Advertising & Marketing Law
Successful Comparative Advertising—Self-Regulation
and Comparative Claims—Session on Clear and Adequate Disclosures
The Annual NAD Conference
October 2004
By Nancy
J. Felsten, Esq. and Adam Greenwood
General Rules of Advertising Law Involving Disclosures,
Disclaimers, and Supers
There is little disagreement that effective—yet legal—advertising
must present the consumer with clear and accurate information concerning
the product or service, and that all product claims, whether monadic
or comparative, must be fully supported by the facts, the surveys,
the test data, and real-world consumer use, as appropriate in light
of the claims made. Advertising claims that falls awry of this straightforward
standard open the door to claims of false advertising, whether by
a regulatory or governmental body, a competitor, or even in some
cases by an aggrieved consumer under state unfair competition statutes.
The FTC has long defined false advertising as (i) "a representation,
omission or practice that is likely to mislead the consumer…";
(ii) "Examine[d] [] from the perspective of a consumer acting
reasonably in the circumstances;" and further that the (iii)
"the representation, omission or practice must be a 'material'
one." See, FTC Policy Statement on Deception, Oct. 14,
1983. The FTC (like the courts and the NAD), considers the complete
advertisement and formulates its opinions on the basis of the "net
general impression conveyed by them and not on isolated excerpts."
Standard Oil of Cal., 84 F.T.C. 1401, 1471 (1974), aff'd
as modified, 577 F.2d 653 (9th Cir. 1978), reissued,
96 FTC 380 (1980).
Enter the disclosure. As a threshold matter, disclosures, disclaimers
and supers may be used to augment, explain and clarify—never
to contradict—the message at issue. The legal standards or
parameters governing disclosures, regardless of the advertising
medium, are again simple on their face: supers must be "clear
and conspicuous" if they are to be effective. As the cases
below indicate, an analysis of the effectiveness of disclaimers
generally includes consideration of: the size of the print, the
proximity of the disclaimer to the claim it modifies, the color
of the type used and of the background on which it appears, and
the potential for the disclosure, or the lack thereof, to affect
consumer choices. There is no definitive test for what constitutes
an effective disclosure, but creating or analyzing one, however
articulated, invariably involves a balancing of the four P's—Prominence,
Presentation, Placement, and Proximity.
A review of some recent cases regarding supers, disclaimers and
disclosures from the FTC, NAD and the federal courts, provides structural
guidance for creating truthful advertising in the first place, and
an analytical framework for determining the "effectiveness"
of a particular advertisement, viewed together with its tiny-type
qualifications.
FTC Actions
In the Matter of KFC Corporation, 2004
FTC Lexis 90 (June 2004)
Although not really a super/disclosure case, this matter illustrates
FTC concerns with express and implied health claims, coupled here
with purported product-associated beneficial weight loss attributes.
Television advertisements showed fit, attractive people happily
eating buckets of KFC chicken, with the voice-over positioning the
KFC chicken meal as healthier than a Burger King Whopper and compatible
with low carbohydrate diets. There were several variations of the
commercial, featuring comments such as:
"The secret's out. The Original Recipe chicken breasts have
less fat than a BK Whopper," and, "For a fresh way to
eat better, you've gotta KFC what's cookin'!" or
"Man, you look fantastic! What the heck you been doing?
A: 'Eating Chicken.'" or
"So if you're watching carbs and going high-protein, go
KFC."
The various audio claims were accompanied by on-screen supers such
as:
"Comparing edible portions. 2 Original Recipe breasts 38
g fat, Whopper 43 g fat… Not a low sodium, low cholesterol
food."
"A balanced diet and exercise are necessary for good health."
"Not a low fat, low sodium, low cholesterol food. 12-piece
bucket also contains legs, thighs, and wings…."
The FTC concluded that the advertisement was deceptive; KFC was
not "healthier" by any reasonable comparison, indeed the
chicken breasts had more or less comparable fat content but with
higher transfat, cholesterol, sodium and calorie counts; the ads
in any case promoted the entire bucket of chicken parts; and the
explanatory supers neither clarified the issues nor could they in
any case be processed by the consumer in the time allotted on screen.
Some at the FTC were particularly concerned given the implicit health
claims and noted that: "[c]ompanies should not be allowed to
benefit monetarily from this kind of deception, especially where
the health and safety of consumers are compromised."
In the Matter of Tim R. Wofford, Docket
No. C-4061, 2002 FTC Lexis 58 (October 2002)
The Wofford case involved rebate offers used in connection
with the purchase of computer peripherals. The FTC alleged Wofford
failed to provide the promised rebates within a reasonable period
of time, or sometimes at all. The complaint further charged Wofford
with failing to disclose all material elements of the offer. As
often happens in these cases, the Consent Order here set forth extremely
detailed, medium specific, definitions of the FTC's meaning of "clearly
and conspicuously" with reference to future Wofford disclaimers:
"(a) In an advertisement communicated through an electronic
medium (such as television, video, radio, and interactive media
such as the Internet and online services), the disclosure shall
be presented simultaneously in both the audio and visual portions
of the advertisement. Provided, however, that in any advertisement
presented solely through visual or audio means, the disclosure
may be made through the same means in which the ad is presented.
