Stay ADvised: What's New This Week, February 7
In This Issue:
- Deceptive Reviews in the News: NAD Decides "Best Reviews" Has Got to Be Better
- Congress Takes Aim at Targeted Advertising
- FTC Settlement Is a Prescription for Enforcement of Contact Lens Rule
- Some Ad Claims Don't Fly, Others Soar at NARB
Deceptive Reviews in the News: NAD Decides "Best Reviews" Has Got to Be Better
On the heels of the Federal Trade Commission's (FTC) recent guidance on website reviews, the National Advertising Division (NAD) considered Smile Direct Club's (SDC) argument that reviews on BestCompany.com are neither impartial nor independent, despite the company's claims to the contrary.
Having recently won a challenge before NAD with respect to claims that competitor Byte made on BestCompany.com, SDC now challenged BestCompany.com over the same types of claims made against SDC.
The issue before NAD was whether BestCompany.com's claims that its website's reviews are impartial was accurate given that, as the company confirmed, its rankings system gives greater weight to certain "verified" reviews. Further, argued SDC, BestCompany.com's "partner" relationship with certain companies impacts scores and rankings on its site.
In its arguments, SDC challenged the implied claim that Best Company is not "pay to play," meaning it doesn't accept payment in exchange for better review scores. SDC also challenged both express and implied negative claims about SDC and its products found on BestCompany.com, as well as the claim that reviews and testimonials about Byte reflected independent opinions and not incentivized endorsements.
NAD concluded that Best Company's claim that it is independent and impartial was unsupported. NAD found that the company's ranking methodology results in a higher score for businesses that partner with Best Company, in particular, because of the unique weight it gives to partner reviews. For example, the company's "review generation" campaign resulted in more verified reviews, which are given a higher weight in the review scoring system and also resulted in more reviews of partner companies.
NAD concluded that the evidence didn't show that Best Company "systematically guarantees top rankings." Yet, "… from the perspective of the consumer who believes that they are relying on an unbiased ranking system, the ranking is not what it appears to be because preferred partner relationships impact the rank." Therefore, NAD recommended that Best Company discontinue claims that it is "a truly independent and impartial review site" and is not "pay to play."
NAD found that Best Company had a reasonable basis for the claim that its reviews were all moderated by a tech-enabled process "to ensure they are real and authentic" as the company successfully showed it had a policy of excluding incentivized reviews. NAD nevertheless recommended Best Company modify its "100% Verified" claim to limit it only to reviews that passed additional verification that the reviewer was a bona fide purchaser of the product.
There's more than one way to be impartial. The blatant "pay-to-play" bias is one thing, but a review site's methodologies don't have to rise (or stoop) to that level to be biased. As we see here, review methodology that is more subtly skewed in favor of "preferred partners" is also biased. This is especially important in the context of consumer reliance on online reviews.
As NAD noted in its decision, and as we covered last week on Stay Advised about the FTC's recent publication of a Guide on Soliciting and Paying for Online Reviews and the Fashion Nova settlement, the truth in advertising of online reviews is a hot topic, and enforcement bodies both compulsory (FTC) and voluntary (NAD) are taking a hard line.
Congress Takes Aim at Targeted Advertising
Whether you've heard it called surveillance advertising, targeted advertising, or personalized ads, digital marketing that is tailor-made just for you using data about you is everywhere these days. A bill has recently been introduced in Congress to explicitly ban most forms of the simultaneously useful (to consumers), invasive (also to consumers), and lucrative (for advertisers) practice.
Democratic Representatives Cory Booker (D-NJ), Anna Eshoo (D-CA) and Jan Schakowsky (D-IL) recently introduced the Banning Surveillance Advertising Act, seeking to curtail advertisers and "advertising facilitators" (AKA social media, ad tech companies, and data brokers) from using personal data to display targeted ads they say are "premised on unseemly data collection and tracking to enable advertising."
The bill would bar advertising facilitators from posting ads that use personal information or enable an advertiser to do so. This would preclude the use of any personal information to identify an individual for the purposes of targeting advertising.
