In This Issue:

• Huggies Diaper Evidence Not a Good "Fit" for #1 Claim, NAD Says
• NAD Takes a Tall Drink of "Rehydration Champ" and Finds Claim Is Not Puffery
• 9th Circuit Finds Ascertainable Loss, and Eddie Bauer False Reference Pricing Lawsuit Lives Again
• Plaintiffs Alleging Greenwashing Lawsuit May Proceed Given Claims That Rust-Oleum Should Clean Up Its Advertising

Huggies Diaper Evidence Not a Good "Fit" for #1 Claim, NAD Says

Huggies claimed its diapers were the #1 Best Fitting, a broad claim requiring broad evidence against the market—evidence that the National Advertising Division (NAD) found Kimberly Clark ("KC") did not have in a challenge brought by The Procter & Gamble Company ("P&G"), makers of rival Pampers diapers. NAD further found that in context (headlined by the "1 Best Fit" claim), a demo of Huggies and Pampers laid flat, side-by-side on a board with the supposed "curves" outlined likewise created an unsupported comparative fit claim.

The "#1 Best Fitting Diaper" claim appeared on TV, in print and digital ads, and on Kimberly Clark's website. In support, KC provided (with minimal detail) the results of a series of studies, conducted versus various diapers in market, over the course of many years, which it said supported the broad claim. NAD disagreed. Although noting that there is no industry standard for testing diaper fit (which presumably encompasses all diaper points whether at the waist, inner and outer thighs, etc.), NAD found Kimberly Clark's testing was insufficient to provide a reasonable basis for the claims. NAD noted that even the summary chart of conclusions submitted for its "six" studies "revealed several flaws in the study which render[ed] it unreliable to support the challenged claims."

First, the study (which properly used real babies) only tested movement in the diapers (sag from beginning position to end position post insult) but did not measure or compare overall fit at the start, which was necessary to support a "better fit" claim (if the diaper did not provide a superior fit from the get-go, it doesn't really matter if it sags less than another, it could still be a poorer fit). Second, several of the measurements used to show superiority were measured "by hand and eye" with a ruler, a very inexact science for comparing very small differences between diapers. Such manual measurements are less reliable, for example than the image analysis used by P&G in its testing, as NAD reminded the advertiser. The studies had several other flaws, including limited leg gap measurements, a disproportionate gender ratio, and one badly fastened diaper. In short, as NAD looks at claims and studies—the testing was not a good fit for the #1 diaper-fit claim.

NAD next analyzed whether a challenged side-by-side comparison and a number of express and implied claims related to the diaper's curves in the comparison implied that Huggies were the better fitting diaper and so were false and misleading. The side-by-side comparison depicted a Huggies diaper next to a P&G Pampers diaper, alongside one of two claims: "only Huggies has the most curves to fit your delicate skin" for Little Snugglers or the #1 Best Diaper Fit claim that appeared both as a line claim and with the Huggies Little Movers product.

P&G argued that this side-by-side comparison is an "inherently misleading product demonstration because the depiction provides no relevant information about fit," given that the diapers were pinned completely flat to a board and that in use on a baby, all diapers curve around the legs and waist. Accordingly, the side-by-side diaper display provides no information (or inherently misleading information) about diaper performance with respect to fit. The challenger also argued that the emphasis on curves falsely conveyed the message that only Huggies have curves.

Here NAD agreed, but only to a point. In the context of the surrounding claims, NAD agreed the diaper demo created an unsupported superior fit message for Huggies Little Movers and Huggies Little Snugglers. "The use of the words 'to fit,' along with the visual comparison of the two diapers, ties that superiority claim to fit, and reasonable consumers may take away the message that the curves result in a superior fit," reasoned NAD. Because Huggies had not substantiated the claim that its diapers offered a superior fit to Pampers, this claim was not substantiated and should be discontinued. By itself, however, NAD determined the side-by-side comparison of diaper "curves" lying flat on a table did not convey a specific message about product fit in the absence of affirmative fit messaging.

Finally, a depiction of dotted lines drawn alongside the Huggies diapers in the side-by-side demo to highlight the curved sides should be discontinued. They depicted an "apples-to-oranges" comparison—one portion of the Huggies diaper versus another altogether different portion of the Pampers diaper. NAD asked the advertiser to modify this claim so that the dotted lines are used to depict equivalent parts of the diaper.

Key Takeaways

The case is a good reminder that NAD examines very closely all support, whether that support is a direct and solid fit with the claims, and the context of advertising. In that sense, this case provides a good primer for how NAD analyzes performance claims and their support.

NAD Takes a Tall Drink of "Rehydration Champ" and Finds Claim Is Not Puffery

Body Armor Sports Nutrition ("BA") included the statement "The Rehydration Champ is Here" in advertising for its Flash I.V. Sports Drink. Did this convey a comparative superiority message or was it mere puffery?