The audio disclosure shall be delivered in a volume and cadence
sufficient for an ordinary consumer to hear and comprehend it.
The visual disclosure shall be of a size and shade, and shall
appear on the screen for duration, sufficient for an ordinary
consumer to read and comprehend it.
(b) In a print advertisement, promotional material (including,
but not limited to a rebate coupon or form), or instructional
manual, the disclosure shall be in a type size and location sufficiently
noticeable for an ordinary consumer to read and comprehend it,
in print that contrasts with the background against which it appears…
"In the case of advertisements disseminated by means of
an interactive electronic medium such as software, the Internet
or online services: (a) 'in close proximity' shall mean on the
same Web page, online service page, or other electronic page,
and proximate to the triggering representation, and shall not
include disclosures accessed or displayed through hyperlinks,
pop-ups, interstitials or other means; (b) a disclosure made 'through
the use of a hyperlink' shall mean a hyperlink that is itself
clear and conspicuous, is clearly identified as a hyperlink, is
labeled to convey the nature and relevance of the information
it leads to, is on the same Web page, online service page, or
other electronic page proximate to the triggering representation,
and takes the consumer directly to the disclosure on the click-through
electronic page or other display window or panel."
In the Matter of Palm, Inc. Corporation,
Docket No. C-4044, 2002 FTC Lexis 17 (April 2002)
The FTC challenged magazine and newspaper advertisements picturing
a fully-equipped Palm handheld computer device (PDA), and touting
the multitasking, Internet-accessing abilities of the PDA. The FTC
charged that the advertising misled the consumer to believe the
purchase of all "Palm" devices included everything shown
and necessary to access the Internet. The FTC took issue with an
"extremely fine print disclosure, in approximately 4-point
type at the bottom of the ad," and along the side of another
ad, both in white text against a light-colored background, stating:
"Application software and hardware add-ons may be optional
and sold separately. Applications may not be available on all
Palm handhelds."
Palm Inc. entered into a Consent Agreement agreeing not to "make
any representation, in any manner, expressly or by implication,
about the ability of any such product to perform any function that
requires the purchase of additional products or services unless
respondent discloses, 'clearly and conspicuously' when additional
products are needed in order to access the Internet."
As in Wofford and other Orders, the Consent Order defined
"clearly and conspicuously" to mean, inter alia: appearing
in both the audio and video for any electronic medium, at least
where the claim itself is presented both visually and aurally; and,
in a reasonable type size and location, with contrasting print and
background, for print advertising.
Hewlett-Packard Company, File No. 002-3220,
and Microsoft Corporation, File No. 002-3331 (May 2001)
These cases also involved challenge to advertisements for PDAs.
Several ads pictured a Pocket PC accessing email or Internet sites,
and thereby arguably represented that products came with built-in
wireless access to the Internet and email at "anytime and from
anywhere", while revealing in fine-print footnotes: "Modem
required. Sold separately." The FTC found such disclosure inadequate
to remedy the otherwise misleading message of the advertising.
Value America, Inc., Docket No. C-3976
(September 2000) (consent order), Office Depot, Inc., Docket
No. C-3977 (September 2000) (consent order), and BUY.COM, Inc.,
Docket No. C-3978 (September 2000)
The FTC challenged promotions for low-cost computer systems that
failed to disclose the "true" costs of the products offered,
leaving important restrictions to the fine-print footnotes or headnotes.
The FTC found the disclosure contradicted the main message and ordered
BUY.COM, Office Depot and Value America to disclose "clearly
and conspicuously" that the advertised "free" and
"low-cost" computer products required the purchase of
three years of Internet service, as well as other significant restrictions.
The Consent Orders further state that, as a matter of law, if the
companies advertise a price or rebate that is conditioned on the
purchase of any other product or service, the companies must properly
disclose both that requirement and the price of the other products
and services.
NAD CASES:
QVC: Shopping Spree Sweepstakes, Report
# 4189, NAD Case Reports (May 2004)
Consumers brought to NAD's attention advertising containing "mice
type" disclosures involving the amount of time available to
redeem a sweepstakes prize. NAD determined that: "In this advertisement,
while bolded, the one year-limit term [for redeeming the winner's
QVC Shopping Dollars] was nevertheless distant from the main claim,
buried in other text, and difficult to read". In reaching its
conclusion, NAD considered, but was not persuaded by, the advertiser's
argument that the challenger would necessarily have read the Official
Rules in order to validly enter the contest. In fact, NAD noted
that all of the material information, with the exception of the
one-year limit, was contained in the headline portion of the advertisement.