There are limited exceptions baked into the bill, particularly with respect to "contextual ads," meaning that ad tech companies could still publish ads based on content the individual consumer is looking at or has searched. The exception to the exception, though, is that this information can't be used for targeting ads taken out of "context," meaning additional ads using that contextual data.
For advertisers, the bill would prohibit them from targeting advertising based on personal information obtained from third parties, but they'd still likely be able to use their own first-party data to run targeted ads. Advertisers would, however, be barred from publishing targeted ads based on color, race, nationality, or other protected classes. The bill exempts targeting based on an individual's general location, but more specific location tracking is also barred.
The ad leaves enforcement in the hands of the FTC and provides a private right of action with penalties of up to $5,000 per violation and attorneys' fees.
Though it's unclear how likely this bill is to pass, it continues to demonstrate the broad hostility to targeted advertising. Big tech companies have already announced they plan to limit targeted ads and user tracking to some extent. Advertising groups continue to say, however, that the law and other regulatory actions like it, if enacted, could harm small businesses given how important data-driven advertising is in the digital world.
FTC Settlement Is a Prescription for Enforcement of Contact Lens Rule
Vision Path, which sells contact lens subscriptions online as Hubble, has agreed to a $3.5 million settlement with the FTC over allegations it engaged in deceptive tactics in violation of the FTC Act, the Fairness To Contact Lens Consumers Act, and the Contact Lens Rule.
The FTC claimed Vision Path deliberately set up its business practices in violation of contact lens rules in order to sell more of its own brand of Hubble contact lenses. In addition to the allegations that Vision Path's sales practices fell short of contact lens rules, the FTC alleged that the company generated deceptive online reviews and made false representations to consumers about its services.
On endorsements, the FTC alleged that the company posted deceptive reviews online. It "made a concerted effort to influence the impression consumers got about Hubble and its lenses, including by attempting to increase the number of positive reviews." Among other things, Hubble offered customers $30 worth of contact lenses in exchange for writing reviews on the Better Business Bureau's website, though the site requires posters to attest to the independence of the review. In one case, the company's Director of Customer Experience even posted a glowing review under the guise of being a customer.
But the bulk of the suit revolves around Vision Path's alleged failure to properly verify prescriptions as mandated by law and other violations of the Contact Lens Rule. According to the complaint, Hubble regularly deceived consumers into buying its own brand of Hubble contact lenses rather than the prescribed brand. The company allegedly set up its ordering system online to make it more likely that consumers would order Hubble contact lenses rather than the brand prescribed by their provider. It also substituted Hubble lenses for prescribed lens brands.
Contact Lens Rule provides that companies may only sell contact lenses in accordance with a valid contact lens prescription. Sellers must verify with a prescriber that a prescription is valid before making a sale. If the prescriber doesn't get back to the company within eight business hours, that's a "passive verification," and the vendor can make the sale.
Hubble structured its verification system to make it difficult if not impossible for prescribers to verify prescriptions. These roadblocks included verification messages deliberately phrased to make them difficult to understand and abruptly short verification calls. Hubble also used manufacturer names, rather than commonly used brand information, in order to obstruct verification. The complaint alleges that in at least one instance the company sold contact lenses with invalid or denied verifications.
The company also misled consumers about its verification system, representing that it would obtain accurate information from prescribers when that was hardly the case, according to the FTC. It also made false statements about the termination of its subscription services.
In addition to the civil penalty and consumer redress order, the settlement bars the company from engaging in the conduct that got it in hot water in the first place.
While the Vision Path settlement concerns violations of the Contact Lens Rule, you could say the FTC's got just one thing on its mind these days: online advertising. The Commission didn't bury the lead.
"Even if your business isn't covered by the Contact Lens Rule, don't blink or you'll miss and important FTC message about the appropriate use of endorsements and customer reviews." The Commission offered advice for marketers posting reviews: check out the FTC's Guides on just this very subject matter.
