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Brand Protection & Advertising

Stay ADvised: What's New This Week, November 29

12.03.21
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In This Issue:

Retailer's Environmental Claims Mostly Sustained at NAD

As consumers look for environmentally-friendly options and retailers answer the call by marketing "sustainable" products, the National Advertising Division's (NAD) routine monitoring program continues to scrutinize related claims. In this case, NAD challenged claims made by retailer Everlane about its ReNew Clothing line. NAD approved some claims, but recommended the company modify others.

Three claims concerning Everlane's advertising describing its use of recycled plastic and elimination of new plastic caught NAD's attention: an aspirational claim about "no new plastic," a claim about the 9 million plastic bottles Everlane has recycled to date, and the claim that its products are "safer for the environment."

Rooting its analysis in the Federal Trade Commission's (FTC's) Green Guides, NAD first noted that the FTC cautions against making broad claims about environmental product benefits because they could have a number of meanings that the advertiser is required to substantiate. Qualified general environmental claims are permissible, however, as they can "prevent deception about the nature of the environmental benefit" by using "clear and prominent qualifying language that limits the claim to a specific benefit." Second, NAD pointed to the Green Guides' recommendation against the use of environmental certifications or seals that omit the basis for certification or seal on product labels.

NAD found that Everlane had a reasonable basis for its "no new plastics" claim by qualifying it and providing adequate support. On its website, Everlane stated that it "set out to remove virgin plastic from our entire supply chain by 2021." Though aspirational in nature, this claim did set a specific goal, said NAD, and therefore conveyed a message that required substantiation.

Everlane explained in detail how it achieved 90 percent of its stated goal and why it would be difficult to achieve the remaining 10 percent. In this way it qualified the "no new plastics" claim by referring to a specific environmental benefit and explaining how it planned to achieve this goal.

NAD also found Everlane's claim about the 9 million plastic bottles it recycled to be supported. Everlane provided a reasonable basis for the claim based on a detailed explanation of how it arrived at the claimed number, and backed it up with documentation.

NAD, however, asked that Everlane modify its claim that its clothes are "safer for the environment" because of its use of "Bluesign-approved dyes." Bluesign is a reputable certification body but, as NAD explained in it recent decision regarding Butterball turkey products, claims tied to third-party certification must clearly and conspicuously display the origins of that certification. While Everlane's Bluesign certification qualified the environmental benefit claim by detailing why the product is safer for the environment, "there is no reference to Bluesign as being an independent certification" on the product page where the claim is made.

Key Takeaways

As this case demonstrates, general environmental benefit claims are difficult if not impossible to support, but carefully and clearly qualified claims will pass muster with NAD. The case further reminds us that we would really like to have the FTC weigh in on sustainability claims when it reviews and updates the Green Guides, currently slated for 2022 (but don't hold your collective breath).

NAD Takes a "Byte" Out of Teeth Aligner's Incentivized Reviews

Orthodontics remains an oddly hot topic at NAD, this time regarding the use by Straight Smile of incentivized reviews for its Byte tooth aligners. Although Straight Smile discontinued most of the claims challenged by competitor SmileDirectClub, NAD weighed in on two remaining claims of concern—one relating to its use of and disclosures regarding incentivized reviews generally and the related use of #1 rankings provided by third-party review site BestCompany.

Recommendations regarding disclosures of incentivized reviews is not new ground for NAD, but its discussion of rankings by third-party review sites is an extension of prior NAD opinions.

Regarding the first issue, SmileDirectClub alleged that reviews and testimonials that appeared on BestCompany.com and on Byte's own webpage were incentivized without sufficient disclosure. More specifically, Byte used a blanket disclosure to explain that some of its reviewers "were given free product in exchange for their honest opinions." The problem for NAD was that a blanket disclosure does not differentiate between reviews that are incentivized and those which are not—a concern tangentially raised by the FTC in its 2017 Guidance for Business.

NAD explained that, "[t]he goal of providing a disclosure is to allow consumers to assess the credibility of the review." That goal is not served if consumers can't know whether or not incentives were provided, noting that "[c]onsumers reading individual reviews may not see the disclosure or, even if they do see it, realize that it applies to the particular reviews they are reading."

NAD did not accept Byte's excuse that it has no way of knowing which are which, and suggested that reviewers simply be told to include they received free product when writing their reviews. Further, based on well-settled NAD precedent that companies are responsible for their advertising even if it appears on a third-party site, NAD recommended that Byte take reasonable measures to provide clear and conspicuous disclosures for each individual incentivized review appearing on BestCompany.com as well.

NAD then turned to the purported "expert recommendation" received by BestCompany. The use of third-party review sites to support "ranking" claims is common among many companies—but as NAD noted in its decision, many of these sites include a pay-to-play component, and that payment changes the game and the disclosure requirements. Straight Smile happily touted its "BEST OVERALL" ranking by review site BestCompany. What it did not mention, at least clearly enough for NAD, was the pay-to-play nature of the relationship between the two companies.

First, the disclosure of the financial arrangement, which appeared as a pop-up box, was not clear and conspicuous because consumers had to click on it to access the disclosure. More importantly, however, NAD also agreed with SmileDirectClub that the ranking conveyed a false impression that it was based on an honest assessment of the company rather than on the paid relationship.

Since BestCompany's rankings are influenced by the material connection with Byte and companies in essence pay for a higher rating, NAD recommended Byte discontinue use of this ranking entirely (whether by Byte directly or by BestCompany on behalf of Byte), or modify it to provide a clear and conspicuous disclosure so consumers understand that the ranking is advertising paid for by Byte, and is not based on independent review.