Bayer Corporation: Aleve, Report # 4126,
NAD Case Reports (December 2003)
McNeill, PPC, makers of Tylenol products, challenged a series of
television commercials for Advertiser's Aleve pain reliever, in
which a woman tells her husband that the doctor recommended that
she take Aleve and not Tylenol for nighttime arthritis pain. Challenger
complained that the audio comparison ignored the fact that Tylenol
produces many different products and that it was improper to refer
broadly to "Tylenol." Challenger argued that the supered
disclosure stating the comparison as between Aleve and Extra-Strength
Tylenol was insufficient. Leaving aside the issues of doctor-recommended
claims (which NAD recommended be revised in future advertising),
NAD found the comparative super adequate (or at least not per se
inadequate) because it "appears for a sufficient length of
time, in a typeface appropriately contrasted with the background,
and, again, an advertiser can compare two dissimilar products even
if a competitor makes a more similar product, as long as the objects
of comparison are clearly identified."
NARB Panel # 121, Appeal of NAD Final Decision
Regarding Advertising for Total Cereal, (November 2003)
Kellogg Company challenged television advertising for Total Cereal
depicting a "weight conscious woman" reacting to a study
suggesting that increased calcium intake can help people lose weight.
The woman, who had earlier mentioned that she eats Kellogg's Special
K, then selects Total cereal, the "only one providing 100%
daily value of calcium", over Special K. NAD found the ad implied
that simply replacing Special K with Total would result in greater
weight reduction. The study relied upon in the ad, however, had
nothing to do with dieting and cereal consumption as noted in the
ad's super which read: "Study did not test cereals." NAD
found this super contradicted, rather than qualified, the ad's implied
message that simply choosing Total cereal will help with weight
loss. NARB disagreed, and found the advertising supported and the
super and disclosure consistent with what it deemed the reasonable
consumer takeaway; this despite commenting that the super was largely
immaterial because of its limited timing and duration, its location
at the bottom of the screen, and the lack of contrast inherent in
using white print on a light background.
Hawk Communications LLC, Report # 4131,
NAD Case Reports (January 2004)
Challenger, BellSouth Corporation, argued that Hawk's billboard,
radio and television advertising claims stating that Joi Express
offers "Dial-up at DSL Speed" were misleading. NAD agreed
that the advertising implied that "with Joi Express all
online activities can be performed at DSL speed." Although
no consumer perception survey data was submitted, "it is well
established that in the absence of reliable consumer perception
evidence, NAD is authorized to step into the shoes of consumers
and determine the reasonable messages conveyed by an advertisement."
Hawk acknowledged that not all online activities were performed
at DSL speed, but claimed that its website clarified any
potentially misleading statements. NAD stated that "material
qualifying information should appear in close proximity to the specific
claims it is intended to modify. An advertiser cannot modify a misleading
representation with a disclosure that appears in an entirely different
medium."
BMW of North America LLC: Advertising for BMWX5
with xDrive, Report # 4156, NAD Case Reports (March 2004)
NAD inquired into print advertising tucking a disclaimer in small
grey print on a grey background, printed sideways on the edge of
a 2-page spread, saying that the starting price of the car listed
was not actually the price for the car depicted in the advertisement.
That car's price was advertised in large print as: "from $40,995",
with the fine print noting that the price for the car shown began
at $58,395. Given the awkwardness of the disclaimer, and the extent
of the price differential, NAD noted that such material qualifications
should be made clearly, conspicuously and in close proximity to
the underlying claim. NAD stressed that advertisers cannot use disclaimers
to change the express meaning of a claim or to render truthful an
otherwise misleading claim.
NMD Marketing: Slim 90, Report # 4187,
NAD Case Reports (May 2004)
Producer of dietary supplement included claims on its website such
as "Slim 90 can help you lose weight without strenuous exercise
and without giving up your favorite foods," and "Slim
90 is safe and delivers results without harmful side effects."
NAD initiated the challenge and urged that "[d]ietary supplement
manufacturers advancing health and efficacy claims must have substantiation
that such claims are truthful." Such advertising cannot be
saved by mere inclusion of the DSHEA disclaimer such as: "This
statement has not been evaluated by the FDA. This product is not
intended to diagnose, treat, cure, or prevent any disease."
NAD found the disclaimer insufficient to "cure an otherwise
deceptive advertisement, particularly where strong, unqualified
claims are made that contradict the disclaimer." Simply put,
"anecdotal evidence is insufficient to support performance
claims."
Cavalier Telephone, LLC: Local, Long Distance
and DSL Internet Services, Report # 4148, NAD Case Reports
(February 2004)
In television commercials, Cavalier claimed that it only charged
5-cent per minute to make telephone calls, and it failed to effectively
disclose that customers could only take advantage of this rate through
a monthly membership fee of $24.95. Ignoring Cavalier's defense
that the television commercials were too short to include all these
details, NAD stated that "[w]here time allowances do not permit
for full disclosure of material terms and conditions so as to prevent
price claims in long-distance telephone advertise[ments] from being
misleading to customers, [ ] such claims should simply not be made."
Verizon, Long Distance Telephone Service Report,
# 3750, NAD Case Reports (April 2001)
AT&T challenged a Verizon advertising campaign involving Verizon's
long-distance coverage. NAD found Verizon print advertising misleading
because the disclosures provided failed to properly clarify the
extent of the coverage area provided by the advertised calling plans.
