Stay ADvised: What's New This Week, April 4
In This Issue:
- Chobani and Danone Face Off on Yogurt Calorie Counts at NAD
- NAD Finds Beauty Claims “PerSe” Reasonable, but Qualifies Them
- Jury Finds Natera Guilty of False Advertising; Co. Must Pay CareDx $45 Mil
Chobani and Danone Face Off on Yogurt Calorie Counts at NAD
Do Danone yogurts really have fewer calories than the "average" yogurt—and what is "average" anyway? At its core, these were the questions before the National Advertising Division (NAD) when it recently considered a challenge to claims that Danone made about the calorie and sugar content of some of its yogurts.
Chobani, no stranger to challenges at NAD (including at Danone's hand), challenged claims that some of Danone's Greek-style and non-Greek-style yogurts contain fewer calories and less sugar than the "average" yogurt in the same (sub)category of yogurts.
Specifically, NAD considered whether several of Danone's claims comparing its products "along a single nutritional metric" to "average" competing products in a sub-category of yogurt were supported. In one challenged claim, for example, Danone stated that its Light & Fit Nonfat Vibrant Vanilla yogurt has "At least 40% fewer calories than average flavored non-Greek yogurt."
NAD first considered whether Danone's comparator—a so-called virtual "market basket" filled with nonfat, low fat, and regular fat Greek or Non-Greek yogurts—"conveyed a confusing or misleading message about the bases of comparison," and whether consumers would further understand that the term "average" meant the average sugar or fat content of the range of yogurts included in the "basket."
Despite Chobani's arguments otherwise, NAD determined that consumers (i) do not parse claims as carefully as Chobani advocated and so would understand the term "average" to mean "an average of" the products included, and (ii) would further understand that the term Greek or Non-Greek Yogurts (depending upon the claim) would include varieties with differing fat levels.
NAD next turned to the data itself, specifically whether it (i) was out of date and/or (ii) had improperly excluded private label products, and/or (iii) had improperly calculated the products' nutritional benefits using a "straight average rather than a weighted one taking into account market share.
On the "stale data" issue, NAD concluded that Danone's year-old data passed muster because "advertisers need a reasonable basis to support advertising claims; perfection is not required." Danone apparently updates its data annually and NAD found that given the fragmented market, and the inclusion of at least 85 percent of the relevant category, small market changes were unlikely to affect the results. Further, Danone explained that it underclaims its nutritional benefit advantages to account for marketplace shifts.
As to the exclusion of "private label data" from the market basket, NAD accepted Danone's explanation that it didn't include this data because it wasn't able to confidently verify it. While it would have been ideal to include private label sales in the "market basket," it would be worse to include unreliable private label market data.
Finally, NAD agreed with Chobani that a "weighted average" was more appropriate to "determine the basis of comparison for the challenged claim" given the "highly fractured" nature of the market. Nonetheless, all but one Danone claim survived a "weighted average" analysis. Accordingly, NAD recommended that Danone modify only the claim "Two Good Vanilla" contains "80% less sugar than average Greek yogurts," to reflect the lower sugar benefit arrived at once computed using the weighted average method.
One thread running throughout this NAD analysis was the prior NAD decision and recent case Chobani, LLC (Chobani Less Sugar Greek Yogurt) in which NAD determined that the "market basket" Chobani used to refer to "other yogurts" should be modified. But while one company's market basket may not pass muster at NAD, another company's may—unfortunately for Chobani.
NAD Finds Beauty Claims “PerSe” Reasonable, but Qualifies Them
In a reopening of a Fast-Track SWIFT case, NAD determined that a custom haircare company's claim about its "Review and Refine" online reviews was supported but required additional information regarding how the reviews were obtained.
First, some procedural background: during the original SWIFT matter, Function, a competing maker of customizable hair care products, challenged Prose's practice of only publishing 5-star "Featured Reviews" while simultaneously claiming that it had "over 192,000 5-star product reviews!" In that proceeding, NAD found Prose's claim unsupported and recommended it be discontinued. Prose agreed to comply.
