Stay ADvised: What's New This Week, August 10
In This Issue:
- Background Check Company "MyLife" Must Respond to Some Background Checking of Its Own Acts and Practices
- Four Complaints for Four Energy Companies: FTC Targets Deceptive Savings Claims
- NAD Finds Product Claims (Almost) Squeaky Clean
- NARB Takes the Shine Off S.C. Johnson's "Non-Toxic" Glass Cleaner Claims
Background Check Company "MyLife" Must Respond to Some Background Checking of Its Own Acts and Practices
The Department of Justice (DOJ), on behalf of the Federal Trade Commission (FTC), has filed suit against a company it accuses of including misrepresentations and false innuendo in ads for its online background check reports, in addition to engaging in a host of related deceptive and illegal acts.
The DOJ's complaint alleges that consumers who requested the free "teaser" credit reports advertised by MyLife.com received results that falsely implied the subject had arrest or criminal records, which could only be viewed, of course, by purchasing a subscription. According to the complaint, MyLife.com made millions of dollars using such impermissible scare tactics to lure customers into purchasing its background check reporting services. Once purchased, consumers often found themselves unable to cancel the purchased subscription, which came without useful information but with recurring charges.
The DOJ's complaint accuses MyLife.com of deceptive acts and practices in violation of Section 5 of the FTC Act, the Fair Credit Report Act (FCRA), the Restore Online Shoppers' Confidence Act (ROSCA), and the Telemarketing Sales Rule (TSR).
According to the DOJ, the company's telemarketing tactics misled prospective customers by providing "materially misleading and deceptive statements and omissions, including about the benefits of a subscription and about MyLife's cancellation and refund policies and practices." The DOJ's complaint also charges the company with other misleading billing practices, including subscription pricing plans that failed to disclose all material terms and costs.
In order to bring the company within the reach of the FCRA, the DOJ alleged that the company qualifies as a consumer reporting agency (CRA) because it sells arrest and court records, and that it has violated the FCRA by providing consumer reports "without reason to believe those subscribers have permissible purposes to obtain such reports," and "without knowing subscribers' purposes for obtaining the reports and without employing procedures for requesting and identifying each subscriber's purpose."
Federal agencies can and will work together to expand their reach in order to find and prosecute, to the maximum extent of the law, those who earn their keep preying on consumers. This case marks another instance of announcements by the DOJ and the FTC to jointly prosecute, in particular with respect to COVID-19-related fraud.
Four Complaints for Four Energy Companies: FTC Targets Deceptive Savings Claims
The FTC is hot on the trail of companies touting deceptive energy and savings claims. It recently filed four complaints against four separate companies advertising paint coating products with allegedly wildly overstated insulation and energy-saving claims.
According to the FTC, the defendant companies use false claims to advertise special insulated wall coatings and paint for which they charge higher prices. Specifically, the FTC complaints allege that the companies misrepresent that their products have a high R-value (the measure of a substance's insulating power). Each complaint alleges that the defendant companies market their insulation coatings as having R-values of at least R-19, when these coatings actually have R-values of one or less than one.
The complaints allege that the companies are unable to substantiate the high R-value claims and that these misrepresentations violate the FTC Act. Specifically:
- Georgia-based F&G International Group Holdings advertises building coating paints with an R-value of 30 at the recommended thickness on its website and on marketing emails. But the FTC asserts that the company's own test results show that at the company's recommended thickness, the R-value is less than one.
- Florida-based SPM Thermo-Shield markets coatings with an R-value of 22 "against solar heat." In reality, the FTC claims the products' R-value is, again, less than one.
- Kansas-based Superior Products International II sells roof and wall coatings with an advertised R-19 value, but the FTC says the claims are false and the R-value is likewise less than one.
- Arizona-based SuperTherm is alleged to have misrepresented an R-19 on its "COATING THAT REALLY WORKS," which product the FTC alleges has an R-value of "considerably less than one," and which fails to perform as advertised.
In the case of SPM, the FTC further alleges that the company's marketing misrepresents a 50 percent savings on heating and cooling costs, savings the FTC also alleges are unsubstantiated.
The FTC has a special place in its regulatory heart for energy savings claims: it doesn't like them. Whether the allegedly misleading claims relate to monthly bills or, in these cases, how well insulation works to save on energy use and, by extension cost, these cases remind manufacturers that the FTC continues to monitor closely.
In the words of Andrew Smith, Director of the FTC's Bureau of Consumer Protection, without solid "scientific support" behind claims "touting the energy-saving properties of their products," the FTC can and will take action against a wide range of companies.