The print disclosure reading "Not all services available in
all areas" was insufficient, NAD found, because it appeared
in "extraordinarily small print, against a poorly contrasting
background and was not placed in close proximity to the claims it
was intended to qualify." NAD noted again that mice-type disclosures,
buried in a full-page newspaper advertisement, will not, as a general
rule, be sufficient to disclose "material" information.
Thane Int'l: BioSlim Weight Loss Program,
Report # 3557, NAD Case Reports (June 1999)
Here, the NAD reaffirmed its position that rote inclusion of "standard"
disclaimers, without sufficient attention to the nature of the claims
presented, will not save otherwise misleading advertising. The Electronic
Retail Association referred to the NAD a 30 minute infomercial that
made claims about the efficacy of the advertised weight-loss program,
which advertising depicted results the NAD found simply did not
mirror the type of results consumers could reasonably expect to
experience. Such excessive claims could not be reined in, the NAD
opined, by simply appending tried and true weight-loss advertising
disclaimers such as: "Individual results may vary." Nor
could such disclaimer put in to context the extent to which the
featured endorser's experience is "atypical", as required
by FTC's guides to weight-loss advertising.
Voicestream Wireless: Wireless Telephone Service,
Report # 3714, NAD Case Reports (December 2000)
Verizon challenged print advertising touting Voicestream's introductory
prices. The advertising contained very fine print at the bottom
of the page, away from the main text, stating the limitations of
the geographic coverage of a cellular calling plan. NAD agreed the
information was a material fact and had not been clearly and conspicuously
disclosed. NAD did not take issue with the wording of the
disclosures, but only with their impact. "The problem
was not the language of the disclosure but the fact that the limitations
of the coverage area were not clearly conveyed. The disclosure appeared
in a mice-type footnote, physically distant from the main text of
the advertising claims. As well, the FTC has recognized that 'mice-type'
disclosures at the bottom of a full page newspaper advertisement
will not, as a general rule, be sufficient to disclose material
information."
CASE LAW
United States v. Washington Mint, LLC,
143 F. Supp. 2d 1141 (D.Minn. 2001)
This case involved an allegedly ineffective disclaimer on defendant's
print advertising, stating that defendant had no official affiliation
with the United States government. Despite the disclaimer, consumer
confusion was very likely, the court found, because the company's
name was Washington Mint LLC, and it was involved in the production
of a gold coin replica of Sacagawea. The Court ordered, in great
detail, specific changes to the advertisement so as to mitigate
the likelihood of consumer confusion:
This language is to be prominently displayed at the top of any
Washington Mint advertisements or other marketing materials for
replicas of United States Mint products. The disclaimer is to
appear in an easily readable font of at least 12 point and is
to be placed within the photograph box of any advertisement or
other marketing material. The disclaimer is not to be included
with other text below the photograph box, but is to be placed
immediately adjacent to or below the actual photograph used in
the advertisement or marketing material. The language is also
to be in a different color than the background of the photograph
box in which it is placed so that the language is clear and noticeable.
Surdyk's Liquor, Inc. v. MGM Liquor Stores,
Inc., 83 F.Supp.2d 1016 (D.Minn. 2000).
In this case involving a print advertisement, the court granted
a preliminary injunction on the claim that defendant was falsely
advertising the sale of products that were not in fact actually
available for sale. The Court found the advertisements misled the
consumer regarding the "immediate availability" of certain
wines and held ineffective a super, in "very fine print,"
to the effect that "supplier shortages may affect stock availability
without warning."
Columbus Rose Ltd. v. New Millennium Press,
2002 WL 1033560 (S.D.N.Y 2002)
Court granted preliminary injunction regarding allegedly misleading
representation on the cover of a compilation of short works by numerous
authors. Author David Baldacci's name appeared more prominently
than the others, leading to the likely conclusion that consumers
would misinterpret the compilation as his new full-length book.
The court found ineffective the disclosure, in "very small
print" underneath Baldacci's name, which revealed that the
book was a "novella" with "four other stories in
this compilation." Compounding the problem, the image of the
book on Amazon.com only enabled people to read Baldacci's name.
Novartis Consumer Health v. Johnson & Johnson-Merck
Consumer Pharm. Co., 290 F.3d 578 (3rd Cir. 2002)
Case involved advertising claims on behalf of over-the counter
medications for heartburn. Defendant's advertisements claimed the
medication was "made just for" nighttime heartburn, but
explained in fine print that the drug did not contain a sleep aid.
The court held that: "The common theme in these cases is a
finding, based on a facial analysis of the product name or advertising,
that the consumer will unavoidably receive a false message from
the product's name or advertising. When consumer deception can be
determined by examining the challenged name or advertising on its
face, the Plaintiff is excused from the burden of demonstrating
actual deception through the use of a consumer survey." Completely
unsubstantiated claims in advertising are per se false. The
court upheld the preliminary injunction grant noting: "Although
we are skeptical whether disclaimers can cure false advertising
claims (made literally or by necessary implication), they may be
able to dispel misleading messages implied by a product's name.
