Stay ADvised: What's New This Week, December 16

Articles

• NAD Puts the Lid on Dietary Supplement Claims
• Supplement Maker Feels the Pain of the FTC’s Ire Regarding Allegedly False Arthritis Treatment Claims
• Congress to Investigate Event Ticketing Industry
• AGs to FTC: It’s Time to Strengthen Laws Against Deceptive Negative Option Marketing
• Customer Says Burger King Vegan Whopper Claims Are "Impossible" 

NAD Puts the Lid on Dietary Supplement Claims

Nutritional supplement maker Nexus Formulas (Nexus) has agreed to significantly change its advertising for at least one of its products following a recommendation by the National Advertising Division (NAD).

Nexus recently found itself before NAD, the advertising industry’s self-regulating investigative unit, following a challenge by the Council for Responsible Nutrition (CRN)(a trade association representing dietary supplement suppliers) about many of the claims the company made while promoting Plavinol, a dietary supplement intended for health conditions associated with metabolic syndrome, such as high cholesterol and high blood pressure.

Nexus marketed Plavinol as a scientifically sound and effective supplement for treating these types of health issues. As part of a long-standing initiative between CRN and NAD, CRN challenged Nexus’s advertisements which included claims about Plavinol’s performance and ingredients, as well as purported endorsements by the medical community.

NAD found many of Nexus’s advertisements lacked the competent and reliable scientific support necessary for Nexus’s claims regarding Plavinol. For example, Nexus claimed that Plavinol helped lower cholesterol and blood pressure and would help people with metabolic syndromes lose weight—all with no side effects and in a short period of time. NAD noted that these performance claims lacked scientific evidence.

NAD also noted that while Nexus claimed that doctors recommended Plavinol to patients suffering from metabolic syndrome, Nexus failed to provide competent support for such treatment. NAD further noted that where Nexus did provide “evidence” for its efficacy claims, it too was insufficient. One “White Paper” Nexus said supported its claims could not qualify as competent evidence because its author was not clear or identifiable, rendering it inadequate proof for Nexus’s asserted claims.

As to the company’s claims that Plavinol contained certain “active ingredients” “shown to reduce excess sugar in the blood which is why so many users are seeing a reduction in the symptoms of Metabolic Syndrome,” NAD found nothing in the record supporting these assertions. NAD reasoned that Nexus’s touting of Plavinol’s “active ingredients” alongside its claims that the supplement treats diseases like metabolic syndrome gave the false impression that the active ingredients were the same as those in prescription medications. That impression was again “not supported by any evidence in the record.”

Nexus further claimed Plavinol “lowers high blood pressure in 30-days [and] has been used safely in China for 54 years” and is “non-addictive and side effect free.” But NAD found no evidence to support these assertions and recommended Nexus discontinue these claims “because the advertiser failed to submit any testing demonstrating that Plavinol, or the ingredients therein, are safe, non-addictive, or that [the ingredient] has been used safely in China for 54 years.”

Finally, NAD also found fault with doctor testimonials hyping Plavinol’s health benefits, noting that there was no evidence that the quoted doctors had assessed the reliability of Nexus’s medical studies and because Nexus had not submitted any evidence showing that a substantial percentage of surveyed doctors recommend Plavinol’s use. Nexus said it would comply with the recommendations.

Key Takeaways

This case adds to the significant guidance already available for advertisers about the types of evidentiary support needed to back health claims made to promote a product. NAD put it quite succinctly: “health-related product performance claims must be supported by competent and reliable scientific evidence on the actual product as it is marketed to consumers.”

Supplement Maker Feels the Pain of the FTC’s Ire Regarding Allegedly False Arthritis Treatment Claims

The Federal Trade Commission (FTC) recently announced a settlement with a Colorado company over allegedly misleading health claims used to market arthritis treatment supplement Synovia.

The settlement with A.S. Research (ASR) and its principals Stephen J. Young and Michael K. Ledeboer resolves FTC allegations that the company misled consumers by claiming its supplement Synovia could heal damaged arthritis joints. The settlement imposes a $4.1 million judgment on the defendants but reduced it to $821,000 due to their inability to pay the full amount.

