Stay ADvised: What's New This Week, May 9
In This Issue:
- Here Comes the Sun…Set—Minnesota Sues Solar Panel Cos. Over Pattern of Misleading Claims
- FTC Looking to Beef Up Anti-Telemarketing Protections
- Not to "Bragg" or Anything, but Goli Held on to Its Product Name at NARB
- Challenge at NAD Takes the Sheen off Lab-Made Diamond Claims
Here Comes the Sun…Set—Minnesota Sues Solar Panel Cos. Over Pattern of Misleading Claims
A group of Utah-based solar power companies misled and fleeced Minnesota consumers, according to a lawsuit filed by Minnesota Attorney General Keith Ellison. AG Ellison alleges the companies used aggressive and misleading marketing tactics and misrepresentations to lure consumers into sketchy contracts (that in some cases consumers didn't even know they were signing).
The complaint charges that Brio Energy, Bello Solar Energy, Avolta Power Inc., Sunny Solar Utah, and the companies' executives engaged in a litany of deceptive tactics—from questionable sales practices to deceptive marketing claims to misrepresenting contracts as merely informational documents. "The Solar Defendants use deceptive and misleading tactics to gain consumers' trust, obtain access to their homes, and sell them solar panels that cost far more than the average Minnesota solar" panel system, according to the lawsuit.
To market the solar panel systems, the companies allegedly used online ads and lead generation, telemarketing and door-to-door sales. Nothing shady so far. But then, using deliberate, scripted high-pressure sales tactics, the complaint alleges the companies misrepresented the cost savings and financial benefits consumers would receive if they purchased the solar panels. In fact, AG Ellison alleges that there was a significant markup between the cost of these systems and the average cost of installing solar panels in Minnesota.
According to the complaint, to get in the door (literally), salespeople misrepresented their relationship with Minnesota electric companies, giving the impression that they worked for the utilities. They dressed as company employees and used utility company logos without authorization. Then, salespeople misled consumers into thinking they were only interested in providing information on energy savings "so they know whether solar energy is a good fit for them."
Unsurprisingly, salespeople were hired for their willingness to "win" at all costs and to engage in these aggressive sales tactics. Salespeople were allegedly instructed to obfuscate their intent, confuse consumers, and be willing to "go to war" to sell the solar panels.
The complaint also claims that the defendants tricked consumers into signing sales contracts by passing them off as requests for more information rather than the binding sales contracts they were. Defendants also failed to inform consumers about vital provisions in these contracts, such as their three-day right to cancel.
The deception didn't end there, claims AG Ellison. Consumers experienced installation delays that the companies blamed on utilities. When consumers complained (and complain they did), they were threatened with steep cancellation fees and lawsuits.
Seeking financial redress and to bar defendants from continuing the illegal actions that AG Ellison says have cost Minnesota consumers millions of dollars, the complaint alleges that defendants violated Minnesota consumer protection, false advertising, and deceptive practices laws.
What is it about clean energy that tends to bring out the dirtiest deceptive marketing tactics? As we covered, last year New York Attorney General Letitia James sued an entirely different solar panel company over pretty similar marketing tactics. For the companies in this lawsuit, other lawsuits may be imminent. Minnesota is the first to file, but other states have warned the companies in this case about using the same tactics.
FTC Looking to Beef Up Anti-Telemarketing Protections
The Federal Trade Commission (FTC) may soon strengthen protections against aggressive telemarketers. It recently issued a Notice of Proposed Rulemaking (NPRM) to amend the Telemarketing Sales Rule (TSR) that would provide protections for businesses and impose stricter notice requirements on telemarketers.
To tackle the increasing telemarketer-targeting of businesses with marketing scams, the FTC proposed broadening the application of the TSR, which since 1995 has required telemarketers to make certain disclosures and has prohibited misrepresentations in sales calls—to businesses as well as consumers. The amended rule would prohibit business-to-business in addition to business-to-consumer misrepresentations.
The FTC also proposed strengthening existing recordkeeping requirements and establishing others in seven categories that include requiring telemarketers to keep copies of each prerecorded message, records showing telemarketer business relationships with consumers, and records of the service providers used by telemarketers to make calls. The Commission could use this information in enforcement actions for violation of the TSR.
Alongside the NPRM, the FTC also announced an advanced notice of proposed rulemaking (ANPRM) seeking comment on other changes to the TSR that the FTC is contemplating, including whether to make it easier for consumers to cancel subscription plans by making telemarketers provide consumers with a simple notice and cancellation when they sign up for a subscription plan.
The advanced notice also contemplates adding additional protections against tech support scams in which telemarketers trick consumers into purchasing unnecessary services. With these scams steeply on the rise in the last few years, the proposed rule seeks comment on whether to nix the exemption for telemarketers who get consumers to call them by publishing deceptive online ads.
Continuing the business-to-business theme, the ANPR asks the public to weigh in on whether the TSR should broadly stop treating telemarketing sales calls to businesses differently than it does consumers, as is now the case.
The FTC has been true to announced intention of shoring up protection for small businesses. In the past few years, the Commission has ramped up enforcement of actions against scammers who specifically targeted small business owners—and cost them millions of dollars.