If a district court is not persuaded that the defendant's proposed
disclaimer would protect consumers fully, it may take the more significant
measure of entering a complete prohibition on false speech."
JTH Tax, Inc. v. H & R Block Eastern Tax
Services, Inc., 128 F.Supp.2d 926 (E.D.Va. 2001)
Tax preparing service was sued over advertisements for a "no
additional charge refund application loan." The service qualified
the ad with a fine print disclaimer stating that the money being
offered was a loan in the anticipated amount of refund, and that
it was not the refund itself. This was an attempt to satisfy the
IRS regulatory requirement that: "In advertising the availability
of a RAL (refund application loan), … a financial institution
must clearly… refer to or describe the funds being advanced
as a loan, not a refund; … it must be made clear in the advertising
that the taxpayer is borrowing against the anticipated refund and
not obtaining the refund itself from the financial institution."
The Court found that, although it made the advertisements literally
true, the "Defendant's disclaimer is ineffective both because
it is in tiny print easily missed and because the word 'advance'
is not clear to consumers as a synonym for 'loan.''
Scotts Co. v. United Indus. Corp., 315
F.3d 264 (4th Cir. 2002)
Advertising on the package of a crabgrass control product contained
an image of unwanted crabgrass with a red cross through it and read,
in large print, "Prevents Crabgrass up to 4 WEEKS After Germination."
A disclaimer in small print on the bottom of the package read: "Crabgrass
image [on the package] for illustration only, as this product is
for pre- and early post emergent control and does not control mature
plants." The Circuit Court vacated the lower court grant of
preliminary injunction, ruling that the disclaimer was indeed sufficient
to dispel otherwise misleading conclusions that could be drawn from
the product's packaging. In addition, the challenged image depicting
the alleged "killing" of crabgrass was only part of a
larger image on the package and that this disclaimer was the first
of three "bullet points" that clarified the image.
Materiality: Some Definitions and Examples
Although the element of materiality is often assumed, presumed,
or occasionally overlooked in false advertising cases, the unqualified
or insufficiently qualified "claim" must be "material"
in order to be actionable. The FTC in 1983 stated that in deciding
whether a representation, omission or practice is material, "[t]he
basic question is whether the act or practice is likely to affect
the consumer's conduct or decision with regard to a product or service.
If so, the practice is material, and consumer injury is likely,
because consumers are likely to have chosen differently but for
the deception." FTC Policy Statement on Deception, Page 2,
Oct. 14, 1983. Additionally, the "Commission presumes that
express claims are material," and the Commission infers materiality
"when evidence exists that a seller intended to make an implied
claim". Claims have been found material where they concern
the "purpose, safety, efficacy, or cost, of the product or
service" and are also likely to be material if they concern
"durability, performance, warranties or quality. Information
pertaining to a finding by another agency regarding the product
may also be material." Id. at Page 6.
Below is a sampling of some recent decisions which discuss, or
at least mention, the meaning of "materiality" in the
context of false advertising.
FTC
In the Matter of the Ted Warren Corporation
et al., Docket No. C-4078, File No. 99-23298 (2003)
Respondents sold and distributed materials on the web that "purported
to teach purchasers how to profitably trade stocks, commodity futures
and options, and real estate." The FTC found "material"
advertising claims which implied that certain types of no-funds
required "paper trading" would inevitably be profitable,
and failing to adequately disclose associated risks. Claims involving
the profitability and efficacy of the advertised product were indisputably
"material."
FTC v. Artmart Publications, Inc. stipulated
final judgment (C.D.Cal. Oct. 2003)
Respondents made several misrepresentations in promoting the purchase
of advertising space in their various publications to advertisers.
Artmart allegedly misrepresented its demographics, prices and active
customer base. The Consent Order prohibits, inter alia,
the defendants…from misrepresenting any material fact that
would affect a consumer's decision to purchase any good or service."
NAD
AT&T: AT&T "00" Info,
Report # 3622, NAD Case Reports (February 2000)
NAD initiated this inquiry regarding print advertisements and the
charges assessed to customers with using directory services. The
advertisement clearly stated that "no other carrier's 411 or
555-1212 directory assistance service (in locations where the ad
appeared) delivers all of the advertised attributes of AT&T
'00' Info." AT&T stated in mice-type print on the lower
corner of the full page advertisement that a 99¢ charge applied
to this service. NAD found the information material to consumer
choice of service providers, and recommended use of a larger type
size for this disclosure in future advertising for AT&T '00'
Info.
CASE LAW
BellSouth Telecomm., Inc. v. Hawk Communications, LLC, 2004
WL 1085324 (N.D.Ga. 2004)
Defendant disseminated unqualified comparative claims touting the
superior speed of its Internet service. The Court found Defendant's
Internet speed claims to constitute material misrepresentations.
