In This Issue:

• U.K.'s Competition Authority Sees Red on Unilever "Green" Claims, Launches Investigation
• Class Action Bets That DraftKings' "$1,000 Bonus" Offer Is Deceptive Advertising
• NAD Concludes LegXercise Health Claims Are a Stretch
• Grand Canyon University Ads Deceive Students Into Paying More, New FTC Suit Claims

U.K.'s Competition Authority Sees Red on Unilever "Green" Claims, Launches Investigation

Consumer goods giant Unilever seeks to "mak[e] sustainable living commonplace." Now those aspirations are under review as the U.K.'s Competition and Markets Authority (CMA) investigates the company's green claims.

Have "green" claims for Dove, Vaseline, and a host of everyday household products crossed the line from aspiration to deception? After an initial review, the CMA is considering whether the company has overstated some environmental claims.

Explaining its decision to begin the formal investigation, the CMA said it is concerned that Unilever used vague and broad language which may be misleading consumers about the environmental impact of the company's products, including exaggerating the "natural" aspect of product ingredients.

The CMA has also raised concerns that Unilever's recyclability claims are unclear and that it employs "green" colors and imagery to create an overall impression "that the products are more environmentally friendly than they actually are." The CMA also said that Unilever may be misleading consumers by focusing on a single aspect of a product to suggest the product overall is more environmentally friendly than it really is.

Such claims may violate the CMA's Green Claims Code which, like the FTC's Green Guides, "aims to help businesses understand how to communicate their green credentials, while avoiding the risk of misleading shoppers."

"So far, the evidence we've seen has raised concerns about how Unilever presents certain products as environmentally friendly. We'll be drilling down into these claims to see if they measure up. If we find they're greenwashing, we'll take action to make sure shoppers are protected," said CMA Chief Executive Sarah Cardell.

The move is a sign that the CMA is expanding its investigation into greenwashing claims in the retail sector, which it launched in January 2022 with a review of environmental claims made in the fashion sector by Asos, Boohoo, and Asda. The Unilever investigation follows the CMA's announcement that it is turning its greenwashing scrutiny towards the "fast-moving consumer goods" space.

Though it stressed that it has not reached any conclusions or found any wrongdoing, the CMA has officially reached out to Unilever about the investigation.

Key Takeaways

As we noted in our take on the CMA's investigation of Asos and Boohoo's environmental practices, the Unilever investigation could be a first step toward class action litigation or FTC action in the United States.

Class Action Bets That DraftKings' "$1,000 Bonus" Offer Is Deceptive Advertising

A class action lawsuit filed before the new year aims to take to task a leader in the sports betting industry over allegations it misled consumers with its $1,000 signup bonus and other marketing, stressing the particular egregiousness of the deception in light of betting's addictive nature and the audience to which the marketing is directed.

The suit alleges that DraftKings violated the Massachusetts Consumer Protection Act by engaging in unfair and deceptive practices and promoting untrue and misleading advertising.

According to the complaint, DraftKings' promotion of the $1,000 signup bonus was intentionally false and misleading because in order to receive the bonus consumers actually would have to place an upfront deposit of $5,000 and gamble five times that amount, or $25,000, within 90 days – all on bets with odds of (-300) or worse. Plaintiffs allege that they did not understand that they would need to comply with all these conditions or that the bonus would not be awarded in funds that could be withdrawn, but only as "non-withdrawable credit ('play money') to be used for further gambling."

Plaintiffs allege DraftKings compounded the deception by offering the bonus only to newcomers to the Massachusetts sports betting world, knowingly misleading consumers who "would be unlikely to understand the cost and risk involved in qualifying" for the offer. According to plaintiffs, new consumers, like plaintiffs, "could not reasonably understand" the fine print notice specifying the additional conditions that would have to be met to earn the signup bonus.

