Stay ADvised: What's New This Week, July 18
In This Issue:
- NAD Sours on Dakota Nutrition, Inc.’s Elderberry Claims
- NAD Gives DuckDuckGo Privacy Claims the Go-ahead (Mostly)
- FTC and Florida Team Up To Shut Down 'Grant Bae' Scam Targeting Minority-owned Small Businesses
NAD Sours on Dakota Nutrition, Inc.'s Elderberry Claims
One advertiser of nutritional supplements will be changing the names of its elderberry products following a National Advertising Division (NAD) decision addressing a novel issue: How much of an ingredient does a product have to contain to "warrant claiming the ingredient is in the product or whether it can be used in the product name."
Dakota Nutrition Inc.'s claims about its Extra Strength Elderberry 3-in-1 Immune Booster Capsules, Extra Strength Elderberry Gummies, and Immune Defense 7-in-1 Immune Booster Capsules were challenged by competitor Nature's Way Brand, which argued that, among other deficiencies, Dakota Nutrition's supplements do not contain sufficient amounts of elderberry to support its marketing claims. (Dakota voluntarily discontinued the challenged disease treatment and prevention claims, leaving the elderberry "ingredient" claims as the only issue before NAD).
The NAD noted there is no NAD precedent addressing the percentage of an ingredient required to justify a product's name and marketing claims but stated that a recent case involving Goli Nutrition is instructive. In that case, the NAD determined that because Goli's apple cider gummies contained 5% apple cider vinegar powder, representing 12% of the overall product, Goli could use "Apple Cider Vinegar" in the gummies' product name and advertising.
In this instance, however, the NAD determined the submitted testing showed that Dakota didn't have a reasonable basis for its express and implied claims about the content and effectiveness of the elderberry in its products. The NAD found that the various tests provided by Dakota failed to show that the products contain elderberry. The accepted testing method for elderberry did not confirm that the product contained elderberry in any meaningful amount, and there was no evidence to suggest that the small elderberry quantities actually contained in the products would have any meaningful impact on consumers' health and wellbeing. Other testing methods employed by Dakota similarly failed to show any significant presence of elderberry, said the NAD. The NAD recommended that the company discontinue the advertising and marketing materials making the relevant express and implied claims about its products' elderberry content, including related claims of its products' ability to help ward off infections and colds due to the alleged presence of elderberry therein.
The NAD also asked Dakota to discontinue the use of "elderberry" in the products' names. The NAD noted that although it was "reluctant to require an advertiser to change the name of a product" simply because a challenger speculated that the name was misleading, "where a challenged product claim amounts to an unsupported express claim, extrinsic evidence of consumer confusion is not required to recommend a product name change."
Here, use of the word "elderberry" in the products' names amounted to an express claim that the products contain a "meaningful" amount of the substance, the NAD concluded, and Dakota did not provide a reasonable basis for its claims related to elderberry in the products at issue.
This case reflects an interesting confluence of tried and true NAD principles—in the absence of perception evidence, NAD will only require a name change if the name amounts to an express claim, in the context of health care claims, juxtaposed with the idea that "emotive" ingredients (here elderberry) can be referenced on packaging as long as the reference does not imply efficacy. The concept of actives versus emotives appears in personal care cases, for example, challenging shampoo names and advertising. Here the NAD determined it was all too much, with all too little support.
NAD Gives DuckDuckGo Privacy Claims the Go-ahead (Mostly)
Claims that the search engine DuckDuckGo (DDG) has made about the superior privacy protections provided by its Privacy Essentials product are supported, according to the National Advertising Division (NAD). The NAD did, however, request one minor tweak to the company's advertising.
With consumer concern about third-party tracking and privacy top of mind, the NAD initiated a self-monitoring challenge inquiring into DDG's express claims that its Privacy Essentials product offers the "best, quickest and easiest step you can take for your privacy health" and implied claims that it does not share consumers' personal data with third parties. The claims at issue appeared in a YouTube video in which DDG also touted that its Privacy Essentials product blocks certain websites that track users on mobile devices, apps and websites.
DDG argued that the claims convey the message that its Privacy Essentials app is an "all-in-one privacy solution that provides the best balance of protection, speed and ease of use among its competitors," and therefore they are not unqualified claims that DDG's product is simply the best, full stop.