Some Ad Claims Don't Fly, Others Soar at NARB
The National Advertising Review Board (NARB) weighed in on the appeal of a NAD matter involving two emergency air medical transport companies—advertiser Air Methods Corporation and challenger Global Medical Response (GMR)—and took a middle ground approach in its review. GMR challenged Air Methods' advertising claims concerning membership programs and air transport fees, including its new no-membership-plan business model.
Both companies operate air medical transport fleets in rural areas where the service is necessary due to limited access to healthcare services. Because pricing for air transport is prohibitively expensive, air transport companies (including GMR and, until recently, Air Methods) generally offer air transport insurance, or "membership program," though the insurance may not cover all costs. In 2019, Air Methods adopted a business model offering protection without requiring membership by contracting with insurance carriers.
Of the three membership claims challenged by GMR, NARB agreed on two with the challenger and NAD: "Living Shouldn't Require a Membership" and "Patient care decisions should never be made on the basis of membership." Emergency medical services are not permitted by law to decline to provide service when summoned by medical professionals. Upholding NAD's conclusions, the NARB panel agreed that those two statements should be discontinued because they imply that competitor medical air transport services would not provide service to a patient unless they have a membership.
However, the NARB panel sided with Air Methods that the claim "No membership required" does not necessarily convey a message about competitors. The NARB panel suggested that Air Methods only use the "no membership required" claim when it is clear, in context, that the advertiser is not making comparative claims.
Air Methods also made the claim that the "No Surprises Act," which prohibits balance billing for patients with commercial insurance and became effective in January 2022, "effectively eliminates" the need for an air medical membership, which the NARB panel found was a bridge too far. At best, the No Surprises Act makes medical memberships less appealing or cost effective. The NARB panel concluded that the claim could instead be "modified to avoid the implication that memberships provide no financial benefits" and to "accurately describe the protections" of the Act.
NAD concluded that the reasonable consumer could interpret Air Methods' claim that dropping the membership plan "has enabled us to reduce our patients' out-of-pocket expenses to an average of $200" as referring to the initial method billed, rather than referring to a final payment amount after any dispute process. Air Methods dropped the "$200" figure from its marketing. As to the balance of the claim, NARB disagreed with NAD's conclusion, and agreed with Air Methods on appeal, that there was no need to modify the term "out-of-pocket," because the term was accurate and not misleading.
The NARB panel upheld NAD's conclusion that the claim "we've seen lower costs and better outcomes through our Patient Advocacy program by working to increase insurance coverage for our services" could be interpreted as an unsupported comparison to Air Methods' competitors. The terms "better outcomes" and "lower" are ambiguous and could be interpreted by reasonable consumers to mean better outcomes, so NARB recommended that Air Methods modify the claim to clarify that it references financial outcomes and discusses the experience of Air Methods and not its competitors.
The NARB panel also upheld NAD's recommendation that the claim that "Memberships don't actually provide you with the financial protection that they claim" be discontinued. It reasoned that Air Methods had not supported the claim that its competitors mislead the public about the benefits of their membership plans.
Another claim challenged by GMR conveyed the message that membership funds are used to pay lobbyists because it's a "money-making scheme." The panel concluded that this claim implied that "substantial portions" of the membership fees were used for lobbying when, as NAD had also concluded, this message was not supported by the evidence. The "money-making scheme" reference conveyed an unsupported message of unethical conduct as well.
Finally, the NARB panel took the middle ground on the contested claim "Don't fall victim to membership deception and money-making fraudsters—say NO to air medical memberships." NAD had recommended this claim be discontinued as an unsupported message about competitors. NARB agreed that the term "fraudsters" was not puffery, as the advertiser claimed. On the "say NO to air medical memberships" portion of the claim, however, the panel agreed that the claim should be discontinued in the context "say no to fraudulent conduct," but could be modified and used in a proper, non-"fraudulent" context.
It's not every day that a NARB panel disagrees with NAD, but in this decision, the panel showed a willingness to parse through the claims with a fine-tooth comb and make delicate distinctions about what was not supported, and what could be supported if modified slightly.