Advertising Law - Feb 21, 2014

In a First, Dreft Sponsors—And Tweets About—Jonas Baby

In what appears to be the first endorsement for a celebrity baby birth, Dreft laundry detergent announced the arrival of the first born child of Kevin Jonas, the eldest member of the pop group the Jonas Brothers.

Using the hashtag “#BabyJonas,” Dreft tweeted a picture of the newborn with her mother and the message, “On this day, a little star was born. Meet Alena Rose Jonas.” Delivered just prior to kickoff of the Super Bowl, Dreft sent a second tweet that “Even the littlest star can outshine the biggest game. Congratulations @KevinJonas & @DanielleJonas! #BabyJonas.” Similar messages were shared on Dreft’s Facebook and Instagram pages.

Kevin foreshadowed the relationship by tweeting his support of Dreft the day before his daughter’s birth: “Love using @Dreft as we prepare for Baby Girl! Follow @Dreft for exclusive content from our growing family! #BabyJonas #DreftAmazingBabyDays.”

A representative for Kevin Jonas declined to discuss the financial arrangement between Dreft and the Jonas family. But the new twist on birth announcements may have triggered implications under Federal Trade Commission guidelines.

In December 2009, the FTC updated its Guides Concerning the Use of Endorsements and Testimonials in Advertising, which apply to social media, word-of-mouth marketing, and other promotions and advertising in which consumers or celebrities speak on behalf of companies. One of the requirements: celebrities have a duty to disclose their relationships with advertisers when making endorsements outside of the context of traditional ads. The FTC’s .Com Disclosures similarly require disclosures in space-constrained ads, such as tweets. For example, the FTC recommends using a hashtag like “#ad” or “#sponsored” at the beginning of a tweet. Kevin Jonas’s failure to indicate Dreft’s sponsorship in the tweets runs afoul of the FTC’s guidance.

Why it matters: In contrast to the celebrities who want to keep their children out of the limelight with a ban on paparazzi photographs of celebrity children, the Jonas’s endorsement deal might set a new precedent for celebrity babies. Some industry insiders predict that other celebrities will likely follow suit by striking up relationships with brands over life events, particularly given the success of the Jonas sponsorship, with more than 43,000 retweets of Dreft’s six tweets throughout the day of the birth. Other traditional publications such as weekly magazines, which used to break the news about famous offspring, are on the decline. However, it will be interesting to see how the FTC pursues those who violate the Guides. Celebrity parents should be ready to accept the consequences.

Lawmakers Request Investigation of Outlet Mall Marketing, Pricing

Are outlet stores engaged in deceptive advertising and pricing? A letter from four lawmakers has requested that the FTC investigate.

Outlet stores may be violating both Section 5 of the Federal Trade Commission Act as well as the FTC’s Guides Against Deceptive Pricing, warned Sens. Sheldon Whitehouse (D-R.I.), Richard Blumenthal (D-Ct.), and Ed Markey (D-Mass.), joined by Rep. Anna G. Eshoo (D-Calif.).

“Historically, outlets offered excess inventory and slightly damaged goods that retailers were unable to sell at regular retail stores,” the legislators wrote to FTC Chairwoman Edith Ramirez. “Today, however, some analysts estimate that upwards of 85 percent of the merchandise sold in outlet stores was manufactured exclusively for these stores.”

Outlet-specific merchandise “is often of lower quality” than goods sold at non-outlet retail locations, and not all retailers use different brand names or labels to distinguish outlet-specific merchandise from retail merchandise, according to the letter. “This leaves consumers at a loss to determine the quality of outlet-store merchandise carrying brand-name labels.”

The holiday season shopping rush triggered the lawmakers’ concern, particularly as outlet stores continue to grow in popularity (roughly 300 outlet malls across the country generated $25 billion last year, according to the letter).

While the letter writers “have no objections” to the evolution of the type of merchandise offered at outlets, “we are concerned that outlet store consumers are being misled into believing they are purchasing products originally intended for sale at the regular retail store,” the legislators explained.

The letter also requested that the FTC take a closer look at outlet store pricing. “It is a common practice at outlet stores to advertise a retail price alongside the outlet store price – even on made-for-outlet merchandise that does not sell at regular retail locations.” If the item was never sold in the retail location or at the retail price, the advertising would be deceptive, as the actual retail price could not be substantiated. 

In addition to investigating the possibility of deceptive marketing and pricing, the lawmakers suggested the agency should consider whether establishing a formal definition of “factory outlet,” “outlet store,” or similar terms would help protect consumers.

To read the letter from lawmakers, click here.

Why it matters: According to the FTC, a new law – and the confusion surrounding its requirements – has provided a new opportunity to trick consumers. The agency’s first complaint alleging ACA-related fraud allegations will not likely be its last.