In support of their claims, plaintiffs repeatedly highlight the addictive nature of gambling as adding to unfairness of the business practices at issue, citing to studies from the American Psychiatric Association and World Health Organization finding that gambling is an addiction.

Plaintiffs bring the case on their own behalf and on behalf of a putative class of "all citizens of Massachusetts who opened an account and deposited funds with DraftKings' Massachusetts sports betting platform in response to the '$1,000 Bonus' promotion and placed monetary bets through DraftKings' Massachusetts sports betting platform and were damaged thereby." In support of their class allegations, plaintiffs allege that DraftKings engaged in widespread advertising and promotion of the $1,000 bonus offer and deliberately used local sports heroes and celebrities to deceptively advertise its product.

DraftKings has denied all liability in public statements responding to the suit, touting that it takes responsible gambling and consumer protection very seriously and indicating that it tried to resolve the plaintiffs' concerns out of court prior to the lawsuit being filed. DraftKings just recently stipulated with plaintiffs to set a briefing schedule for a motion to dismiss the complaint, which should be fully briefed by the end of March 2024.

Key Takeaways

What makes this case unusual is who filed it. The Public Health Advocacy Institute (PHAI) filed the suit on behalf of two class action plaintiffs. Together with Northeastern University Law School professor Richard Daynard, PHAI was instrumental in litigating the 1980's era lawsuits against Big Tobacco that changed advertising of cigarettes.

NAD Concludes LegXercise Health Claims Are a Stretch

The subject of many an infomercial, the LegXercise is a device marketed to improve a variety of movement and circulation ailments—in particular for seniors. It moves users' legs while they sit—claims that did not sit well with Actegy Health, which challenged IntelliBrands at the National Advertising Division (NAD) for its LegXercise claims.

Actegy challenged a variety of health-related claims for the LegXercise related to issues of circulation, blood flow, restlessness, pain, aches, relaxation, cramps, tingling, swelling, mobility, walking, weak legs, coldness, discoloration, effective exercise, and overall health. (Try saying that three times fast!)

IntelliBrands argued that its hands were clean regarding many of the challenged claims because they were made by endorsers in testimonials (like those featured in infomercials). Unsurprisingly, NAD did not agree—admonishing (in line with the FTC) that claims made in consumer testimonials must be substantiated just the same as claims made directly in brand advertisements.

To support its claims, IntelliBrands submitted articles examining the effect of passive exercise on the body as well as a study evaluating the effects of LegXercise on circulation. First, NAD found that the articles did not support the challenged claims because none tested the LegXercise, nor was there evidence that any of the movements outlined in the articles were equivalent to the LegXercise movements. Second, NAD found that the two-week study evaluating the effects of LegXercise on leg circulation was flawed, unreliable, and did not substantiate the claims. It featured too few participants, did not use a control, and relied in part on subjective self-reporting rather than objective measures. Accordingly, NAD recommended that IntelliBrands discontinue its health-related claims.

NAD then turned to the question of the LegXercise product name. Is it, as the challenger claims, an express claim that the product is exercise? Or is it, as the advertiser argued, a product name that truthfully states it is a passive exercise device?

Keeping in mind that NAD will generally not require an advertiser to change a product name absent extrinsic evidence of consumer confusion unless it conveys an expressly false message, NAD concluded that LegXercise did not convey a false message. LegXercise is a "fanciful term that has no meaning and does not convey the message that the product offers clinically meaningful exercise." The product name could stay.

Next NAD analyzed the "physical therapist" claim, a challenge to a LegXercise advertisement in which a physical therapist is shown moving a patient's leg, before fading out to be replaced by the LegXercise. A voiceover states: "it's like having a physical therapist right in your own home!" Actegy Health argued that this ad conveys the message that the LegXercise is equivalent to a physical therapist.

