In This Issue:

• FTC Alleges Avast Delivered Deception While Promising Protection
• A LASIK Purveyor Settles FTC Charges That Even Eye Surgery Can't Help Consumers See Truth in False Ad Claims
• These Power Tools Can't Claim They're Made in America, NAD Concludes
• Chew on This: New York Introduces Legislation to Regulate Food Advertising to Kids

FTC Alleges Avast Delivered Deception While Promising Protection

Advertising data privacy but delivering just the opposite, that's what the Federal Trade Commission (FTC) says software company Avast Limited (Avast) has been doing for years. Now the agency has filed a complaint accompanied by a proposed order that would require the company to pay $16.5 million for these alleged deceptive practices.

The FTC alleges that Avast sold its users' data without their consent while at the same time advertising that its products would safeguard users' privacy. According to the FTC's complaint, Avast promised its services would safeguard consumers' personal data by blocking third parties from accessing that information. The company further claimed its products, including browser extensions, would decrease internet tracking that collected personal data.

Instead, according to the FTC, Avast deliberately sold personally identifiable information (PII) for millions of users through its subsidiary Jumpshot. The data was allegedly sold to third parties including major advertising companies, marketing data analytic companies and data brokers. From 2014, when it acquired Jumpshot, through 2020, Avast allegedly sold the very browsing data it claimed it would protect, without providing notice to consumers.

The FTC also claims that Avast doubled down on its deceptive practices when it promised that any sharing of user information would be done in "anonymous and aggregate form." Actually, the information sold to third parties was sold in non-aggregate, re-identifiable form, compounding the severity of the privacy violation and the gap between the representations and the reality, said the FTC.

The complaint further alleges that many Jumpshot products went so far as to "[provide] third-party data buyers with extraordinary detail" about the personal lives of Avast users.

Further, though Avast claimed it used an algorithm to remove PII before selling customer data, the FTC argues otherwise, alleging that the company's data feeds included unique identifying information.

FTC commissioners issued a statement giving their take on what makes this case particularly egregious: "While the FTC's privacy lawsuits routinely take on firms that misrepresent their data practices, Avast's decision to expressly market its products as safeguarding people's browsing records and protecting data from tracking only to then sell those records is especially galling."

In addition to the monetary fines, the proposed order would impose a prohibition on Avast from selling browsing data obtained from its products, and require it to obtain users' affirmative consent before selling or licensing any browsing data obtained from third-party products for advertising purposes, to delete web browsing information before transferring any data to Jumpshot, and to implement a privacy program addressing the alleged misconduct.

Key Takeaways

The case is a reminder that brazen chutzpah will not stand in the way of FTC enforcement activity. The FTC continues to remain laser-focused on privacy concerns.

A LASIK Purveyor Settles FTC Charges That Even Eye Surgery Can't Help Consumers See Truth in False Ad Claims

LasikPlus and Joffe MediCenter (collectively, LasikPlus) agreed to pay $1.25 million to settle allegations brought by the Federal Trade Commission (FTC) that they misled consumers about the cost of LASIK eye surgery. The FTC has begun disbursing the settlement fund forms to affected consumers.

The complaint alleged that LasikPlus, the nation's largest LASIK surgery chain, falsely and "aggressively" advertised a promotional offer for LASIK eye surgery at prices "starting at" less than $300, a fraction of the price most customers ended up paying. Additionally, some ads allegedly neglected to mention that the advertised price was only for one eye, and not for both. According to the complaint, LasikPlus had been engaging in false advertising practices since at least 2015.

According to the FTC, LasikPlus used a classic bait-and-switch scheme by promoting a fabulous deal but not revealing to consumers that the low price only applied to individuals with nearly normal vision who could even drive without glasses. Given the eligibility requirements, only 6.5% of consumers actually qualified for the promotional price, according to the FTC and many fewer took advantage of it. Why? Because LasikPlus staff allegedly discouraged consumers who did qualify for the promotion, pushing them to more expensive options. As a result, only 1.3% of consumers ultimately took advantage of the surgery at the promotional price.

According to the FTC, the actual price most consumers were quoted was between $1,800 to $2,295 per eye. Further, consumers didn't learn about the price they would realistically have to pay for the procedure until they had spent a considerable amount of time and effort on eye exams and consultations, ostensibly in reliance on the ad promoting the low price. Nor, the FTC claimed, did LasikPlus disclose the eligibility requirements for the procedure, other than generic disclaimers like "results may vary" and "restrictions apply."

In addition to the monetary penalty, the settlement bars LasikPlus from engaging in the deceptive conduct of which it's accused and requires it to make clear and conspicuous disclosures about pricing in its advertising.

Key Takeaways

Lots of good reminders here. First, language like "starting at" won't save a deceptive claim. And the FTC was very clear, as it has been in many cases previously, that all material terms of an offer must be presented—clearly and conspicuously—in concert with the offer they modify. Here, a pricing offer.

These Power Tools Can't Claim They're Made in America, NAD Concludes

Just when you think that advertisers understand what they need to show if making a Made in America claim, along comes another case demonstrating there is still more to learn. Milwaukee Electric Tool Corporation brought a challenge to claims by competitor Stihl Inc. regarding whether or not Stihl could appropriately claim its outdoor power equipment products are "Made in America."

