Stay ADvised: 2024, Issue 4

Davis Wright Tremaine LLP

In This Issue:

  • Bissel Takes a Bite Out of SharkNinja's "#1 Brand" Claim at NAD
  • StubHub Deceives Consumers About "Estimated" Fees, According to Class Action
  • NAD Declines to Let PMS Supplement Maker Cramp Bayer's Style
  • FTC Floats Complaint Accusing Cash Advance App FloatMe of Deceptive Advertising Using Dark Patterns

Bissel Takes a Bite Out of SharkNinja's "#1 Brand" Claim at NAD

What makes a brand No. 1? Is it sales in dollars or units sold? That was the question in a recent challenge brought by Bissel Homecare, Inc. (Bissel), the leading seller by units in the floorcare category, to claims made by competitor SharkNinja (Shark)—whose sales brought in more dollars, at least in 2022. Bissel brought its challenge as part of NAD's Fast-Track SWIFT program, designed to examine a single well-defined issue in an expedited manner.

SharkNinja's claim to be "American's #1 Floorcare Brand" appeared in a 28-minute-long infomercial for its new Shark CarpetXpert, Shark's first upright deep cleaner (UDC) product. During the infomercial, a voiceover audio states, "Now, Shark, the #1 floorcare brand in America, unveils their latest innovation in deep cleaning." The audio is paired with a large image of the claim that Shark is "America's #1 Floorcare Brand" alongside a small-print disclosure explaining the claim was based on dollar sales.

Bissel argued it was the leading seller based on unit sales (volume), Shark's disclosure was insufficient to counter consumers' inclination to assume units (and not dollars), and Shark was a new entrant in the UDC market, so it could not be the brand leader.

NAD has seen this issue before—and in the past has agreed that either of units or dollars may be acceptable depending on the type of goods and whether or not the basis for the claim is clear and conspicuous. In this case, Bissel argued that the difference in prices for products in the floorcare category was a "critical reason" why the claim could only be supported with data of unit sales—which Bissel insisted is how consumers would understand the claim, and particularly here given the enormous disparity in units sold. Apparently, Bissel sold four million more units (more than 30%) more than Shark in 2022. Shark countered that its "significant lead" in dollar sales, despite selling fewer units, showed the opposite—that dollar sales should be the marker of success and demonstrate the brand's popularity among consumers. It added that this was especially so given the distinction between slow-moving consumer goods (i.e., luxury goods and rare household purchases like vacuums with more price variability) versus fast-moving consumer goods (i.e., frequently purchased items like toothpaste with less price variability between brands). Given that vacuums are slow-moving goods (and aren't replaced regularly), it argued, the fact that more consumer dollars went towards Shark products than Bissel products evidenced that Shark is the more popular brand.

After analyzing the market category and the data, NAD sided with Bissel, noting that generally "#1 Brand" sales rankings refer to the number of units sold in a particular category "because they reflect the number of times consumers pick one brand over another." Here, NAD explained that, "[w]hile Shark's lead in dollar sales may demonstrate that it is a very popular floorcare brand," "the data shows that when consumers chose a floorcare product, more consumers chose a Bissel product than a Shark product." NAD did not agree with Bissel that Shark's recent entry in the UDC market was problematic, given that the "floorcare" category is generally defined as including deep cleaning uprights. NAD concluded, however, that "in this context, with a wide disparity in unit sales in the category, consumers would reasonably expect that the '#1 brand' is the #1 brand in popularity even if there is another leader in dollar sales."

Accordingly, NAD recommended that Shark discontinue its claim to be the "#1" brand altogether, or modify the claim to clarify that it is "the #1 brand in dollar sales."

Key Takeaways

This case is interesting in part because NAD did not require Shark discontinue the claim altogether. Instead, given the wide disparity between dollars and unit sales in this particular category, NAD did what it has done in a number of cases in the past few years—indicated that a disclaimer is not good enough. Instead, NAD said Shark is welcome to continue the claim as long as it includes "based on dollar sales" as part of the main claim. This is in keeping with a relatively recent NAD trend that explanatory information, which in NAD's view is so material that it affects the fundamental meaning of the claim, cannot be relegated to a footnote.

