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Brand Protection & Advertising

Stay ADvised: 2025, Issue 5

Brand Protection & Advertising Law News
03.03.25
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In This Issue:

 

FTC Continues Junk Fee Quest With Lawsuit Targeting Largest Rental Manager

In its quest to police what it considers to be junk fees, the Federal Trade Commission (FTC) has joined forces with Colorado's Attorney General in a lawsuit alleging that a rental property manager calling itself "The Global Leader in Rental Housing" is piling on unexpected fees and misleading consumers.

According to the 53-page complaint, Greystar—the largest multifamily rental property manager in the U.S.—is falsely advertising the cost of its rental properties by advertising one price and then failing to disclose multiple mandatory fees on top that significantly add to the price tenants actually end up paying. As a result, the true cost of renting a Greystar property is much higher than advertised due to the inclusion of these hidden fees. This bait-and-switch pricing is allegedly meant to attract tenants by advertising low prices and then relying on the applicant's sunk costs of nonrefundable application fees and deposits to get the applicant to agree to the higher-than-expected monthly cost.

The cornucopia of fees read like the product of a very creative Greystar fee name brainstorming session: there are "valet trash" fees, package handling fees, utility fees, media package fees, verification fees, and pest control fees.

Consumers apparently cannot opt out of these fees even if they are for services the tenant does not want or use, and allegedly they only find out about them after filling out forms providing personal information. Sometimes consumers do not find out about the fees until after they pay an application or deposit fee as part of a 40-to-60-page lease agreement. If they nevertheless decide not to rent the property following disclosure of the additional fees, Greystar allegedly does not return the application or deposit fee.

The combination of significant termination fees, time spent on the process, and the difficulty of finding a rental property all mean that those consumers who take the Greystar bait end up locked in, argues the government.

The company also knows that pricing is a top consumer priority when looking for rental properties, and it deliberately omits mandatory fees from the rental price to make the price appear lower, according to the allegations. The complaint goes on to note that even in Greystar listings that include a separate "fees" section, only optional fees are listed while what the FTC calls the predatory mandatory fees at issue remain undisclosed. 

These misrepresentations are not only problematic because they deceive consumers, but they also make it difficult for tenants to choose a unit that will fit their budget and to appropriately comparison shop, says the government.

Key Takeaways

By deliberately taking action on the issue of junk fees against companies whose wrongdoing does not quite fit into the new rule regulating junk fees in the hotel and delivery industry (which takes effect in May), the FTC is effectively letting businesses know that on the issue of junk fees, it has tossed its hat in the ring—and it is not going to surrender. At least that is what the FTC's stance was under the Biden Administration, under whose purview this complaint was filed. We will have to wait and see whether the FTC under Andrew Ferguson feels the same way.

 

NAD Again Confirms Advertisers May Not Hide Behind Platform Tools or Abdicate Influencer Monitoring to Affiliates

In its self-monitoring role, the National Advertising Division (NAD) again considered the breadth of advertiser responsibility in a challenge to social media marketing for certain NuOrganic products. The inquiry focused on videos posted on TikTok by a teen influencer describing herself as a brand ambassador for NuOrganic, promoting the advertiser's eyelash serum. NAD considered whether a material connection between the influencer and the brand was clearly and conspicuously disclosed.

According to NuOrganic, the influencer got paid commissions through TikTok's affiliate program, which are calculated based on TikTok's internal tracking practices. NuOrganic maintained that it had no transparency into or information about tracking activity results. Yet, TikTok's terms of service for advertisers provides that sellers decide the rate of commission paid to influencers.

NAD concluded that NuOrganic did have a direct financial relationship with the influencers because it paid influencers who received its products and posted about their experiences, even if it was TikTok's tracking that determined how much the influencer would be paid. Additionally, some of the influencer's videos were featured on NuOrganic's official Instagram account. Finally, the financial connection between the influencer and the brand would not reasonably be assumed by the influencer's typical audience of teenage girls. Taken together, these facts were enough for the NAD to determine that NuOrganic must disclose the material connection and, further, that NuOrganic bears responsibility to ensure that its influencers and other advertising affiliates sufficiently disclose the material connection.