As always, the NAD's analysis focused on whether DDG had a reasonable basis for its claims based on its underlying support. DDG argued that its Privacy Essentials app is the best way to protect privacy because it offers three key privacy features "out of the box"—encryption, tracker blocking and private search.
Based on evidence provided by the advertiser's expert, the NAD found that DDG had a reasonable basis for identifying these three features as "key" to protecting consumer privacy. The expert explained that HTTPS encryption protects against networks intercepting data and that DDG provides HTTPS connections whenever possible. DDG's expert also provided evidence that Privacy Essentials blocks third-party websites and sends signals to first-party requesting that such first-party sites limit information sharing with third parties.
The NAD then found that DDG's Privacy Essentials app was indeed, as claimed, the quickest and easiest way to access the "most comprehensive protection" based on the expert's explanation that DDG is the only app to offer this level of protection straight out of the box.
The NAD concluded that DDG provided a reasonable basis for the challenged claims' reference to comprehensive "all-in-one out of the box" solutions, and that the company does not share personal data with third parties.
The NAD did, however, urge DDG to modify its advertising to note that the protection afforded by the Privacy Essentials app "does not extend to the use of search engines and apps outside of the DDG solution."
Privacy and security remain on NAD's radar, just as related issues remain a high priority for the FTC. NAD continues to provide an important backstop to the FTC for these (and other) key consumer protection concerns. The case is also a reminder that advertisers can and do prevail at NAD!
FTC and Florida Team Up To Shut Down 'Grant Bae' Scam Targeting Minority-owned Small Businesses
A scammer who allegedly warned her customers—small businesses seeking assistance in obtaining capital, including COVID-19 relief funds—she'd "block anyone and everyone who feels that they are investing their money in a scam" has now been "blocked" herself by the Federal Trade Commission (FTC) and the Florida Attorney General's office. The government entities secured from a federal district court in Florida an order temporarily freezing the defendant's business's assets and temporarily enjoining the defendants from misrepresenting certain facts about the businesses' capabilities.
The FTC and the State of Florida allege that Grant Bae, the name under which C. Lee Enterprises and its owner Traeshonna P. Graham do business, was not a grant writing business but a scam. Grant Bae allegedly wrested thousands of dollars from small businesses by making false marketing claims on its website and social media posts about its ability to help "struggling minority-owned small businesses" access unused grant money and other benefits.
According to a joint complaint filed by the FTC and the Florida Attorney General's Office, Grant Bae has been advertising its grant writing and consulting services to minority-owned small businesses since 2020. The company's website and social media posts tout Graham's false credentials and the company's fictitious grant-writing services and bogus results, alleges the complaint.
Grant Bae allegedly made false promises that it could deliver "guaranteed" funding and procure COVID-19 relief grants for small businesses. The complaint also alleges that the company falsely claimed that minority-owned businesses qualified for $25,000 in grants and that Grant Bae customers paying top dollar for an "Elite" package would be guaranteed $250,000 in funding.
None of that turned out to be true, say the FTC and the Florida Attorney General's office. Instead, they allege, the only ones who made money were influencers paid by Grant Bae to spread the company's false claims.
To lure small businesses, owner Graham is alleged to also have deceptively hyped up her credentials, holding herself out as an expert in grant writing with over eight years of experience developing the "gift" of grant writing when she in fact had little-to-no experience in the field.
The complaint also alleges that to start and fund Grant Bae and its deceptive scheme, Graham used money she obtained from the Paycheck Protection Program, which authorizes the Small Business Administration to assist eligible small businesses facing economic uncertainty related to COVID-19.
Grant Bae also allegedly misled small businesses about her access to grants, claiming that she had access to $268 million in grant funding to "disperse throughout all our great clients" and that her customers could access funding that she had obtained from non-profits and government agencies. The company also allegedly misrepresented the status of its customer grant applications, which it often falsely communicated had already been awarded or were pending.
The complaint alleges violations of the Federal Trade Commission Act, the COVID-19 Consumer Protection Act and the Florida Deceptive Unfair Trade Practices Act.
This matter is at the intersection of two self-described FTC enforcement priorities: COVID-19 scams and scams targeting small businesses. On the small business front, the FTC is pushing on all cylinders, proposing a rule specifically intended to protect businesses against telemarketers, and filing complaints that, like this one, target scammers who prey on small businesses.