Spam Texts for Gift Cards, Electronics Result in FTC Settlement

Millions of text messages promising free gift cards and electronics were the issue in a recent FTC settlement with an affiliate marketer.

According to the agency, Wisconsin-based Jason Q. Cruz was responsible for texts telling consumers they were “selected” for $1,000 gift cards and all they had to do was enter the code ‘FREE’ at a Web site to claim their prize.  The scam, which ran for almost one year, also featured texts that recipients won free iPads and gift cards to major retailers, including Best Buy.

When consumers clicked on the link to claim their promised gift card, however, they did not receive their “free” gift. Instead, the promise of a free item was reiterated with prominent displays of company logos on the Web site, and to encourage consumers to act quickly, the sites also featured a counter with a message that only a limited number of the free items remained (such as “15 of 1,000 left”).

Consumers were then taken to a third-party Web site and were required to provide detailed personal information and sign up for multiple trial offers with monthly charges in order to get the free items, the FTC said. A typical consumer had to accept over ten trial offers (many featuring negative-option components), and in most instances it was “not possible for a consumer to obtain the promised free merchandise without spending money.”

Pursuant to the stipulated final order, “serial spammer” Cruz is permanently banned from sending or assisting others in sending unsolicited text messages to consumers. He also may not deceptively present an offer as “free” or mislead consumers about the use of their personal information. All consumer information acquired by Cruz in connection with the marketing of free items and gift cards must be destroyed.

Except for $10,000, the monetary judgment of $185,041.26 was suspended, based on an inability to pay, which the agency said amounted to all the money Cruz earned in connection with the scam.

To read the complaint and stipulated final judgment in FTC v. Cruz, click here.

Why it matters: In an agency crackdown against spam texts, the action against Cruz was one of eight complaints filed across the country last March against the senders of an estimated 180 million unwanted messages. “When scammers use unwanted text messages to entice consumers with deceptive offers, that’s a significant problem,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a press release about the settlement with Cruz. “Banning a serial spammer like Mr. Cruz from sending unsolicited text messages helps the FTC take a huge cut out of scammers’ efforts to target consumers in this way.”

Hello, Lawsuit: Competitor Files Lanham Act Suit Challenging “Natural” Claims

In a twist on the never-ending litigations surrounding “natural” product claims, Procter & Gamble recently filed a Lanham Act suit against Hello Products LLC in New York federal court.

Hello launched a line of oral care products in 2013 touted as “99% natural” as an alternative to traditional, processed toothpaste. P&G alleges that both of these claims are false and misleading.

The product packaging for Hello toothpaste includes the “99% natural” claim with similar statements on its Web site and in promotional materials. But testing conducted by P&G – the maker of the Crest family of toothpastes – discovered that Hello Paste contains ingredients such as Sodium Lauryl Sulfate, Sorbitol, and Xylitol. Each of these three ingredients is subjected to extensive chemical processing before transforming into the ingredients included in the product, the plaintiff said. Together, these three ingredients, plus fluoride, comprise half of the ingredients in Hello Paste, according to the complaint.

Acknowledging that a uniform definition of “natural” ingredients does not exist for cosmetics or over-the-counter drugs, the plaintiff said it was still clear that Hello deceives consumers.

“No reasonable definition of ‘natural’ includes ingredients that, even if sourced from ‘nature’ (as all product ingredients must be), are subjected to extensive, transformative chemical processing before their inclusion in a product,” P&G said in its complaint, citing for support a decision from the National Advertising Division of the Better Business Bureaus as well as guidance from the Food and Drug Administration and the United States Department of Agriculture.

Hello’s comparative advertising also violates the Lanham Act, P&G alleged. Claims such as “not the old copy + paste” and “chemistry not chemicals” on the company’s Web site are coupled with negative comparisons of competitive products, including characterizations of Crest and Colgate-Palmolive toothpastes as “chemically enriched.” The company’s attempt to position itself as “uniquely natural” – even though it contains the same active chemical ingredient, fluoride, as Crest – “is thus literally false or false by necessary implication,” according to the complaint.

P&G noted it delayed filing based upon representations from Hello that the company would remove the 99% label and product comparisons from its Web site. As Hello failed to make the promised changes, P&G now seeks injunctive relief that requires Hello to cease making the claims at issue, to disseminate corrective advertising, and to pay a monetary award of treble damages.

To read the complaint in The Procter & Gamble Co. v. Hello Products LLC, click here.

Why it matters: False advertising lawsuits over “natural” claims are certainly not new. However, these lawsuits typically take the form of consumer class actions. P&G’s Lanham Act complaint takes a note from the plaintiffs’ bar and may trigger other such suits in the future.

Topics:  Advertising, Celebrity Endorsements, Endorsements, FTC, Lanham Act

Published In: Antitrust & Trade Regulation Updates, Art, Entertainment & Sports Updates, Communications & Media Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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