NAD noted that reasonable consumers would understand that it would be unreasonable to expect LegXercise to produce the same personally tailored results as a physical therapist. But it also reasoned that reasonable consumers may believe that using the device would be equivalent to seeing a physical therapist who employs the same movements as LegXercise (back and forth) for the same ailments. Since IntelliBrands did not submit any evidence that using LegXercise is equivalent to seeing a physical therapist in any respect, NAD found the implied message of physical therapist equivalency unsupported.

NAD also recommended that IntelliBrands discontinue implied claims that using LegXercise is equivalent to walking. The claim stemmed from a video that showed how LegXercise has a counter that tracks "steps." NAD reasoned that the word "step" is associated with walking, and "by claiming that the product counts steps, consumers can reasonably take away the message that using the product is equivalent to walking a number of steps," although there is no evidence in the record to support this message.

However, NAD found substantiated the claims that the LegXercise provides continuous automatic movement and flexes the knee and ankle joints, as they describe how the product works. It qualified its approval by exhorting IntelliBrands not to make a claim about the movement's health benefits.

Key Takeaways

The case is a good reminder that just because a product has been around for a while doesn't mean its claims are in the clear. To substantiate health claims, advertisers must offer methodologically sound evidence that is a good fit for the claims, as health-related claims are held to a high standard of proof. And, of course, testimonials (which are at best anecdotal) are not stand-ins for claims support.

Grand Canyon University Ads Deceive Students Into Paying More, New FTC Suit Claims

Another university is facing Federal Trade Commission (FTC) allegations that it falsely advertises many of its educational offerings.

This time the school in the hot seat is Grand Canyon University (GCU) of Arizona. The FTC alleges in a lawsuit that the school deceives students about the cost and requirements of its doctoral programs and falsely calls itself a not-for-profit institution in violation of the FTC Act. The lawsuit also alleges that GCU and its President Brian Mueller are violating the Telemarketing Sales Rule by engaging in illegal telemarketing practices.

According to the complaint, GCU and Mueller advertise "accelerated" doctoral programs equal to the cost of just 20 courses (or 60 credits) for a full doctoral program's tuition and fees, although only 2% of GCU doctoral students complete their program at that advertised cost.

In reality, GCU requires significant additional coursework for doctoral students, which considerably raises tuition (by thousands of dollars) as well as the time required to complete the degree. Students completing their dissertations must undertake multiple additional dissertation requirements, called "continuation courses." All of these requirements not only make the actual GCU doctoral tuition significantly higher, but result in most GCU students never completing their doctoral degree because of the additional time and cost well beyond those advertised, claims the FTC.

A second allegation of the FTC's investigation is that GCU deceptively markets itself as a private "nonprofit" university when it has not operated as such since 2004. Today, the FTC alleges, GCU is a for-profit "institution that makes significant profit for its stockholders," including for co-defendant, Grand Canyon Education, Inc. ("GCE") and its CEO Brian Mueller (yes, the same one that is the President of GCU).

GCU markets itself as a nonprofit deliberately, alleges the FTC, and this representation is material to consumers (defendant Mueller stated in a 2018 interview that characterizing the university as a nonprofit "is a tremendous advantage" and that it allows them "to recruit in high schools that would not let us in the past"). However, despite what GCU says about itself, the FTC notes that the Department of Education declined to confer nonprofit status on the school.

Finally, the FTC alleges that GCU uses illegal marketing tactics to make these deceptive marketing claims. For example, GCU – through GCE as its service provider – allegedly instructs telemarketers to direct prospective students to materials that advertise the low tuition and credit numbers. After advertising online and on social media for prospective students, GCU telemarketers allegedly contact consumers who specifically requested not to be contacted, in violation of the law.

Key Takeaways

This type of case is not new—remember the University of Phoenix, which agreed to pay the FTC $191 million over similar allegations. What is surprising is that these companies continue to flourish. In GCU's case, it's also notable that the Department of Education recently fined the university $37.7 million over its allegedly deceptive marketing. GCU hit back at the Department in court, saying it disputes the assessment that it is a for-profit institution. Clearly the FTC disagrees.

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