According to the FTC’s complaint, ASR promoted Synovia on its website, in newspaper ads, and bulk mailers as a powerful supplement to treat arthritis joint damage and pain; so powerful, in fact, that one ad claimed a Synovia customer “gave away his walker” after using the supplement. Worse, ASR allegedly fabricated studies and doctor testimonials, when marketing Synovia as a replacement for joint pain injections which some arthritis sufferers take to alleviate painful symptoms, according to the FTC.

ASR “claimed to sell a miracle supplement that cured joint pain and arthritis, but they lied to consumers about the product’s results and also used fake testimonials and fake doctor endorsements,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection.

In addition to the misleading marketing allegations, the complaint also accused the defendants of charging customers more for a version of Synovia that ASR claimed contained bonus ingredients for pain relief and speedy joint repair, when the product actually contained the exact same ingredients as the regular-priced version.

On top of the monetary judgment imposed by the settlement (which the FTC said it intends to use to refund consumers who purchased Synovia), the settlement bars defendants from making any misleading or unsupported representations about Synovia or any dietary supplement or drug.

Key Takeaways

“If you lie about the effectiveness of your product, the FTC will hold you accountable,” said Smith, signaling the FTC’s growing impatience with widespread abuse in the marketing and sale of nutritional supplements. Given the growing market for supplements, the FTC will likely continue to investigate companies misrepresenting the effectiveness of their products to capitalize on the public’s hunger for alternative health treatments.

Congress to Investigate Event Ticketing Industry

In Congress’ latest move to address potentially unfair and deceptive practices in live event ticketing, the House Energy and Commerce Committee announced a bipartisan investigation of this industry.

The Committee’s investigation arises out of concerns with “potentially unfair and deceptive practices occurring in the primary and secondary ticket marketplace.” The Committee already sent letters to six leading ticketing companies—Live Nation (subsidiary of Ticketmaster), AEG, StubHub, Vivid Seats, TicketNetwork, and Tickets.com outlining the Committee’s concerns and requesting specific information about each company’s ticketing practices and pricing. Congressman Frank Malone of New Jersey spearheads the Committee and its investigation.

“Despite ongoing bipartisan efforts by the Committee, as well as federal agency action to better understand the current ticketing marketplace, consumers still face a host of troubling practices and trends in the ticketing industry,” noted Committee leaders in the letters.

A 2016 U.S. Government Accountability (GAO) study commissioned by the Committee found many concerning issues in the ticketing industry. Among them are substantial markups in ticket prices and misleading marketing aimed at deceiving consumers into thinking they are buying tickets directly from a venue rather than a secondary seller.

In fact, GAO found that “white label websites” in the secondary ticketing marketplace dress themselves up to appear like legitimate event venues by using an image or name of the venue while getting inventory and services from the big ticketing companies. By doing so, these sites are able to charge higher prices than the actual venue.

Additionally, ticketing site prices often contain high hidden fees that mislead consumers who believe they are getting the tickets for a lower price, said the GAO. Holds placed on tickets by venues, artists and others contribute to a lack of transparency about seat availability and compound the problem by driving up prices based on a false perception of unavailability.

The letters represent the latest in a series of steps the government has taken to address this issue, beginning with the passage of the “Better On-line Ticket Sales Act of 2016,” which prohibits using computer software to bypass ticketing website security measures.

Key Takeaways

Members of Congress buy tickets to large events just like the rest of us, and when they see widespread concern, they act. “Many of [these issues] have been documented in consumer complaints, press stories, and government reports,” including a 2019 scandal which revealed how some artists got in on the scalping action, too, reselling concert tickets provided by LiveNation on resale websites like Stubhub.

AGs to FTC: It’s Time to Strengthen Laws Against Deceptive Negative Option Marketing

A coalition of 23 state attorneys general have joined forces to identify a number of measures needed to reform the regulation of negative option marketing in response to a Federal Trade Commission (FTC) request for comment on its current review of its Rule on Use of Prenotification Negative Option Plans (more commonly known as the “Negative Option Rule”).

Negative option marketing involves consumers agreeing in advance to receive and be charged for products or services until they affirmatively cancel with the seller. Although negative option marketing takes a number of different forms, the current Negative Option Rule (Rule) addresses only prenotification marketing where sellers send to consumers who have enrolled in the program a notice of goods intended to be shipped unless rejected by the consumer. The goods are sent and charged for only if the consumer takes no action to decline the delivery within 10 days of receiving the notice. Negative option marketing is widely used and often abused, say the states.