"The evidence clearly establishes that speed is an inherent
quality or characteristic of Internet service that matters to consumers
and likely influences their purchasing decision."
FTC Guidelines for Creating Effective Print and
Internet Disclosures
Print disclosures: In print ads, the FTC frequently
has found fine-print footnotes or dense blocks of text to be inadequate
to modify a claim made elsewhere in the ad. Disclosures should be
placed in proximity to the claim they qualify, of sufficient site
to attract attention, clearly worded and in type color contrasting
to the background color.
Internet disclosures: On May 3, 2000, a staff working
paper was issued examining how the Commission's consumer protection
rules and guides apply to advertising and sales on the Internet.
The basic guidelines are as follows.
- The same consumer protection laws that apply to commercial
activities in other media apply online.
- Place disclosures near, and where possible, on the same screen
as the triggering claim.
- Use text or visual clues to encourage consumers to scroll down
a Web page when it is necessary to view a disclosure.
- Make hyperlinks that lead to disclosures obvious.
- Keep in mind whether other parts of the advertisement distract
attention from the disclosure or whether the advertisement is
so lengthy that the disclosure needs to be repeated.
- The size, color and graphics of the disclosure affect its prominence.
The type size of the disclosure should be compared to other texts
on the page. Color and graphics of the disclosure should aim to
draw the consumer's attention to them.
- Repeat disclosures on lengthy Web sites, as needed, and keep
in mind that consumers navigate Web sites differently.
General Rules Governing Some Specific Areas of
Advertising
"Rebate" Offers and
Related Advertising
FTC ACTIONS
In the Matter of America Online, Inc. and Compuserve Interactive
Services, Inc., File No. 002-3000 Consent Order (2003)
In its Complaint, the FTC took issue with an allegedly deceptive
rebate program associated with Internet access services, containing
automatic charges inadequately disclosed, and a "cash rebate"
for purchase of eligible computers without disclosing the prerequisite
of signing on for three years of Internet services. Consumers complained
they failed to receive the promised cash rebate, prompting FTC inquiry.
In the Matter of Value America, Inc., Docket No. C-3976
(2000)
Complaint alleged that offers failed to adequately disclose accurate
"sale" prices of various computer products, or the prerequisites
to obtaining the promoted $400 rebate check - specifically the requirement
that purchasers entering into a three-year contract for Internet
service, and bear the attendant costs of such service. In the Consent
Order, FTC affirmed its definition of "rebate" to mean:
"cash, instant savings, instant credit, or credit towards future
purchases, offered to consumers who purchase products or services
from respondents, which is provided at the time of purchase, or
subsequent to the purchase." The Order required respondents
to make "clear and conspicuous" disclosures, as defined,
and further, not to make any representation about the time in which
any rebate will be mailed or otherwise provided unless respondents
have a reasonable basis for such representation. Respondents also
agreed to properly comply with the FTC's "Mail or Telephone
Orders Merchandise Rule" and provide any rebate within the
time specified or, if no time is specified, within thirty (30) days
of receiving a properly completed request for such rebate as well
as to perform other corrective action with respect to injured consumers.
FTC v. UrbanQ, LLC, Docket No. 2:03-CV-03147-LDW (E.D.N.Y.
April 2003)
UrbanQ told consumers who bought items from their Website they
would receive rebates within 12 weeks of purchase. Stipulated Final
Order for Permanent Injunction stated that UrbanQ may not fail to
provide any rebate within the time specified, or, if no time is
specified, within thirty (30) days; and it may not offer a rebate
without having a reasonable basis or ability to pay it. UrbanQ was
also required to pay $600,000 to the FTC to be distributed to aggrieved
customers.
In the Matter of Philips Electronics North America Corporation,
File No. 022-3095 (2002)
Philips Electronics charged with failure to satisfy rebate promises
made to consumers of computer peripheral products. The corporation
allegedly misrepresented the time in which they would deliver rebates,
in addition to unilaterally modifying the terms of their rebate
programs after they had already begun. The Consent Order forbids
the corporation from misrepresenting the terms and timing of a rebate
offer without the customer's consent. The corporation was also required
to send rebate checks within ten days of the Order to individuals
listed in their database, and within sixty days to those who contacted
respondent in any manner.
FTC v. Cyberspace.com, LLC, 2002 WL 32060289 (W.D.Wash.
2002)
Defendant sent to millions of small businesses unsolicited checks
for $3.50, each with an invoice number and form making the check
appear to be part of an ongoing business relationship. None of these
materials, however, disclosed on their face, or in any other reasonably
discernible manner, that the mailing was an "offer" to
purchase services, or that by cashing the check the consumer was
actually contracting for Internet access with attendant monthly
charges. The back of the check did contain detailed disclosures,
but the FTC argued that the combination of the check and the placement
of the disclosures rendered them inconspicuous and ineffective.
