Stay ADvised: What's New This Week
- Cops on the Beat on Main Street: Scammers Fined and Enjoined for Duping Small Business Owners
- Nutrition Company Advertising to Children: Hyperbole Is Not Child’s Play
- Beer Brawl: Competitors Clash over Comparative “More Taste” Claims
Cops on the Beat on Main Street: Scammers Fined and Enjoined for Duping Small Business Owners
An international multi-agency enforcement action aimed at protecting small businesses from a telemarketing scam has resulted in a default judgment and order against a network of defendants in the U.S. and Canada. Following a temporary restraining order and asset freeze issued in mid-2018 in the U.S. District Court for the Northern District of Illinois, the court found all defendants jointly and severally liable for the offensive activities, resulting in forfeiture of almost $5 million and a permanent injunction barring defendants from engaging in future bad acts.
In June 2018, the Federal Trade Commission (FTC) filed a complaint and motion for an ex parte restraining order against nine defendants whose operations spread across Canada and the United States as part of the “Operation Main Street” initiative to protect small businesses. Specifically, the FTC alleged the defendants placed telephone calls to small businesses requesting payments for internet-related services that the business owners had not actually ordered or utilized. The scammers claimed they were calling to collect on unpaid invoices for Internet directory listings, search engine optimization services, and/or website design and hosting services. Further, the FTC claimed, the defendants often harassed and threatened their potential victims, demanding immediate payments, and implying that their credit would be damaged as a result of further collections actions should they not pay.
The FTC further claimed that the defendants created false invoices to dupe unwitting victims into believing that someone in their company had legitimately ordered the services and used directory-sounding business names such as Premium Business Pages, Ameteck Group, The Local Business Pages and Data Net Technologies. According to the FTC complaint, the various corporate and individual defendants engaged in a common enterprise “through an interrelated network of companies that have common ownership, officers, managers, business functions, and employees, that operate from a common business location, and that commingled funds.”
Having previously issued the temporary restraining order in June 2018, Judge Rebecca R. Pallmeyer entered the Default Judgment and Order against the defendants on November 28, 2018, requiring forfeiture of ill-gotten gains in the amount of $4,655,340.72 and banning the defendants from further misrepresenting to consumers any financial, legal or other obligations that they did not in fact incur. In addition, the Order prohibits the defendants from engaging in any future efforts to advertise or sell internet-related services. Carving out the possibility for future legal actions against the defendants, the court specifically noted that the Order would not pre-empt any potential criminal actions that might arise from the same conduct underlying the actions here.
This case serves as a reminder that the FTC and other regulatory authorities serve to protect small businesses as well as consumers, particularly where these two populations merge. The judge’s rulings also demonstrate to what little degree the courts will tolerate when presented with evidence of harassment, threats, and deception.
Advertising to Children: Hyperbole Is Not Child’s Play
A popular maker of plush toys for children has agreed to modify claims regarding its products’ capabilities following an adverse finding from the division of the Better Business Bureau that reviews advertising to children. A key issue in this case involved identifying the appropriate level of scrutiny that must be applied to advertising to children, given their credulity and inability to distinguish between hyperbole and reality.
The Children’s Advertising Review Unit (CARU) of the Advertising Self-Regulatory Council (ASRC), a division of the Council of Better Business Bureaus, recently reviewed advertising for Wish Me Puppy toys manufactured by Jay at Play. At issue in this matter were Jay at Play’s television ads, which CARU recommended be modified “to better convey to children that their wishes will not magically come true if they play with the toy.” The commercials were reviewed to determine whether children might expect heightened product performance resulting from the advertising campaign. The commercials featured the stuffed Wish Me Puppy dog toys, but also “showed kids in the ads making wishes, including Grandma arriving for a visit or rain clearing up, and showed the wishes coming true.” As a result, CARU expressed concern that an audience of children might believe the toys could actually make their [sometimes unrealistic] dreams and wishes come true, which is problematic as television commercials are often a child’s first contact with a brand.
In its defense, Jay at Play argued that the “use of hyperbole, fantasy and puffery” are commonly used in advertising and thus should be permissible here. CARU disagreed, determining that “while most adults may recognize an unrealistic promise or assertion, children may not always understand the difference between truth and hyperbole,” which renders them potentially unable to understand such marketing techniques. This confusion could likely create unrealistic expectations for product performance in the children’s minds.