Not to "Bragg" or Anything, but Goli Held on to Its Product Name at NARB
In a matter that created some interesting procedural machinations, Bragg Live Products got a second chance to argue that Goli's use of the name Apple Cider Vinegar for its gummies dietary supplement product was inherently deceptive.
NAD had originally found the name was not expressly deceptive (concluding the product did indeed contain some level of apple cider vinegar), although NAD required modification by Goli when the name was used together with advertising claims to avoid communicating that the gummies provided equivalent health benefits to actually gulping down a tablespoon of real apple cider vinegar (acetic acid). Goli appealed that and other portions of NAD's original decision, which allowed Bragg a cross-appeal to the National Advertising Review Board (NARB) as a right (normally, a challenger must seek leave if it wishes to appeal an NAD decision).
On review, NARB agreed with NAD and found the advertiser's product name was not in and of itself misleading, albeit it recognized the difficulty in maintaining the name and yet avoiding communicating implied health claims when used in advertising. What was interesting procedurally, however, is that although Goli appealed other aspects of the NAD decision, it did not actually pursue its appeal on those points. So Goli gave Bragg a second bite at the apple it would not otherwise have had, in connection with an appeal Goli essentially let lapse.
Goli got there procedurally—despite its apparent disinterest in pursuing the remainder of its appeal—because in addition to its initial appeal on the merits of NAD's decision, it raised what very recent amendments to NAD's rules call a "non merits issue," here a jurisdictional question that is resolved by the NARB Chair—and not by an NARB Panel. As provided for in Section 2.1-O of the applicable Policies and Procedures (revised effective November 9, 2021), the NARB Chair resolved Goli's non-merits appeal, and it did so to some degree in Goli's favor.
The non-merits briefing and decision by the Chair likely took 20 business days or so. At that point, it might have behooved Goli to simply withdraw its appeal instead of choosing not to argue the merits to NARB. The NARB decision doesn't tell us what happened, other than that Goli did not "pursue" its appeal—which is not the same as a formal decision to withdraw. That said, whether Goli's withdrawal would have prevented Bragg from pursuing its cross-appeal depends upon a few factors tied to timing and the payment of fees.
Had Goli actually withdrawn the appeal, one of three things would have occurred: (i) if Goli had already filed its brief on the merits, Bragg would have been allowed to continue its cross-appeal as a right; (ii) had Goli withdrawn prior to filing it appellate brief but after Bragg had paid its fee for the cross-appeal, Bragg would have been required to seek leave to appeal from the Chair; or (iii) had Goli withdrawn prior to filing its appellate brief but before Bragg had paid its fee, Bragg would have been out of luck on its ability to continue with its cross appeal.
These interesting procedural questions aside, we know that Bragg did get to continue with its cross-appeal and found its arguments no more effective before NARB than they had been before NAD. Bragg argued that NAD's determination on the product name was inconsistent with NAD's conclusion that Goli should discontinue references to "apple cider vinegar," "ACV," and/or "vinegar" in the product name when used in advertising, which NAD found could convey the unsupported message that the daily dose of ACV Gummies meets the daily dose recommendation for ACV (which it does not). NARB recognized that Goli would be hard pressed to advertise without changing its name but agreed with NAD that the name—which accurately reflected an ingredient in the product—was not expressly false.
The panel also declined to entertain Bragg's contention that NAD should have given Goli more specific guidance on how to eliminate its implied health claims, saying that was really up to Goli and that in the event Goli failed to comply, Bragg could turn to NAD's compliance process.
The case is a reminder to read the NAD/NARB rules and procedures closely—there are most definitely strategic questions to think through beyond the merits of a given action.
Challenge at NAD Takes the Sheen off Lab-Made Diamond Claims
NAD was again asked to weigh in on advertisements for lab-created diamonds as it considered a challenge to claims made by a jewelry company selling both lab-created and natural gems.
The challenger, Blue Nile, which also sells both natural and lab-made gemstones (including diamonds) for jewelry, challenged a promotional offer by competitor Brilliant Earth advertising "Free Diamond Earrings" for "One Day Only!" Blue Nile alleged that the promotional offer impliedly claimed that the "free" diamond earrings are natural and not lab-grown diamonds and, further, that the "free" offer is only available for a very limited time.
Blue Nile argued that these claims were misleading because, first, Brilliant Earth did not adequately disclose that the free diamond earrings that come with purchases between $1,000 and $5,000 would be with lab-created diamonds. Blue Nile argued that Brilliant Earth's disclosure of this fact, via a hyperlink, was ineffectual. As to the limited-time claims, Blue Nile called these claims misleading because Brilliant Earth had run similar promotions multiple times in prior months.
Despite issues interesting to NAD, Brilliant Earth voluntarily agreed to discontinue the claims, so NAD did not have the ability to address the substance of the allegations. As happens when an advertiser voluntarily discontinues claims during the pendency of a case, for compliance purposes NAD will treat the claims as if it had recommended discontinuance.
Although NAD didn't dig in to the substance of the claims because Brilliant Earth voluntarily discontinued them, the lesson for advertisers remains: be wary of making claims about products that are either not equivalent or not perceived by consumers as such, without clearly and conspicuously noting that fact.