StubHub Deceives Consumers About "Estimated" Fees, According to Class Action

Plaintiffs in a class action against StubHub accuse the ticket seller of throwing fee transparency out the window by misleading consumers about its "Estimated Fees Filter" and charging consumers deceptive, predetermined "junk fees."

The complaint alleges that StubHub deceptively and intentionally claims that it is "estimating" ticket fees early on in the ticket purchasing process, when in fact there's no estimate at play. Instead, say plaintiffs, an algorithm baked into the site consistently tacks on a $3 fee on each and every ticket, "like clockwork," at the end of the purchase process.

As a result, plaintiffs allege that StubHub misrepresents ticket prices "by a consistent amount," effectively engaging in a "bait and switch" tactic whereby StubHub claims its fees are variable (and that each ticket purchase gets a different estimate), and instead charges a standard, predictable fee determined in advance by its algorithm.

Plaintiffs state in the complaint that StubHub's "representations that [it] accurately presents 'estimated fees' are false and misleading. Despite having the ability to properly portray the additional fees up front, Defendant systematically and intentionally misrepresents what Defendant will ultimately charge consumers."

According to the complaint, StubHub also tricks consumers into accepting the additional fees, imbuing the purchasing experience with a sense of urgency in a landscape of uncertain fees. As an example, plaintiffs described how ticket prices show fee increases only after the final checkout screen. Additionally, the complaint details how throughout the purchase process the screen features a 10-minute timer. While the timer is running users have "to review over a half dozen cluttered screens that inundate [visitors] with colorfully distracting information," creating a sense of scarcity. The timer also conveys to users a sense of urgency that has an effect of rushing the user into making their purchase decision when they will be likelier to waive off the fees, especially when given the impression they will lose coveted event tickets if they do not complete the purchase in that very moment. Plaintiffs further claim that the price increase that shows up on screen is not obvious to the user and requires "quick witted memory and mental math" to ascertain.

Plaintiffs claim that fees just like those StubHub assesses have been the recent target of multiple government bodies who have taken action to enforce and legislate against these so-called "junk fees." Plaintiffs point to the Federal Trade Commission (FTC) and the U.S. Senate's passing of the TICKET Act, which would require ticket sellers to display the total ticket price, including all additional fees or other assessments, up front. Plaintiffs add that New York and California have both recently enacted fee transparency laws that get to the same types of issues.

So far only the complaint has been filed, so we'll have to see how this one develops once StubHub makes its filings in the case. We'll be keeping an eye on this one.

Key Takeaways

This case is not alone in merging a few hot topics in the advertising law world—false advertising of ticket prices, junk fees, and the use of so-called "dark patterns" (including false urgency) to close a deal. Ticket sellers—and on-line sellers generally—would do well to take heed.

NAD Declines to Let PMS Supplement Maker Cramp Bayer's Style

The proof is often not simply in the ingredient list. A recent case at the NAD shows once again how seriously it takes the need to substantiate health claims—here for a dietary supplement claiming to relieve distressing pre-menstrual symptoms. The advertiser—Focus Consumer Healthcare—made these and other claims, including that its product was clinically tested and natural, and touting the properties of its Ashwagandha and magnesium ingredients. Bayer Consumer Health brought the challenge against Focus, the manufacturer of the dietary supplement, Pamprin Botanicals.

Bayer further challenged claims on the Pamprin Botanicals product packaging and elsewhere, including that the product was "scientifically tested," that its "mood support" claims were misleading, and the allegedly "implied" claim that Pamprin B was "proven to reduce all common PMS symptoms."