Thereafter, in July 2021, Function filed a compliance inquiry expressing concerns about a revised Prose claim to have "225k Five-Star Product Reviews." In response to the compliance proceeding, Prose requested that NAD reopen the underlying matter. NAD agreed, the original challenger declined to participate, and NAD then reviewed the claim in its self-monitoring capacity.
NAD first considered Prose's "review and refine" method whereby it requested consumer feedback, revised the product (these are all custom haircare products) to fix any dissatisfaction, and obtained reviews for the original product, any reordered product and any revised product. NAD determined that the consumers surveys used to generate the reviews were neutral and reliable.
Next, NAD analyzed two other potential concerns with Prose's "collection and display of the 5-star reviews": the potential for inflated 5-star reviews, and the fact that Prose's website contains only positive ratings. NAD looked to the FTC for guidance and noted the importance consumers place on reviews when making purchasing decisions and the concurrent importance that reviews not give a misleading impression.
To ensure transparency, NAD recommended that when using its 5-star review claim throughout its advertising, it include with the claim "important qualifying information about how it collects and counts reviews." NAD further recommended that Prose clearly disclose that its ratings are counted on a per product—rather than a per order—basis and include reviews of re-ordered products.
NAD did not take issue with Prose's highlighting a number of positive reviews, while including no negative or even neutral ones at it site. NAD found that Prose communicated that the reviews quoted represented some, but not all product reviews, and this was enough to signal to the consumer that Prose was selective in its presentation. Interestingly, NAD didn't find the lack of negative or neutral reviews on the site problematic in this case since the company's reviews were apparently, and genuinely, all 4- and 5-star.
NAD seemed to accept that positive reviews reflected "the typical customer experience" especially given that there were no material connections between reviewers and the company. It didn't hurt Prose's case that its business model is predicated on getting as many "true" 5-star reviews as possible both by reformulating its products to meet consumer need and surveying its customers on a continuous basis.
Reviews. Reviews. Reviews. Stay tuned, NAD continues to provide companies with useful guidance in how to source and use them.
Jury Finds Natera Guilty of False Advertising; Co. Must Pay CareDx $45 Mil
Medical diagnostic company Natera must pay CareDx $44.9 million after a jury overwhelmingly found Natera guilty of falsely advertising its test for diagnosing problems with kidney transplants.
The jury found Natera liable to the tune of $21.2 million in compensation for nine out of 10 false advertising counts, as well as $23.7 million in punitive damages over Natera's unfair competition—both of which jurors found were intentional.
The lawsuit—one of several lobbed between the parties—centered on CareDx's patented kidney transplant surveillance diagnostic test, AlloSure, which is used to detect rejection of donated kidneys. CareDx alleged that "in an attempt to poison the marketplace" competitor Natera engaged in a deliberate false advertising campaign to deceive the public into believing that Natera's competing soon-to-be-released product, Prospera, is superior to CareDX's AlloSure.
CareDx alleged that was not the case. Natera's false advertising claims were rooted in a flawed study that was inappropriately used to compare the products, as CareDx noted in its complaint:
The comparisons to AlloSure are false both because the Natera study is so materially and substantially flawed that it is unreliable, and because the Natera Study's methodology differs so significantly from the CareDx Study's methodology that its comparison claims are precluded.
The complaint alleged that Natera's false advertising campaign used press releases, a prospectus supplement, presentations to investors, and misleading public statements to deceive healthcare professionals, insurance companies, patients and investors.
Jurors overwhelmingly agreed with CareDx, finding that Natera intentionally and willfully engaged in false advertising and unfair competition.
The big win for CareDx didn't stop here. The company's stock was up following the announcement of the verdict. But it's not all wine and roses for CareDx. Last September, a federal judge invalidated three of the company's patents in a setback for the separate patent infringement lawsuit that the company has filed against Natera. CareDx is also still facing a patent infringement suit filed by Natera.