Stay ADvised: What's New This Week, April 18
In This Issue:
- Plaintiff Claims He Fell for Furniture Store's Deceptive "Goof Proof" Warranty
- Under DSSRC Microscope, Meal Prep MLM Does Good (But Still Falls Short) On Earnings Claims
- NARB Clearly Sees (Most of) Bausch + Lomb INFUSE Claims as Unsupported
- FTC $102 Mil Trial Win Is "On Point"
Plaintiff Claims He Fell for Furniture Store's Deceptive "Goof Proof" Warranty
A man who purchased the "Goof Proof" warranty at Bob's Discount Furniture is suing the company, claiming it misled him and other consumers by promoting its warranty/service contract, then refusing to repair the furniture according to its terms.
This case was catapulted into the courts when the reclining couch-chair combo that plaintiff Robert Potthoff had purchased at Bob's Discount Store broke while he was in the process of getting up from it. As alleged in his complaint, plaintiff then filed a claim under the company's "Goof Proof" extended warranty, which he'd purchased in conjunction with the now malfunctioning chair. Plaintiff's warranty claim was subsequently denied, with Bob's Discount claiming that the chair broke due to normal "wear and tear" (apparently a type of "goof" not covered by the insurance).
The complaint alleges that although Bob's denied the claim on the principle that it was a matter of normal "wear and tear" and therefore excluded from coverage, the recliner broke because of a defect with the chair, not because of wear and tear. As plaintiff tells it, the chair's nuts and bolts never fit the furniture properly, gradually weaking and loosening the recliner, and its springs were defectively designed—leading to its untimely demise.
Despite failing to live up to its promise by allegedly falsely claiming that the damage wasn't covered, the complaint asserts that Bob's salespeople strongly pushed the warranty, motivated by company incentives. And, when plaintiff repeatedly asked representatives what the warranty would cover, they told him it would "cover any issues which come up for five years," a representation on which he says he relied when purchasing the product.
Plaintiff alleges that reasonable consumers rely on the company's truthful marketing and description of its services, as he did. The complaint further alleges violations of the Illinois Fraud and Deceptive Business Practices Act, as well as other state consumer fraud and breach of warranty laws. A similar putative class action was filed in September 2021 and voluntarily dismissed fewer than three months later.
Companies that offer warranties must limit their promises to those they plan to fulfill. Avoiding gimmicky turns of phrase, such as "goof proof," can avoid over-promising misrepresentations.
Under DSSRC Microscope, Meal Prep MLM Does Good (But Still Falls Short) On Earnings Claims
Meal kits are big business, but there is more at stake than just ease of preparation, taste and claims marketed to consumers—earnings claims made to would-be salespeople come under scrutiny too.
The Direct Selling Self-Regulatory Council (DSSRC) initiated a matter against Tastefully Simple, a meal kit multi-level marketing (MLM), as part of its independent and ongoing monitoring of advertising claims in the direct selling industry. The DSSRC looked into claims made by Tastefully Simple's salesforce on social media regarding the earnings potential for members working for the MLM.
DSSRC's initial review highlighted five problematic earnings claims promoted by the company's salesforce members on social media, all touting large income amounts and career-level rewards for being a member: "Are you looking for a new career or a second income source?"; "What would you do with an extra $500 to spend each month?"; "Replace another income"; "Full-time opportunity"; and "Travel for free."
Tastefully Simple was able to have these posts quickly removed. Going a step further, the company also "informed DSSRC that it took the opportunity to revisit its commitment to clarity on income transparency." Tastefully Simple showed the DSSRC its compliance documents conveying the company's expectations of salesforce members, the details of consultant training, and "the company's approach to the communication of earnings claims."
Still, DSSRC found 10 additional problematic posts with overblown earnings representations. One such post claimed that "Tastefully Simple provides my family with debt free holidays, paid medical bills, groceries, vacations, and so much more!!" Other problematic buzzwords included "replacing your income" and "paycheck." Tastefully Simple managed to get all but three of these posts removed.
DSSRC concluded that these remaining posts could be reasonably interpreted by individuals to communicate that they could earn substantial income as Tastefully Simple MLM members. The program recommended that given the absence of substantiation for these claims, the company do more to discontinue them—specifically by using the social media platform's takedown mechanism for intellectual property violations and, if that didn't work, requesting in writing that the social media company take down the posts.
This case highlights many top-of-mind issues for self-regulation monitors as well as for the Federal Trade Commission—earnings claims, use of testimonials, the need for companies to monitor and take control of those who purport to speak on its behalf. It also shows how challenging it can be to get offending posts removed. The advice? Training, monitoring and more monitoring.
NARB Clearly Sees (Most of) Bausch + Lomb INFUSE Claims as Unsupported
In its first complex track decision, the National Advertising Review Board (NARB) upheld the vast majority of the National Advertising Division's (NAD) findings that Bausch + Lomb's express and implied claims for its daily disposable contact lens were unsupported.
However, NARB it disagreed with NAD on a few narrow points, recommending modification rather than discontinuance in ways that arguably do not fit comfortably with both agencies' precedent (full disclosure, DWT represented Alcon before the NAD and the NARB). The primary focus of the case was a series of claims based on a contact lens clinical study that purportedly supported the Bausch lenses' ability to improve the wearer experience in a number of ways (versus what is part of the problem).