Health claims associated with dietary supplement advertising (or any advertising) are held to a higher standard of substantiation than other advertising claims—both by the NAD and the FTC, which recently published its revised Health Product's Compliance Guidance cited here by the NAD. NAD noted that the claim "clinically tested" conveys a message that Pamprin B is proven to reduce PMS symptoms based on sound methodological science, and that FTC Guidance provides that this means randomized, controlled human clinical trials. One of the questions in front of NAD was whether a study that Focus provided in support of the claims met this standard.

NAD concluded it did not, noting that for multiple reasons the proffered "Citrus Labs" trial "suffered from several significant flaws which rendered the study insufficiently reliable to provide a reasonable basis for Pamprin Botanicals' establishment and express health-related claims." First, study subjects were allowed to take OTC medicines during the first phase of the study, muddling the answer to whether the results came from Pamprin or the OTC medicine. Second, NAD found the study relied far too much on the subjective reactions of participants while it did not include a control group. This not only made it difficult to know whether the changes in PMS symptoms were due to a placebo or to Pamprin B, but it also fell short of FTC Guidance on the importance of the use of a control group in such studies.

Focus argued that in keeping with NAD precedent, inclusion of a control group is not always necessary for general well-being claims. NAD dispensed with that argument quite easily, however, by reminding Focus that Pamprinwas not trying to substantiate a general well-being claim but rather a claim that the product is clinically tested.

NAD emphasized that "a study that measures improvement subjectively and does not control for variables that may materially affect outcomes is not competent and reliable scientific evidence that the product is responsible for the claimed benefits."

Turning to related ingredient claims for the product, NAD likewise found many were unsupported. First, NAD reviewed the express claim "Ashwagandha – a calming influence" and the implied claim that the ingredient reduces mood swings. Focus submitted nine studies it argued showed that daily consumption of the ingredient can reduce stress and cortisol levels in the body. However, NAD found that the only study among those nine that tested the same dosage as found in the Pamprin B product had significant flaws that made it a "poor fit for the challenged claims." In addition, more than half the study participants were men, which clearly make the results not relevant for claims about PMS.

NAD next considered claims by Focus regarding the benefits of magnesium that NAD agreed with Bayer reasonably suggested the mineral helps alleviate period and PMS pain. NAD found that the supporting information, which was comprised of a review of seven studies on the effects of magnesium on PMS, was again not a good fit to support the advertiser's claims. Unfortunately for Focus, the subjects in those studies took a higher dose of magnesium than the amount found in a dose of the product, and several of the studies reported results on anxiety and not on period pain. NAD found one study submitted in support of these claims by Focus was not a good fit because while the women who were the subject of the study took magnesium supplements, they were simultaneously taking pain medication. In addition, these subjects took the supplement and medication for a severe period pain disorder and not to alleviate PMS symptoms as claimed in the advertising.

Additional claims that the product's Vitamin B6 reduced mood swings likewise were insufficiently supported. The clinical studies submitted again used a different dosage and participants used the supplement for an extended period of time. Some of the studies did not show any differences between participants who took Vitamin B6 and the placebo, and, asthe FTC notes in its Health Product's Compliance Guidance, "inconsistent or conflicting results raise serious questions about the adequacy of an advertiser's support."

Turmeric ingredient claims that the herb helps cramps and bloating were also unsupported by the provided studies according to NAD, again due to the use of much higher dosage and a different population than the target Pamprin B audience. Likewise, the claim "Chasteberry—for a better period" and the implied claim that it reduces PMS symptoms was unsupported, again due to the use of a different dosage.

There was some good news for Focus regarding Bayer's challenge to the claim that the ingredients in Pamprin B are "naturally good for you," which appeared on a merchant page. NAD considered whether the claim alongside the image of a leaf conveyed an unsupported message that the Pamprin B ingredients are all-natural, when they are not. Ultimately, NAD found the imagery did not convey the message that the product as a whole was natural, because the page specifically referred to listed ingredients and not to the whole product. As to the ingredients, NAD found that one message conveyed was that the ingredients, shown as they are alongside the leaf imagery, are individually natural. As to those claims, NAD found the "natural" claim unsupported and recommended they be discontinued.