According to the challenger, Stihl's claims went too far, misleading consumers into believing—incorrectly—that Stihl's products meet FTC requirements for a "Made in America" designation.

The challenge zeroed in on claims Stihl made generally about its brand on TV, social media and video ads, many of which include images of the American flag and the additional claim "It's just three words. But they tell you everything you need to know…Not everyone can say them. But we can. MADE IN AMERICA." The claim was generally accompanied by a disclosure stating that "[a] majority of STIHL products sold in America are made in America of U.S. and global materials."

The first issue for NAD was what messages the advertiser's claim conveyed. Giving credence to a consumer perception survey provided by Milwaukee, NAD agreed with the challenger that the advertising conveyed the message that all or virtually all of the advertiser's products are made in the USA, including the parts used to make those products.

The consumer perception survey, which featured control versions of the ads that substituted the word "global" with the word "foreign" and "Made in America" with "Mostly Made in America," showed that either 35.7% or 44.2% of respondents took away the message that all or almost all of Stihl's parts or products, respectively, were made in the USA. This was well over the 15%-20% threshold NAD requires in a well-run survey to show that consumers take away a deceptive message from a claim.

Separate from the survey, NAD found that "the context of Stihl's ads conveyed a strong, unqualified 'Made in America' message," thanks to the "prominent" American flag images, which the FTC has said convey a strong U.S. origin message. Although there was usually a disclosure in the ad, the ad's "collage" of flag, equipment, and scenic location images distracted too much from the disclosure to make it effective, concluded NAD.

Further, because the ads did not focus on a specific product, NAD held that the materials conveyed the message that the products – across the entire brand and not just a specific product – are "Made in America." It also found that Stihl's use of the claim "three words not everyone can say" (referring to "Made in America") reasonably conveyed the message that some companies can't say that their products are made in America, while Stihl can.

NAD did not, however, agree with the challenger that Stihl's claim that the words "Made in America…tell you everything you need to know" conveyed the message that only the "Made in America" claim matters to purchasers of outdoor power equipment.

"[R]easonable consumers are likely to understand that the origin of a product is not the sole attribute of importance in choosing a product and will recognize that this claim is merely hyperbole. Obvious hyperbole and exaggerated displays of a manufacturers' pride in its product can be considered puffery for which no substantiation is required."

NAD next turned to the issue of whether Stihl's "Made in America" message was supported. Stihl explained that a majority of its products are manufactured in the U.S., but that it uses some foreign components, and that a "small minority" of its products are made abroad.

This description did not comply with FTC requirements for unqualified "Made in the USA" claims, which require that "all or virtually all" parts and processing occur in the U.S. and that the product contain no (or negligible) foreign content. As Stihl had provided no evidence that its products could meet this standard, NAD found Stihl's broad unqualified message that its products are "Made in America" unsupported.

Key Takeaways

Interestingly, the FTC had apparently looked into Stihl's "Made in the USA" claims in 2022, though it did not open an investigation. NAD determined it nonetheless had jurisdiction over the challenge because the FTC had not taken action.

Chew on This: New York Introduces Legislation to Regulate Food Advertising to Kids

A proposed bill in New York takes aim at the way food is advertised to children, seeking to protect this "vulnerable population" from "negative health consequences" the drafters say may be exacerbated by deceptive food advertising.

S213-B would amend New York's General Business Law 350-a, which regulates false advertising in the state. It would set specific parameters around food advertising to children.

The bill would put in place several factors to determine if a food ad is false or misleading, applying to ads targeted to children as well as other consumers who are "reasonably unable to protect their interests" because of age, infirmity, or other factors. If enacted, the bill would require courts to consider whether any food advertising is an unfair act, practice, or conduct.

The bill provides that, to determine if an ad is directed at children, factors to be taken into account include whether the ad employs the use of elements like animated characters, subject matter that appeals to kids, or kids' music. Other factors to determine if an ad is targeted at kids include the age of the model and the use of child celebrities.

The bill's drafters say that the bill is necessary because marketers persistently target children, and that such marketing is "inherently misleading, as children often lack the same ability to resist the rewarding cues presented in unhealthy food marketing to adults." They further point to New York's "substantial interest" in protecting the health of its vulnerable citizens.

"[T]he legislature finds that unfair and deceptive marketing targeted at children can mislead and manipulate children into lifelong habits, and that such unfair and deceptive advertising should be regulated accordingly.

The law would also amend the Agriculture and Markets Law to specifically point to the GBL 350-a section regulating food advertising to children. It would also amend the state's public health law.

Key Takeaways

The amendments as currently drafted, though they would protect children, go further. The bill may be applied to other vulnerable populations, so that a food ad may be misleading theoretically if it targets people with physical disabilities, illiteracy, inability to understand an agreement or "similar factors." The law also defines "consumer" in this context as a child or "those acting on" the child's behalf, which could broaden the law's application significantly. On the flip side, the law is very specific when legislating what content constitutes advertising aimed at children.

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