NAD Finds Product Claims (Almost) Squeaky Clean
Following an inquiry it initiated as part of its routine monitoring program, the National Advertising Division (NAD) determined that although a manufacturer of a new "self-cleaning surface" was able to substantiate some of its claims, others did not pass the white-glove test.
NAD has been looking closely at health and safety claims, in particular in times of COVID-19. NanoTouch Materials LLC markets its NanoSeptic technology as creating a "continuously self-cleaning surface" used as a coating or covering for places where fingers and hands touch potentially contaminated surfaces such as elevators, door handles, security bins and public counters.
NanoTouch touts its product as: "Clean based on technology, not toxins. NanoSeptic skins and mats turn dirty, high traffic public touch points into continuously self-cleaning surfaces." "The New Clean means continuously self-cleaning surfaces. It means safe, non-toxic materials. It means turning dirty, high traffic public touchpoints into clean surfaces you can see."
More specifically, NanoTouch explained that surfaces are "coated in a microscopic layer of mineral nanocrystals molecularly bonded to the product," In support, NanoTouch provided a series of lab tests using the actual product in different applications designed to show that viruses don't grow on its surfaces. It also submitted a disclaimer on its site purportedly limiting the reach of its claims.
Following its review, NAD found the advertiser had provided a reasonable basis for its express claims that covered surfaces are continuously self-cleaning," "clean based on technology, not toxins," "powered by light," and the like. But it drew the line at claims such as Nanotouch "turns dirty surfaces into clean ones," finding that "cleaner" surfaces are not necessarily clean and the testing provided (which did not test large contaminants or repeated contamination with viruses and bacteria) did not show otherwise.
NAD also recommended the advertiser modify its claims to avoid implying that consumers using NanoSeptic-treated surfaces don't need to worry about bacteria, and that the surfaces are just as clean as if they'd been cleaned with disinfectants. Interestingly, NAD found these claims implied not so much by product advertising but by the "continuously self-cleaning" label affixed permanently to the surfaces themselves, which in such truncated form included no qualifying discussion of how the product worked (its mechanism of action as distinct from the results) or its general efficacy. NAD emphasized the need for the company to modify the message to clarify that the surface "is supplemental to other infection controls and precautions that they should still take when interacting the surface."
NAD always maintains that "An advertiser is responsible for all reasonable messages conveyed by its advertising, not just those that it intended." This case follows a series of NAD cases, however, where NAD in the times of global pandemic has clearly grafted concerns regarding misleading COVID-19 prevention or treatment claims onto what might in other times be more standard advertising claims.
NARB Takes the Shine Off S.C. Johnson's "Non-Toxic" Glass Cleaner Claims
The National Advertising Review Board (NARB) has determined that household cleaning supply maker S.C. Johnson & Son, Inc., was anything but squeaky clean when the company claimed that its vinegar-based Windex formula was "non-toxic." But the view is not totally hazy for S.C. Johnson, as the NARB also found the company's properly qualified "non-toxic" claims could potentially suffice.
Largely affirming NAD's position in a challenge brought by The Proctor & Gamble Company, NARB recommended that S.C. Johnson discontinue the claim that its Vinegar Windex Glass Cleaner is "non-toxic," finding it to be unqualified given the expectations of the term to consumers. The decision comes fresh on the heels of a California class action lawsuit alleging that S.C. Johnson knowingly advertised other Windex products containing allergens as "non-toxic."
Defending itself in the original challenge before NAD, S.C. Johnson had touted its internal company analysis (its own "Framework"), evaluated by expert declarations and independent assessment, as substantive proof its "non-toxic" claims were based on reliable scientific evidence. While S.C. Johnson's own analysis of its Windex Vinegar Glass Cleaner may have been rigorous enough for academics and health experts to rule out death or serious consequences from misuse of the product, the NARB agreed with NAD that such analysis could not properly support blanket "non-toxic" claims.
NAD determined that the term "non-toxic," as applied to S.C. Johnson's Vinegar Windex, had conveyed a message to reasonable consumers that misuse of the product would not cause even temporary illness (including vomiting, rashes, and upset stomach) to humans or household pets. The NARB agreed, noting that unqualified claims that a product is "non-toxic" would give consumers the expectation that they would not only be safe from death or serious health consequences but even less severe medical conditions as well.
However, the NARB did rule that S.C. Johnson's internal Framework could be used to make qualified non-toxic label claims if the company clearly disclosed the nature of any health risks associated with product misuse. S.C. Johnson said it would comply with the NARB's recommendation and modify the product claims in question.
When it comes to "non-toxic" claims, product makers will have to be spotless before NAD and the NARB. Advertisers should look towards the Federal Trade Commission's Green Guides, rather than the opinions of company-hired experts, when evaluating whether or not its products can be labeled as "non-toxic."