Finally, NAD considered whether the product name Pamprin Botanicals, alongside use of the "naturally good for you" claim and imagery created the message that the product is all-natural. Here NAD gave Focus a slight reprieve. It first determined the name itself was not expressly false. Botanical means "derived from plants," and some ingredients in the product indeed are "derived from plants." NAD found that even considering the name "botanical" with the leaf imagery and the "naturally good for youingredients" claim, consumers would not reasonably take away the message that the product was all-natural. The key was the use of the word "botanical," which does not convey the same message as "natural."

Key Takeaways

This case is a useful primer of the rigor with which NAD (and the FTC) will review health-related claims, and the key elements that competent and reliable scientific support must contain.

FTC Floats Complaint Accusing Cash Advance App FloatMe of Deceptive Advertising Using Dark Patterns

The Federal Trade Commission (FTC) has filed a complaint in federal district court charging FloatMe, a cash advance mobile application company, and its co-founders with a pattern of deceptive advertising.

FloatMe purports to offer cash advances to consumers who are living paycheck to paycheck when they enroll in the app's $1.99 per/month membership plan. According to the complaint, FloatMe advertises that consumers enrolled in its membership plan can receive $50 cash advances "instantly," "now" and "in minutes." FloatMe characterizes these payments in its advertisements as "free money" with "no hidden fees" and "no interest." The FTC charges that, from the ads and mock testimonials on social media to the app store purchase and enrollment process, FloatMe consistently highlights that users can receive a $50 cash advance "instantly" upon enrollment.

Contrary to these advertisements, the FTC alleges that consumers can never receive more than $20 upon enrollment and the payment will only be issued "instantly" if the consumer pays a surprise $4 fee (otherwise the payment is issued after a few days). "To keep customers from cancelling," the complaint continues, FloatMe doubles down on the deception, promoting that it uses an automated process to increase subscribers' cash advance limit. Yet, according to the FTC, there is no such "automated process," and few consumers ever get the advertised $50 cash advance, even after months of enrollment.

Additionally, the complaint alleges, FloatMe never discloses in its ads that it categorically refuses to provide any cash advances to certain consumers based on the type of income they receive, including gig workers and people receiving military or social security benefits, even where such people have paid subscription fees.

The FTC further contends that FloatMe often charges additional fees without consent, including double-charging subscription fees, charging subscription fees before the assigned monthly payment date, and charging fees after account cancelation.

To add insult to injury, if a user ultimately decides to cancel a subscription, FloatMe has allegedly created a difficult and confusing cancelation system, using faulty cancelation mechanisms and dark patterns designed to interfere with customers' attempts to cancel.

The complaint alleges that initially the company did not offer any in-app cancelation option and consumers had to call to cancel. According to the complaint, FloatMe had just two people fielding customer service calls (including cancelation requests) for what was the company's 40,000 users, making it extremely difficult for consumers trying to cancel to reach a customer service agent. Even when the company instituted additional cancelation paths on the website and in-app, the FTC alleges that FloatMe took deliberate steps to create friction in the cancelation process and make it difficult for consumers to cancel subscriptions. According to the complaint, "FloatMe's failure to timely process consumers' cancelation requests…frequently results in consumers continuing to pay the monthly membership fee for a service they are not using and do not want."

Within a month after the FTC filed the complaint, the FTC and defendants filed a stipulated settlement order which has now been signed by the judge. In short, the settlement order obligates FloatMe and its co-founders, Joshua Sanchez and Ryan Cleary, to pay $3 million, cease the deceptive marketing, make it easier to cancel the subscription, and take other related steps to comply with applicable law.

Key Takeaways

The FTC is clearly not through with enforcing what is perceives as predatory practices, including undisclosed fees, impossible cancelation policies, and taking advantage of vulnerable populations. The FTC has been clear about its priorities, and although "dark patterns" may not be new, FTC enforcement seems not to be growing old.

[View source.]

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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