FTC v. Simple Access, Inc., Docket No. CV-No. 00-1210 PHX
SMM (2000)
In a Stipulated Final Judgment regarding defendants' practices
of using "rebate" checks to entice consumers into signing
up for Internet yellow pages directory and Internet service, defendants
agreed to disclose, in a "clear and conspicuous manner":
(a) on the front of any solicitation check a statement that notifies
the payee that the check is part of a solicitation and that cashing
the check will require the payee to pay for a good or service; (b)
on the back of the solicitation check a statement that notifies
the payee of the amount and frequency of the charge that defendants
will impose if the payee deposits or endorses the check; and (c)
in a letter or statement attached to or enclosed with the solicitation
check, all the material terms associated with depositing or endorsing
the solicitation check. Respondent was also required to send all
consumers who deposit the solicitation checks a written communication
confirming the agreement to purchase services and what they must
do to cancel the order and receive a full refund.
In the Matter of Bumble Bee Seafood, Inc., Docket No. C-3954
(2000)
FTC complaint charged that Bumble Bee Seafood, Inc. implemented
a false and misleading coupon program promising a savings of $.75
off of the consumers' next purchase. However, only upon buying the
item and extracting the full coupon, printed on the inside of the
product labeling, could the consumer discover the necessity of purchasing
five cans - not one - in order to obtain the rebate. Consent Order
required disclosure "clearly and prominently and in close proximity
to the offer" of the number of products that had to be purchased
to receive any rebate, defined "clearly and conspicuously"
in media-specific detail, and further ordered additional corrective
action.
As is evident from these cases, "free" and "low-cost"
computer offers, often tied to rebate offers, have received a great
deal of FTC scrutiny in recent years. The FTC has published some
guidelines for advertising in these areas.
- Advertisements should prominently state the before-rebate
cost of the computer, as well as the amounts of the rebates.
- Advertisers should prominently disclose whether the consumer
is required to purchase Internet service to qualify for the 'low
cost' deal. The ad should state the key terms of the purchase
requirements, including the cost and duration of the consumer's
commitment to the Internet service.
- Clearly detail additional terms and conditions such as: (a)
penalties for canceling; (b) additional connection charges; and
(c) when they will receive the rebate.
- Print advertisements should not hide the real cost or
terms or conditions by: (a) putting them in obscure locations,
such as the border area on a print ad; (b) burying them in numerous,
densely packed lines of fine print; or (c) including them in small-type
footnotes.
- Television advertisements should not hide key information in:
(a) a fast moving 'crawl'; (b) superscripts or subscripts using
small print sizes or a color that fades into the background; (c)
type that disappears from the screen too fast for consumers to
read and comprehend; or (d) the middle of a long statement that
scrolls vertically on the screen within a short period of time."
- Internet ads should place information affecting the cost in
close proximity (on the same electronic page) to the price. Advertisers
should not use pop-up windows or hyperlinks to display
key information.
See www.ftc.gov/bcp/conline/pubs/buspubs/bigprint.htm,
for further details on these FTC Guidelines
See also, "Taking the 'Bait' out of Rebates,"
available at www.ftc.gov.
Prescription Drug Advertising
Prescription Drug advertising is laden with disclosure requirements,
which arguably at times overwhelm the ad's main message. The FDA,
which governs drug labeling and packaging, also reviews direct-to-consumer
advertising of prescription drugs. That said, FDA review will only
go so far, and does not in and of itself shield the advertiser from
false advertising claims. As NAD has pointed out, NAD does assert
jurisdiction over Rx advertising to review the "truthfulness
and accuracy of prescription drug advertising." See
Aventis Pharmaceuticals (Allegra) #4231, NAD Case Reports
(September 2004). FDA review of an advertisement is not preemptive
of NAD, at least in part because NAD and FDA serve different aims:
"The purpose of the FDA guidance, and FDA's review of direct-to-consumer
prescription drug advertising, is to ensure that there is 'fair
balance' (adequate disclosure of the side effects of the medication)
and 'adequate provision' (a clear disclosure telling consumers
where they can obtain detailed information on the advertised drug.)
FDA's primary focus is to assure accuracy and consistency with
the product labeling/indication …
Conversely, the dispute now before NAD involves the question of
whether consumers are taking away an implied message because of
the context in which the claim appears in certain advertisements."
Pfizer Healthcare: Revolution Topical Parasiticide, NAD
Case No. 3640 (May 1, 2000).
In addition, when determining to what extent to defer to FDA's
regulations, the NAD considers the target audience (i.e.
physicians vs. consumers), the medium in which the advertisements
appeared, and the "language, tone and tenor" of the challenged
claims. See Novartis Consumer Health, Inc.: Transderm
Scop, NAD Case No. 3717 (Jan. 1, 2001). Adherence to FDA guidelines
does not provide absolute protection from a challenge, but deviation
from them will potentially invite inquiry by any of the FDA, NAD,
FTC or a competitor.
FDA Rx Advertising Disclosure Guidelines
Print Media:
- Brief Summary Requirement
- The FDA requires "that an advertisement for
a prescription drug disclose each side effect, warning, precaution,
and contraindication from the required, approved, or permitted
labeling."