Regardless of whether the influencer was paid in cash or only received free products for her participation, per the FTC's Guides Concerning Use of Endorsements and Testimonials in Advertising ("Endorsement Guides"), getting free or discounted goods qualifies as a material connection.

Alongside the issue of the disclosure of the material connection, NAD also challenged express and implied claims made by influencers that the product is "safe for young eyes," is "for the girls who want naturally long lashes," and is an alternative to lash extensions.

NuOrganic said it had no control over the statements its influencers made on TikTok and that it contacted those of its influencers that it found out were violating applicable guidelines. Yet NAD found that NuOrganic and the influencer had tagged each other in videos similar to those at issue in this decision. According to the NAD, the advertiser is responsible for ensuring that paid endorsements do not convey claims that would otherwise be deemed misleading if the advertiser itself had made them.

Key Takeaways

Regardless of how aware advertisers are of the nitty-gritty of how and how much their endorsers make, so long as influencers are hawking brand products and getting renumerated for it in one way or another, the advertiser is responsible for ensuring that disclosures are compliant.

 

NAD Inquiry Into "Brain Nutrition" Claims for Kids Is a No-Brainer

In keeping with its concerns about health claims, dietary supplements, and kid-directed claims, the National Advertising Division (NAD) opened a self-monitoring inquiry into express and implied claims by Brainiac Foods touting how its products—formulated with BrainPack, a proprietary blend of omega-3 fatty acids and choline— "help close the brain nutrition gap," "promote brain health," and were "developed with neurologists and physicians."

After review, NAD determined that Ingenuity Brands, Inc., dba Ingenuity Brands and Brainiac Foods, provided a reasonable basis for the following claims on Brainiac Brain Squeezers Applesauce, marketed for kids from kindergarten to fifth grade: "Supports Immunity," "Brainiac snacks help close the brain nutrition gap," and "Backed by Science, Loved by Families; Brainiac partnered with Parents, Pediatricians and Neurologists to create a line of delicious snack favorites packed with key nutrients that fuel the body AND brain. Learn more about brain nutrition at www.brainiacfoods.com."

NAD found differently, however, with respect to the "promotes brain health" claim. The claim "promotes brain health" on Brainiac Brain Squeezers Applesauce appeared on the box packaging beside brightly colored text, alongside claims that it "supports immunity" and has "clean ingredients." NAD focused its analysis of the "promotes brain health" claim by looking at two of the ingredients, omega 3's-DHA and choline, which the Applesauce contains in significant amounts and which NAD said are "recognized by the medical and scientific community as critical to brain growth and development."

NAD noted that Brainiac's evidence showed scientific support for the role of DHA and choline on children's brain health. Yet the claim "promotes brain health" on product packaging appeared beside claims that the product is "brain fuel" or "brain boost," claims which the advertisers voluntarily discontinued. This context in which the claim appeared took it beyond a "simple structure/function claim" into conveying a message that the product provides important cognitive benefits beyond supporting brain health.

The cognitive benefits message conveyed by "promotes brain health" in context with the "brain boost" and "brain fuel" claims was not supported "given the gap between the strength of the DHA in the Applesauce and that tested in the underlying studies."

Further, given the serving size content of DHA in the Applesauce, kids would have to eat four pouches a day to get an amount of DHA that would substantiate even a softer claim than the Brainiac claim. There was no evidence that this was an amount of Applesauce pouches that kids would typically eat, especially because the product is a snack intended for intermittent use. The kid-friendly packaging and the appeal of Applesauce to kids over other DHA sources like fish or chicken were not enough to overcome these limitations.

Nor could Brainiac Foods rely on its choline evidence to support this claim. Though the studies submitted by the advertiser showed a clinically significant link between choline and improved cognitive function, they also had limitations as they tested limited populations. Brainiac's claim conveyed a "powerful brain-boosting message" that necessitated stronger support. 