CARU further noted that “while it recognizes that fantasy and imagination are an important part of children’s play . . . advertisements that feature these elements should not create unattainable performance expectations.” As a result, CARU recommended that Jay at Play modify the advertising campaigns to remove any confusion for children. Jay at Play agreed to comply with the suggestions and altered the advertising to address CARU’s recommendations.
Though hyperbole, puffery, and fantasy are commonly used in general audience advertising, children may not be able to understand the difference between those kinds of statements and the truth, which could create unrealistic expectations. As a result, extra care must be exercised when creating advertising for products intended for children.
Beer Brawl: Competitors Clash over Comparative “More Taste” Claims
American beer giants have a long history of clashing when it comes to taste and audience preference claims. Recent advertising for Miller Lite did not go unnoticed by competitor Anheuser-Busch, brewer of Bud Light, with the two companies bellying up to the NAD bar to determine whether Miller’s survey testing protocols underlying its claims pass muster. In the end, the NAD approved MillerCoors’ testing protocol supporting its express claim that consumers found Miller Lite to have more taste, but insufficient for an implied consumer preference claim.
Anheuser-Busch LLC challenged advertising for Miller Lite, a MillerCoors brand, in connection with the latter’s “Know Your Beer” campaign, before the National Advertising Division of the Better Business Bureau (NAD). The challenged campaign included digital vignettes, influencer videos, and other promotions with claims suggesting that consumers preferred the taste of Miller Lite. The ads included claims that a consensus of “7 out of 10” and “a majority agree” that Miller Lite has “more taste” in comparison to competing brands Bud Light and Michelob Ultra. Beyond these express claims made by MillerCoors, Anheuser-Busch also claimed that the ads included implied claims about consumer preference, suggesting that the tested drinkers preferred the taste of Miller Lite over Bud Light and Michelob Ultra.
The digital content contested by Anheuser-Busch featured beer drinkers in select cities participating in filmed taste tests. The shoots were conducted in cities known for allegiance to Bud Light and presented consumers with two unlabeled beers to taste. Ask to consider “color, taste, and aroma,” a majority of participants chose Miller Lite over Bud Light, which resulted in their surprise when informed that the concealed brand chosen as satisfying the stated criteria was Miller Lite.
Anheuser-Busch claimed that marketing messages included in MillerCoors’ digital content were not substantiated by appropriate support, including the claims that “Miller Lite tastes better than Bud Light,” as well as the vague “more taste” claims, arguing that such ambiguous claims could not be appropriately substantiated.
In its reply, MillerCoors countered that the “more taste” claims were adequately supported by tests conducted by the Institute for Perception, an independent third party, where consumers were simply asked which beer they thought had “more taste.” Regarding the alleged preference claims in the digital content vignettes, MillerCoors distinguished claims in those ads from the express claims made pursuant to the filmed taste tests, arguing that those blind, on-camera taste tests were not intended to represent scientific data from a properly conducted, scientific test, but instead were solely part of “a fun, promotional campaign.” Nevertheless, MillerCoors voluntarily discontinued certain claims that quoted numerical statistics, leaving the NAD to review the remaining claims to determine if the offered substantiation was adequate.
The NAD ultimately determined that MillerCoors reasonably substantiated its consumer perception claims that Miller Lite has “more taste” than Bud Light, with tests that instructed participants to focus on whether one beer had more taste than the other, rather than focusing on which one the consumers preferred. Specifically, NAD found that MillerCoors’ data showed 65 percent of drinkers who took the taste test said Miller Lite had more taste than Bud Light and 70 percent chose Miller Lite over Michelob Ultra. Thus, the NAD determined that the scientific support offered by MillerCoors was sufficient for some of their claims.
However, it found that some of the digital vignettes did not meet “accepted protocol requirements for preference taste testing such as double-blinding, a geographically representative sample size, and similarly purchased products,” and as such, recommended that those videos be altered or discontinued. Noting that NAD had concluded that its “more taste” claim was appropriately substantiated, MillerCoors voluntarily ceased running the digital content vignettes.
Advertising claims must be carefully and thoroughly vetted for express and implied claims even if the express claims are supported by adequate substantiation, as competitors will no doubt seek to challenge all claims in a campaign that potentially provide a competitive advantage. Advertisers must also be careful to ensure that their claims are narrowly tailored to the substantiation on which they are based and that appropriate protocols are employed, especially when designed to support a consumer preference claim.