Stokely-Van Camp, maker of competing Gatorade products, argued that this statement, which appeared on BA Sports' webpage and on social media, is an unsupported superiority claim (i.e., a claim that the Flash I.V. Sports Drink is the best rehydration product on the market). The advertiser, in response, contended the statement was puffery and, alternatively, that even if the words are construed as a verifiable claim, it is nonetheless substantiated.

NAD easily determined that "The Rehydration Champ is Here" is not puffery given NAD's view that at least one message reasonably conveyed by the word "champ" in the context of the advertising was one of superiority. NAD focused on the plain meaning of the term "champ," noting that "champion" (for which "champ" is shorthand) is defined as "one who shows marked superiority." NAD also concluded that "champ" is synonymous with other indicators of superiority such as "best." NAD noted that superlatives like "best," when accompanied by specific attributes that market the product as better in a measurable way, are unlikely to be considered puffery.

BA argued that even if "The Rehydration Champ is Here" is not puffery, it is not necessarily a superiority claim. Rather, BA contended, the advertising merely identifies key ingredients of BA's product (i.e., the fact that the Flash I.V. Sports Drink contains comparatively more electrolytes than other products), without making any claim that superior product performance results from the product's formulation. NAD was not convinced. It concluded that the line was not simply an indication of the inclusion of more electrolytes, but rather, it "expressly tout[ed] the superior performance benefit of rehydration." a critical sports drink objective. Therefore, one message reasonably conveyed by "The Rehydration Champ is Here" is that the drink is the best on the market for rehydration – a superiority claim that requires substantiation.

On the question of substantiation (or lack thereof), BA argued that the superior rehydration claim was substantiated because the product in fact has more electrolytes than any other product, and (BA contended) studies indicate that a sports drink with more electrolytes provides greater rehydration benefits than one with lower electrolytes.

NAD disagreed that the research was sufficient to provide a reasonable basis for the superior performance message in the challenged claim:

"While it is not disputed that higher electrolyte sports drinks can provide improved hydration (or that increased sodium content can aid in fluid retention, as shown in these studies referenced by BA), the quantity of electrolytes in a sports drink is not itself substantiation for a claim of superior rehydration." Rather, the evidence showed only that electrolyte needs vary from person to person or activity to activity. What was missing, NAD determined, was comparative product or performance testing showing that the higher electrolyte content of Flash I.V. as compared to other products actually resulted in greater hydration.

Accordingly, NAD recommended that the claim be discontinued.

Key Takeaways

"Champ" now joins NAD's lexicon of superlatives that when paired with product attributes will constitute a claim. All those using words like "max," "ultimate," "first,"" premier," "superior," "best" and "tops" take heed. Standing alone they may work well as puffery. Paired with product performance attributes … not so much.

9th Circuit Finds Ascertainable Loss, and Eddie Bauer False Reference Pricing Lawsuit Lives Again

Portions of a class action lawsuit alleging that retailer Eddie Bauer marketed clothing at a false reference price will proceed after a 9th Circuit panel reversed the lower court's dismissal on the basis that the plaintiff could not plead an ascertainable loss. It found that the plaintiff had indeed pled an ascertainable loss and revived her claim for monetary damages.

The plaintiff alleged that Eddie Bauer falsely advertised that it was selling its clothes for 50% of their normal sale price when in fact the company had never sold those clothes at the advertised sale price. She alleged that this violated Oregon's Unlawful Trade Practices Act (UTPA).

The district court dismissed the claims, finding that the plaintiff had not shown an ascertainable loss as required by UPTA because she had not alleged a misrepresentation as to "a characteristic, quality, or feature" of the clothing she purchased.

In reversing the lower court's findings and holding that plaintiff had indeed pled ascertainable loss, the partially split panel concluded that plaintiff need not show the level of misrepresentation necessary to allege an ascertainable loss under Oregon's UPTA, but only that her "purchase price theory" was sufficient to adequately allege ascertainable loss under the statute.

To reach this conclusion, the panel relied on Oregon's certification procedure, which gave the appeals court an avenue to ask the Oregon Supreme Court its opinion on whether a misrepresentation as to a "characteristic, quality, or feature" of the product sold is necessary to state a claim under the UTPA. The Oregon Supreme Court responded that in its estimation an ascertainable loss "within the meaning of the UTPA can, under some circumstances, flow from a consumer's decision to purchase a product in reliance upon the retailer's misrepresentation as to price history or comparative prices." In its answer, the Oregon Supreme Court reasoned that "plaintiff's purchase price theory is a viable [theory]” of ascertainable loss even in the absence of a showing that the seller misrepresented some characteristic or quality of the product sold.

The panel also reversed the lower court's finding that the plaintiff did not have standing to bring her claim, applying its precedent in Davidson v. Kimberly-Clark Corp., which stood for the proposition that "'misled consumers may properly allege a threat of imminent or actual harm sufficient to confer standing to seek injunctive relief' to prohibit the defendants from falsely advertising their product in the future."