Key Takeaways

Is this the end of pay to play? Going forward, advertisers should note that advertising use of rankings received from pay-to-play review websites are likely a no-go, even with disclosure of the sites somewhat-independent, somewhat-paid-for "process."

Judge Straightens Up Two Classes of Plaintiffs in Orthodontic Pacifier False Ad Suit

Plaintiffs in a class action lawsuit alleging that Newell Brands and its subsidiary NUK falsely advertised their "orthodontic" pacifiers got one step closer to prevailing as the court certified two classes of plaintiffs—one of all pacifier purchasers, and a subclass of purchasers of pacifiers for ages two and up.

In their October 2019 complaint, plaintiffs alleged that Newell and NUK's labeling of its pacifiers as "orthodontic" was false and misleading because it conveyed the message that the pacifiers are beneficial to the dental health of children ages two and up. However, according to the plaintiffs, the scientific consensus is that prolonged use of pacifiers may cause significant issues in the development of children's jaws and teeth. Plaintiffs also alleged that defendants failed to disclose this fact in order to mislead consumers into believing the pacifiers were not only harmless but, in fact, beneficial to their child's orofacial health.

In certifying the classes, Judge Ronald A. Guzmán of the U.S. District Court for the Northern District of Illinois found that the typicality and adequacy requirements for class certification were met and called defendants' arguments against certification "perfunctory." In the case of typicality, the court held that plaintiffs and the class members were subject to the same alleged uniform labeling of the pacifiers, and their claims are all based on the same legal theory about the deceptive labeling. The proposed classes also met the adequacy criterion because named plaintiffs have the same interest and injury as the rest of the class members.

The court also found that plaintiffs demonstrated predominance and superiority. First, damages could be estimated class-wide. Second, "the central issue in the case is whether defendants' packaging and marketing are likely to mislead a reasonable consumer." Given how costly and complex it will be to prove allegations of consumer fraud and that "no rational individual plaintiff would be willing to bear the cost," the court held it was most appropriate to offer proof on this issue on a class-wide basis.

Defendants argued that the subclass of purchasers ages two and up was not ascertainable because plaintiffs had no "viable" method of identifying these purchasers since retailers don't have records of individual customers. Defendants further argued that without a receipt it is impossible to know who purchased the product versus who received it as a gift. Judge Guzmán tossed this argument aside, noting that courts have used "alternative" means of notice. Moreover, "the concern about consumers who received a pacifier as a gift or a sample is a red herring" as the class only includes purchasers and "the Court does not share defendants' skepticism of class members' powers of recollection."

"Plaintiffs also demonstrate that they can prove materiality on a class-wide basis; the claims of every class member will rise or fall on the resolution of the question of whether defendants' packaging was likely to deceive a reasonable consumer," noted the court.

Defendants did not contest numerosity. With respect to commonality, Judge Guzmán rejected the argument that plaintiffs would be unable to use "common scientific evidence" to prove their claims because they hadn't disclosed an expert witness to testify on this issue, saying this was a mischaracterization of the discovery schedule and that plaintiffs had not yet been given the opportunity to present this information.

Key Takeaways

Although the court narrowed the complaint after a 2020 motion to dismiss by nixing the injunctive relief claim, most of the lawsuit remains intact and now ready to be litigated as class action.

Clinique Oil-Free False Ad Suit Proceeds Smoothly for Plaintiff

A federal court overseeing a class action lawsuit alleging that beauty company Clinique's claims that its products are "oil-free" are false has refused to toss the vast majority of the claims.

In the complaint, plaintiff Norah Flaherty alleged that Clinique falsely advertises a number of its skincare products, intentionally mislabeling them as oil-free when they in fact contain "numerous oils." She alleged that she purchased four products based on these representations but that when she used them, she experienced breakouts, oily-feeling skin, and a "loss of confidence in product labeling due to the oil content because they were not oil-free."

Clinique argued that plaintiff could not show that she relied on the alleged misrepresentations because she had already filed lawsuits making similar allegations that products from other manufacturers were falsely advertised as oil-free, then purchased the Clinique products containing some of the same ingredients. Clinique asserted that this showed she must have known about the purported deception.

Judge Marvin E. Aspen was not persuaded by this line of argument, concluding that plaintiff's complaint did not allege that she examined the Clinique ingredients list before making the purchase or made the connection between Clinique's ingredients and those in the other products she purchased. It was plausible, noted Judge Aspen, that plaintiff saw the "oil-free" representation on the front of the package yet did not look at the ingredients list on the back.

Judge Aspen also dismissed Clinique's use of the prior lawsuits to make an argument that the class claims should be dismissed because the other lawsuits made plaintiff's claims not typical of those of other class members. The judge reasoned that it was too early in the lawsuit to say whether plaintiff knew that the Clinique products contained the "offending oils," regardless of the other lawsuits. The court also said it was premature to determine whether, as Clinique argued, certifying a national class was too impractical.

Aside from the claims pertaining to the four products she bought, plaintiff sued on two additional products, claiming they are "substantially similar" to one another because they are "skincare products" and "perform similar functions." On this point, however, the judge noted that these similarities were too generic and dismissed the claims as to the products plaintiff didn't buy.

Key Takeaways

Cases where ingredient lists provide clarity to front-of-pack claims continue to abound and courts continue to go both ways—some tossing them and some keeping them. We will continue to keep score and report on how they go.

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