- The FDA strongly urges advertisers not to use small print
or sophisticated medical terminology when describing the adverse
effects of a drug because such usage tends to discourage customers
from seeking out further understanding of the information.
- The "FDA recommends that any advertisement …
include a statement reminding consumers that the information
presented is not comprehensive and providing a toll-free telephone
number or Web site address (URL) where consumers can obtain
additional information if they wish."
- Exceptions to the Brief Summary Requirement
- The FDA will not object to a consumer-directed
print advertisement that does not comply with the brief summary
requirement if the advertisement includes the FDA-approved
patient labeling for the drug and if that labeling
- "Is reprinted in full in the advertisement;
and
- Includes information from the advertised product's
FDA-approved professional labeling addresses the following
risks:
- Contraindications: all;
- Warnings: all;
- Precautions: the major precautions, including any
that describe serious adverse drug experiences or
steps to be taken to avoid such experiences; and
- Adverse Reactions: the 3-5 most common nonserious
reactions most likely to affect the patient's quality
of life or compliance with drug therapy."
- The FDA will not object to a consumer-directed print advertisement
that does not comply with the brief summary requirement if
the advertisement includes the FDA-approved patient labeling
for the drug and if that labeling
- "Has been modified to include only risk-information
(e.g., by deleting instructions for use); and
- Includes information from the advertised product's
FDA-approved professional labeling addressing" the
risks listed above.
- "An alternative to including risk information in the
text in the body of the advertisement would be to include
risk information as bullet points in a "risk information
window" in the body of the advertisement."
Broadcast Media:
- Major Statement Requirement:
- Advertisers must disclose a product's major risks
in either the audio or the audio-and-visual parts of a broadcast
presentation.
- Adequate Provision Requirement:
- The aim of this requirement is to "allow
most of a potentially diverse audience to have reasonably
convenient access to the advertised product's approved labeling."
- This requirement presumes that the contemplated advertisement:
- Is not false or misleading; and
- Presents a fair balance between information about effectiveness
and information about risk; and
- Conveys all of the product's most important risk information
in accessible language; and
- Conveys all relevant information related to a product's
indication in accessible language.
- The FDA lists the following methods as examples of appropriate
means to convey this information:
- Disclosing a toll-free telephone number for
consumers to call to find information on the package labeling.
"Upon calling, consumers should be given the choice
of:
- 1. Having the labeling mailed to them in a timely
manner; or
- 2. Having the labeling read to them over the phone.
- Reference in the advertisement to a mechanism to provide
package labeling to consumers with restricted access to
sophisticated technology and those who are uncomfortable
actively requesting additional product information or
are concerned about being personally identified in their
search for product information." (i.e. providing
information on a concurrent print advertisement containing
the necessary facts).
- Stating an Internet web page address that contains
access to the package labeling.
- Disclosing that healthcare providers may provide additional
product information.
See "Consumer-Directed Broadcast Advertisements"
(Aug. 1999); a Draft Guidance packet titled "Brief Summary:
Disclosing Risk Information in Consumer-Directed Print Advertisements"
(Jan. 2004).
Telecommunications Advertising
A 2000 joint policy statement from the FTC and the FCC regarding
Telecommunications advertising provides guidance here. First, general
principles involving clear and conspicuous disclosures apply. Second,
the policy statement gives examples of disclosures that are likely
necessary to prevent consumer deception. These include disclosures
on: (a) minimum per-call charges, monthly fees, and other cost-related
items; (b) time restrictions or limitations on the availability
of the advertised rate; (c) geographic restrictions; (d) use of
the phrase "basic rates," as this term technically means
a specific class of tariffed service; (e) comparative price claims,
particularly to make sure that no company relies on dated and inapplicable
rates of other companies; (f) effect of the use of toll-free numbers
and other alternate sources of information.
In PRINT advertisements, the FTC suggests that (a) the cost of
the call be placed adjacent to each presentation of the pay-per-call
number; and (b) each letter or numeral of any necessary price disclosures
shall be, "at a minimum, one-half the size of each letter or
numeral of the pay-per-call number to which the disclosure is adjacent."
In TELEVISION advertisements, the FTC suggests that (a) a visual
disclosure appear adjacent to each visual presentation of the pay-per-call
number; (b) each letter or numeral of any necessary price disclosures
shall be, "at a minimum, one-half the size of each letter or
numeral of the pay-per-call number to which the disclosure is adjacent;"
(c) a visual disclosure shall appear on the screen for the duration
of the presentation of the pay-per-call number; and (b) an oral
disclosure be made at least once, simultaneously with a visual presentation
of the disclosure.
For more information, please contact the following DWT
attorney:
This Article is a publication of the
Advertising & Marketing Law Department of Davis Wright Tremaine
LLP. Our purpose in publishing this Article is to inform our clients
and friends of recent developments in advertising & marketing
law. It is not intended, nor should it be used, as a substitute
for specific legal advice as legal counsel may only be given in
response to inquiries regarding particular situations.
Copyright © 2004, Davis Wright Tremaine
LLP.
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