Noting that said precedent had been called into question in the Supreme Court case TransUnion LLC v. Ramirez, the panel reasoned that the Supreme Court had nevertheless not sufficiently undermined Davidson to meet the 9th Circuit's 'clearly irreconcilable' standard – emphasizing that the panel previously found that "[i]t is not enough for there to be 'some tension' between the intervening higher authority and prior circuit precedent."

The complaint alleged that plaintiff would shop at Eddie Bauer's stores if she had confidence in the truth of Eddie Bauer's prices. Even though Eddie Bauer had already started using the term "Comparable Value" to describe its prices (i.e., based on prices of competing products of similar quality and style) months before the plaintiff filed her complaint, the panel found that the plaintiff nevertheless had standing to sue because she had pled that she would be harmed if in the future she would have to guess whether the retailer was truthfully representing the price of its products.

In a dissent, Judge Carlos Bea disagreed and argued that plaintiff's claim for injunctive relief should be dismissed based on lack of standing, reasoning that Davidson was "fatally undercut by the Supreme Court."

Key Takeaways

The circuits are split on their reading of what is sufficient to plead ascertainable loss in a false reference pricing case. Though here the 9th Circuit revived the suit, finding that a plaintiff need not allege a misrepresentation as to the characteristic, quality, or feature of the product sold in order to show an ascertainable loss, the 8th Circuit recently refused to revive a similar case against another major retailer because the plaintiff in that case had not shown with specificity that she had suffered a monetary loss.

Plaintiffs Alleging Greenwashing Lawsuit May Proceed Given Claims That Rust-Oleum Should Clean Up Its Advertising

Greenwashing allegations that Rust-Oleum falsely labeled its "Krud Kutter" cleaning products as "non-toxic" and "Earth friendly" have survived the company's summary judgment motion.

The court held that "genuine disputes of fact remain on all issues," and that it should be up to a jury to decide whether these challenged claims were unreasonable or not.

The class action complaint alleged that Rust-Oleum falsely advertised Krud Kutter products by misleadingly labeling them as "green" though they contain ingredients that may be damaging to humans, animals, and the environment. The plaintiff alleged that Krud Kutter actually contains chemicals harmful to the skin and eyes and which can kill plants and microorganisms.

Plaintiffs charged that Rust-Oleum engaged in unfair business practices under California's Unfair Competition Law (UCL), deceptive advertising under the state False Advertising Law (FAL), and deceptive practices under the Consumer Legal Remedies Act (CLRA)—all three governed by the "reasonable consumer" test.

Rust-Oleum moved to dismiss the case on a summary judgment motion, arguing that the plaintiff could not show as a threshold matter how the reasonable consumer interprets "non-toxic" and "Earth friendly."

Under the reasonable-consumer test, the court explained that the plaintiff is required to plead facts that demonstrate that a significant portion of the general public acting reasonably under the circumstances could be misled. Further, to survive summary judgment, the court noted that a plaintiff must demonstrate by extrinsic evidence (e.g., consumer survey evidence) that the challenged statements tend to mislead consumers.

The court had held at the pleading stage that the plaintiff's definition of "non-toxic" that "the product[s] did not pose any risk to humans, animals, or the environment" was sufficient. But Rust-Oleum argued that because the plaintiff's expert said at deposition that risk can never be completely eliminated (so that even water can be toxic at certain levels), this evidence showed that "a reasonable consumer would not believe the Krud Kutter products to be totally free of risk." The company further argued that the FTC Green Guides were not "valid metrics" of how consumers interpret the term "non-toxic."

The court was unconvinced. It noted that deposition testimony was "at best anecdotal evidence" and was not dispositive of how a "reasonable consumer interprets challenged claims." On the FTC Green Guides argument, it noted that while they were not dispositive under the reasonable-consumer test, Rust-Oleum had nevertheless not met its burden at summary judgment.

Regarding the "non-toxic" claim (where Rust-Oleum asserted that the additional language on the label stating "Caution: Eye and Skin Irritant" next to the words "Non-Toxic" sufficiently qualifies the claim), there was "at least a genuine dispute of fact" about the interpretation of the label by the plaintiff's expert toxicologist who contended that the potential harm goes beyond eye and skin irritation.

The court also remained unconvinced by Rust-Oleum's argument that the term "Earth friendly" was mere puffery (which is generally not actionable under the reasonable-consumer test as puffery refers to a statement that is extremely unlikely to induce consumer reliance), reasoning that it was not so "nonspecific" as to make it "extremely" unlikely that a consumer would rely on it. The fact that California statutory law also speaks of the term "Earth friendly" further undermined any puffery argument, wrote the court.

Key Takeaways

Advertisers more and more seek to make environmentally friendly claims but continue to do so at their peril to the extent they seek to rely on general statements under a theory of puffery. Consumer surveys show that consumers look to purchase brands with lesser impact—so when crafting claims, brush up your familiarity with the FTC's Green Guides (soon to be updated), EPA regulations and definitions and NAD cases that thoroughly analyze ESG-styled claims. Such review will help as the class action bar comes for a product near you.

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