NAD reached a different conclusion regarding the "help close the brain nutrition gap" claim. Brainiac made this claim and quantified it with an additional claim that "Most kids only get 20% of the recommended daily intake of Omega-3s." Brainiac explained that the "brain nutrition gap" claim refers to the difference between recommended intakes of DHA and choline by kids and the actual intake, and that "brain nutrition" was an appropriate term because Applesauce's formulation contributed significant amounts of these nutrients, helping kids "close the gap" between the average intake and the intake recommended by global health authorities.

NAD found that the evidence Brainiac provided demonstrated that indeed there was a gap between the actual and recommended amounts of DHA and choline daily intakes and that the product did "materially" help close that gap, as the product provides 93 percent of the recommended daily intake.

The BrainPack Daily Adult Gummy Vitamins also made claims about effect on performance. Specifically, the words "memory," "clarity," "focus" and "vision" appeared in big bold white against a bright blue background. Yet NAD found that several studies Brainiac provided on the cognitive benefits of its ingredients did not support these claims. There were significant gaps between the vitamin content in the product and the dosages administered in the provided studies. However, NAD found the claim that the product was "developed with neurologists and physicians" supported.

NAD also analyzed the claim that Brainiac products contain "clean ingredients" and found it unsupported. It urged Brainiac that when making any future clean claims it should clarify the basis for the claim that the ingredients are clean.

Key Takeaways

NAD of late seems to have stepped up its self-monitoring caseload, and this case fits well within the kind of claims NAD focuses upon—here, health claims involving vulnerable populations.

 

NAD Brushes Off Lumineux "Enamel Safe" Claims as Advertiser Says Study Too "Complex" for SWIFT

NAD continued tackling health-related claims in a Fast-Track SWIFT challenge to a mouthwash for which advertiser Oral Essentials once again found itself defending claims for its Lumineux products—this time in a case that arguably stretched the boundaries for SWIFT challenges. The single well-defined issue here was whether the Lumineux Whitening Mouthwash was indeed "Enamel Safe" as marketed, in support of which Oral Essentials submitted a clinical study NAD determined was "not particularly complex."

The "Enamel Safe" claim appeared on the label and in advertising, sometimes close to a "clinically proven" claim. Challenger GuruNanda argued that the product's pH was acidic enough to affect tooth enamel over time.

NAD determined that "Enamel Safe" is a health and safety claim and thus must be supported by competent and reliable scientific evidence. In addition to the health claim, "clinically proven" claims are establishment claims held to the highest standard of proof. The use of a clinically proven claim next to an unqualified safety claim therefore communicates a strong message that the Lumineux mouthwash is clinically proven to be safe.

The company called the Lumineux study it submitted the "gold standard" for tooth enamel testing, which study did not indicate any negative effect on the enamel samples used. That said, the NAD found that although the study bore many indicia of a solidly conducted study, it was "not a good fit" for the unqualified claims made. The study in question was a Scanning Electron Microscopy (SEM) study, which focused on the effects of the Lumineux mouthwash on enamel tooth chips treated as per package instructions.

NAD found that there was no indication that the test represented the amount of substantiation experts in the field believe is reasonable to support the claim of "complete and long-term safety" conveyed by the claim. NAD found Lumineux did not provide evidence explaining why one could infer a general unqualified claim about enamel safety from the limited 30-day study. Nor was it clear to what extent other substances that provide a buffering to acid would counteract the acidity in the mouthwash.

For all these reasons, NAD found that the study failed to substantiate the message that the regular use of Lumineux's Whitening Mouthwash would have no negative impact on enamel at any time.

In its advertiser statement, Lumineux said it is requesting that NAD reopen the case. Although it did not originally contest the SWIFT jurisdiction, it argued that the type of evidence it provided is the kind of complex evidence that is not a good fit for SWIFT. 

Key Takeaways

Lumineux would have done well to challenge SWIFT jurisdiction at the start, and the NAD press release makes no mention in its press release announcing the case of its reaction to the request to reopen the case. In the normal course, reopening requires new evidence not available at the time of challenge that would likely have changed NAD's analysis and decision. It is hard to see how Oral Essentials meets that standard here.

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