Bausch relied on the study for its claims that the INFUSE lenses provided "unsurpassed overall comfort and vision versus DAILIES TOTAL1" lenses, which are manufactured by Alcon, as well as for a series of more specific vision, irritation, and dry eye-related percentage agreement claims (e.g., "84% agreed Bausch + Lomb INFUSE reduced irritation and discomfort.").
NAD had found the Bausch clinical study insufficient as claims support for myriad reasons that squarely fit within NAD precedent and so had recommended discontinuance of all of the study-based advertising claims. NARB agreed with respect to the directly comparative "unsurpassed" claim but determined the remaining study-based "percentage agreement" claims were "monadic" (that is, not directly comparative to DT1 lenses) and so were subject to a lesser substantiation standard.
NARB did require modification to the claims (e.g., to note that Bausch included those who only "slightly agreed" with the various comfort statements) but not outright discontinuance. The modifications required by NARB were thoughtful, and it is highly unlikely that any advertiser would be interested in making the claims with the revisions NARB recommended. Nonetheless, in applying a lower substantiation standard, in our view the NARB veered from well-established precedent.
The challenged advertising, largely directed to eye care professionals (ECPs) and included in a brochure, asserted additional claims based on in vitro data regarding the comparative modulus (stiffness) and moisture of these competing lenses which employ differing technologies that, Alcon challenged, render deceptive the comparative modulus and moisture figures used by Bausch. With respect to the need to modify these claims to be clear about the differing technologies, NAD and NARB agreed, likewise recommending Bausch discontinue claims that impliedly tied the in vitro modulus and moisture figures to clinical outcomes of vision, comfort, and eye health.
Here, NARB adhered closely to precedent in its review of what NAD had called an "apples to oranges" claim regarding the competing lenses' moisture and modules figures. NAD had recommended that Bausch disclose that the claims compared different types of lenses, "which would put a sophisticated audience on notice that there may be other data" relevant to the comparison of moisture and modulus readings. Bausch argued that it should be allowed to promote its own product without pointing out potential competitor advantages.
In upholding NAD's decision, NARB found that the requested modification didn't require Bausch to tout Alcon's advantages but, rather, to provide information that puts Bausch's comparative superiority claims in context by letting ECPs know of other data that might influence their analysis of the competing lenses.
Turning next to implied lens comfort claims, the panel agreed with NAD that Bausch's brochure—with its superior lens properties claims like "most moisture" and "lowest modulus"—communicates an implied message that its INFUSE lenses provide greater comfort than DT1 lenses, an unsupported claim. Bausch had argued that ECPs are highly sophisticated and would know that other properties also influence comfort, but Alcon countered—and rightly so, said the panel—that sophisticated audiences deserve truthful ads as well. Not to mention that "by stressing key determinants of comfort, Bausch is implying to ECPs" that its lenses are more comfortable than competing brands, said the NARB panel.
There is a lot to unpack in this case, including a number of additional claims that NARB agreed with NAD should be discontinued. But with respect to substantiation standards generally, the case may raise some concern for advertisers deciding whether a study does—or does not—support their advertising claims.
If a study is unreliable as claims support, it is unreliable, regardless of whether the claims flowing from that study are comparative or monadic. On this point, we believe NARB got it wrong.
FTC $102 Mil Trial Win Is "On Point"
The old adage that crime doesn't pay is at least true this month, as the Federal Trade Commission (FTC) announced the agency won a victory at trial and $102 million in damages to be returned to consumers predicated on a scheme that tricked victims into giving money or personal information in exchange for bogus advice on applying for various government benefits.
The FTC in December 2019 sued official-sounding On Point Global and a whole host of related companies and individuals involved in an allegedly messy corporate web of deception. The agency's complaint stated that On Point Global operated more than 200 websites promising to deliver assistance with government services in exchange for money or sensitive personal information, but, at best, provided little more than publicly available information found on actual government websites.
With website names like DMV.com, floridadriverslicense.org, coloradodriverslicenses.org, californiadrivers.org, fishinglicense.org and texasdriverslicenses.org, defendants made themselves look legitimate when they were anything but. Consumers who entered their personal information to these websites received marketing emails and texts, offering everything from free gift cards to job search assistance, from the defendants and other third parties. According to the FTC, defendants received millions of dollars from the sale of this data that they collected under false pretenses.
According to the complaint, the schemers also ran fake government benefit websites, ostensibly billed as places to get help on everything from food stamps to unemployment benefits. But all they did was obtain personal information from consumers like income, date of birth, addresses, and telephone numbers.
The FTC noted that scores of consumers complained to On Point and many asked their banks to reverse the company charges. The court granted the monetary reward after ruling for the FTC on a contempt motion against the scheme's ringleader for, among other things, violating the terms of a prior FTC injunction placed on him for pocketing millions via unwanted charges he made using spam texts touting fake "free" gift cards.
It's been a long road to victory for the FTC in this matter, but the case shows the agency's willingness to use multiple means available to it in order to enforce the FTC Act, particularly against repeat (and egregious) offenders as here, and to use any means to seek financial penalties.