertising directed to children, disclosures and disclaimers to children should be clear, close to, and in the same format as, the claims to which they apply. CARU applied those principles in a recent case.

 

In Interactive Media Marketing Studio, Inc./www.MileyWorld.com, CARU Case Report #4789 (January 2008), CARU recommended that the advertiser take steps in future presale ticket promotions to clearly disclose that membership in the fan club does not guarantee the availability of tickets to Miley Cyrus’s concerts. Miley Cyrus is the actress who plays the character Hannah Montana in the popular children’s television show. CARU investigated a ticket sale promotion on the Miley World Web site offering access to presale tickets on five dates for a recent nationwide concert tour. The following claims were made:

 

  • “If you want access to Hannah Montana concert tickets before anyone else, join Miley World today!”
  • “Members get access to concert tickets before anyone else!”
  • “Get advance concert tickets. Members can get select pre-release concert tickets.”

 

CARU received complaints from parents who said they purchased memberships after their children alerted them to the promotion. After purchasing the memberships and gong to the ticket agent’s Web site at the designated start time to purchase tickets, the parents were told that all pre-sale tickets were sold out. CARU determined that the disclosures and disclaimers on the Web site were not clear and conspicuous and were not sufficient to convey the material limitation of the offer to the intended child audience. For example, the Web site disclosure “tickets are not guaranteed” was, in some instances, a footnote with an asterisk located far from the offer of presale tickets and was not prominent in color, typeface, or size. CARU stated that it does not consider such asterisked disclosures an effective mean of drawing a child’s attention to material information.

 

D. ADVERTISING INAPPROPRIATE PRODUCTS TO CHILDREN

 

The CARU Advertising Guidelines state that “Products and content inappropriate for children should not be advertised directly to them.” In Guthy-Renker, LLC/Proactiv Solution, CARU Case Report #4859 (May 2008), a television commercial that ran during children’s programming promoted Proactiv Solution, a cleansing system and treatment regimen for acne. “Real-life” users discussed their personal experiences with the product and highlighted the results through before-and-after shots of their complexions. Pop singer Jessica Simpson appeared in the commercial, praising the benefits of the acne treatment program and stating how easy it is to use. The commercial concluded with information regarding how to purchase the product, either by means of a toll-free number or via the Proactiv Web site.

 

In its investigation, CARU learned that the product is labeled “Keep out of the reach of children.” In response to its inquiry, Guthy-Renker stated that the commercial time was purchased through a third party media buyer, and that the television stations were aware of the buys and approved the broadcast of the commercial during their shows. Guthy-Renker decided to take the voluntary action of pulling the commercial from the time slots in children’s programming. CARU noted that it greatly appreciated the advertiser’s willingness to comply with its Advertising Guidelines. CARU stated in the decision: “In monitoring advertisements during children’s programming, CARU is especially sensitive to the promotion of products not intended for child use. Given children’s inherent vulnerabilities and susceptibilities, CARU strives to ensure that all advertising that reaches a child audience is safe and appropriate.”

 

LAWYER’s REFERENCE SERVICE

 

NAD Cases

 

The Green Willowtree, LLC/Thyodine, NAD Case Report #4824 (April 2008).

 

Biotech Corporation International/Cognivin, NAD Case Report #4821 (April 2008).

 

Bioforce USA/Sanhelios Curbita Bladder Caps, NAD Case Report #4738 (October 2008).

 

Hi-Tech Pharmaceuticals, Inc./Lipodrene, NAD Case Report #4722 (October 2007).

 

Panasonic Corporation of North America/Large-Screen Plasma Display Panel Televisions, NAD Case Report #4697 (July 2007).

 

BornFree LLC/BornFree Baby Bottles, NAD Case Report #4626 (February 2007).

 

Halo Technologies, Inc./Ultraviolet “EV-ST” Vacuum, NAD Case Report #4798C (April 2008).

 

Halo Technologies, Inc./Ultraviolet “EV-ST” Vacuum, NAD Case Report #4798 (February 2008).

 

In Euro-Pro Operating, LLC/Shark Infinity NV30 & NV 31, NAD Case Report #4703 (July 2007); see also, NARB Panel #147 (March 6, 2008).

 

Mead Johnson Nutritionals/Enfamil LIPIL, NAD Case Report #4822 (April 2008).

 

Preval/Actifade Complete Age-Defying System, NAD Case Report #4747 (November 2007).

 

Renaissance Health Publishing, LLC/Revatrol, NAD Case Report #4677 (May 2007).

 

Prints Made Easy, Inc./OnLine Graphic Design & Customized Printing Services, NAD Case Report #4833 (April 2008).

 

CARU Cases

 

ECHO MUSIC/www.jonasbrothers.com, CARU Case Report #4844 (May 2008).

 

Lion's Gate Entertainment/www.TheBratzFilm.com, CARU Case Report #4729 (September 2007).

 

Cookie Jar Entertainment, Inc./www.magi-nation.com, CARU Case Report #4858 (June 2008).

 

Interactive Media Marketing Studio, Inc./www.MileyWorld.com, CARU Case Report #4789 (January 2008).

 

Guthy-Renker, LLC/Proactiv Solution, CARU Case Report #4859 (May 2008).

 

# # #

 

Volume XXVIII
Issue 14
July 21, 2008
Page 5-16

 


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