The coalition, led by New York’s Attorney General Letitia James and Pennsylvania’s Attorney General Josh Shapiro, urges strong and significant reform to the current Rule which has not been substantively amended since first promulgated in 1973, note the attorneys general.

The coalition urged “the FTC to take action and use its power to protect consumers from the harm of predatory marketers.” Particularly problematic are “free trial offers,” notes Attorney General James. Unscrupulous marketers use promises of free trials to sign customers up for recurring charges that continue indefinitely and are designed to make it difficult for consumers to cancel, claims James.

“The collective experience of the [s]tates indicates that trial conversions are rife with the potential for abuse and deception. Companies often lure consumers with words like ‘free’ and ‘trial period,’ thereby implying that the trial comes with no obligation on the part of the consumer (i.e., the consumer has nothing to lose). In reality, consumers often have an obligation to take some affirmative step to avoid being caught in a cycle of continuous charges,” notes the coalition’s letter.

The coalition suggested a number of changes to strengthen the current Rule to combat fraud in this area beyond its current coverage of only prenotification plans. First, the coalition proposes mandatory “informed consent” rules for negative option plans, which would require marketers to explicitly disclose the terms of any negative option plan or free trial offer and seek express consent in the form of an “I agree” button. The coalition also suggests requiring companies to send periodic notices to customers before they are charged.

Additionally, the states ask the FTC to require companies to provide a clear and simplified cancellation process for consumers wishing to opt out of negative option plans. Finally, marketers would be required to provide refunds to consumers who are “unwittingly enrolled in a negative option plan,” starting from the date of enrollment.

Key Takeaways

The FTC’s request for comments on this issue should not come as a surprise since negative option marketing has been the subject of many recent FTC enforcement actions. As to whether the FTC will take up the states’ recommendations, only time will tell.

The FTC has once before declined to expand the Rule following a 2009 request for public comment, citing the existing Telemarketing Sales Rule and the Restore Online Shoppers Confidence Act as already providing appropriate enforcement mechanisms. Marketers utilizing negative option plans should monitor this issue carefully as any changes to the Rule may significantly impact how these programs are regulated.

Customer Says Burger King Vegan Whopper Claims Are "Impossible"

A self-proclaimed strictly vegan man has filed a lawsuit alleging that Burger King misled him about the nature of its “flame-grilled” Impossible Whopper, causing him to inadvertently eat a product containing meat.

Phillip Williams filed the proposed class action suit in South Florida, alleging Burger King failed to tell him that its plant-based Impossible Whopper was cooked on the same grill as meat to achieve the restaurant’s iconic “flame grilled” flavor. Thus, he claims, Burger King misrepresented that its burger was purely vegan.

Burger King advertised its new “Impossible Whopper” by promoting it as “0% beef and 100% Whopper.” Williams purchased the “Impossible Whopper” at an Atlanta drive-through in August 2019, believing it was all vegan and unaware it contained “meat by-products” as it was cooked on the same grill as meat-based burgers. This practice, he alleges, “contaminated” the Impossible Burgers with meat.

Williams alleges he would not have purchased the patty or paid the premium price that Burger King charges for the product had he known the truth about how the burger was cooked. According to the suit, other customers have complained online about the Impossible Whopper’s preparation on a meat-cooking grill. Williams claims Burger King did not alert consumers to this fact at any point in its advertising.

The complaint alleges Burger King’s false and misleading business practices over the sale and marketing of the burgers violates Florida’s Deceptive and Unfair Trade Practices Act. The complaint seeks to compel Burger King to ensure that its future marketing is not misleading or deceptive and also seeks damages amounting to the profits Burger King made on sales of the Impossible Burger resulting from the allegedly deceptive marketing.

This is not the first time the Impossible Whopper has encountered issues. Not too long ago a Brooklyn store mistakenly delivered beef Whoppers to customers who ordered the Impossible Whopper. But this is the first lawsuit accusing the fast food giant of making misleading marketing claims for the Impossible Whooper.

Some have called this suit frivolous, and even other vegans have questioned whether the suit hinders the cause of veganism, noting that the availability of meat alternatives at the fast food chain is a boon for vegans.

Key Takeaways

As the rising appetite for plant-based burgers and other food products by vegans increases, restaurants and food services catering to this demand must be aware of and sensitive to not just the ingredients in these products but how they are prepared.