In This Issue:

• Setting Its Sights on Eye Health Supplement, NAD Finds Health Claims Insufficiently Supported Despite Peer-Reviewed Evidence
• The Long and Winding Road to a Wesson Oil Settlement Led Plaintiffs to $3 Million Fund
• California AG Sues Anti-Abortion Clinics Over Deceptive, Unsafe Abortion "Reversal" Procedures
• Perpetrators of Fake Prize Mailing Scheme Sentenced to 20 Years in Prison
• Blurred Lines: FTC Warns Against Stealth Ads Targeting Kids
• Disclosures Should Shine Bright as Diamonds When Marketing Precious Baubles, NAD Says
• NAD Says Trendy Soap Brand Need Not Wash Away "Natural" Claims – But Should Rinse Off "Detergent"
• Hey Dude, Suppressing Negative Reviews Will Cost You About $2 Million at the FTC

Setting Its Sights on Eye Health Supplement, NAD Finds Health Claims Insufficiently Supported Despite Peer-Reviewed Evidence

The National Advertising Division (NAD) recommended that an eye health supplement maker, MacuHealth, discontinue or modify a number of claims the company made about several of its products. The matter underscores that especially when dealing with health claims, the advertiser must not only have sound studies and other evidence – it also must ensure that the evidence is tailored to support the advertiser's specific claims and satisfies the applicable standard of proof.

A competitor of MacuHealth, Vision Elements Inc., challenged dozens of express and implied claims made by MacuHealth for its MacuHealth, MacuHealth Plus+, VitreousHealth, Vision Edge Pro and TG Omega-e products. The advertiser submitted, in total, 35 studies and scientific reviews as support for the various challenged claims. In assessing the claims, the NAD reviewed the substantiation provided by the advertiser, ultimately concluding that they generally were insufficient to support the claims.

With respect to the claims relating to the MacuHealth product – the advertiser's "flagship dietary supplement product" – NAD reviewed nine peer-reviewed, published scientific studies submitted by the advertiser and found them wanting. Among other things, NAD determined that three of the studies were conducted on ingredient levels different from those contained in the MacuHealth product; that one of the studies lacked a control and was conducted on a small, atypical group of subjects; that several of the other studies were conducted on study populations different from MacuHealth's target population; and that other studies utilized small sample sizes or suffered from other methodological flaws. NAD emphasized in particular that "none of the studies submitted were conducted on the current MacuHealth product as marketed to consumers" and that many of the claims were broader than the more limited findings contained in the studies. Accordingly, although NAD acknowledged a "growing body of research" regarding the effect of key supplement ingredients on macular pigmentation and visual performance, it concluded that the proffered studies ultimately did not support the claims. In doing so, it emphasized that "the mere fact that a study possesses some methodological virtues and appears in a journal does not inoculate it from scrutiny when it is offered as substantiation for health-related claims." NAD also underscored that health claims must be "narrowly tailored and [must] accurately reflect what the research shows."

There were also issues with MacuHealth's advertising of its other products, found NAD. MacuHealth+ is advertised to treat consumers with Age-Related Macular Degeneration (AMD). The advertiser argued that this was not a disease claim but a health claim which if reviewed by the FDA is allowed. But NAD pointed out that there are currently no authorized health claims based on the ingredients and study referenced by MacuHealth.

Neither was NAD convinced by the advertiser's argument that other advertisers selling similar products make similar claims about how their formulations help with AMD. Health claims require competent and scientific evidence, and other advertising does not qualify as scientific evidence.

Vision Elements also challenged claims by MacuHealth that its VitreousHealth product is "scientifically proven" to reduce "floaters" and their symptoms and severity. NAD found that the study submitted by MacuHealth in support of these claims was insufficient. NAD concluded that although the study featured "promising outcomes," it was a "first of its kind" study featuring emerging research not sufficient to meet the "higher standard of proof" applicable to "scientifically proven" claims. It noted that for such claims, typically the "replication of the research" (i.e., multiple studies) will add to the weight and reliability of the evidence, and that advertisers "should avoid overstating the certainty of science in areas where the science is still emerging."

Key Takeaways

Advertisers can consider this matter a reminder of the close scrutiny that is applied to scientific studies submitted in support of health claims. There are also some specific lessons here. First, health claims should be narrowly tailored to accurately reflect the supporting research. A reliable study won't support a claim that is broader than the study's results. Second, when relying on emerging science, advertisers should be especially careful to avoid overstating the certainty of the science. Finally, quality matters a lot more than quantity!

The Long and Winding Road to a Wesson Oil Settlement Led Plaintiffs to $3 Million Fund

The ongoing saga of the Wesson Oil "100% natural" false advertising lawsuit appears now to be in its final chapter after a district court granted final approval to a class action settlement.

This is the second settlement offer to take shape in this decades-old litigation, after the district court's approval of the first settlement was rejected on appeal over concerns that the settlement terms were unduly influenced by interests of ConAgra Foods, the defendant, and counsel for the plaintiff class.

The settlement provides for a $3 million non-reversionary common fund, leaving each consumer with $0.15 cents per Wesson Oil bottle purchased during the class period. The Court characterized the payout as "modest" but "reasonable." The settlement does not provide any fees to plaintiff's lawyers.

Way back in 2011, the complaint alleged that for over ten years ConAgra marketed its Wesson Oil products as "100% Natural" and that the claim is false and misleading because the oil contains genetically modified organisms (GMOs). The complaint further alleged that plaintiffs paid more for the product because of the "100% Natural" claim.

A protracted court battle ensued, featuring extensive discovery and motion practice and an order certifying eleven statewide classes. When ConAgra's attempts to undo class certification by appealing to the U.S. Supreme Court failed, the parties began settlement negotiations.

That's when things got interesting.

The parties originally agreed on a settlement in 2019. That settlement required ConAgra to stop marketing the product as "natural" and provided for a payment of $0.15 per unit of Wesson Oil bottle to consumers up to a maximum of 30 units per person, plus some additional funding to be awarded to certain claimants. Although $0.15 per unit is a small payout, the magistrate overseeing the settlement apparently understood that amount to exceed the price premium attributed to the "natural" labeling. The settlement also provided that class counsel would make an application to the court for an award of almost $7 million in legal fees to be paid by ConAgra, who agreed to "take no position" on the application. If the court gave plaintiff's counsel any less than the requested amount, the difference would go to ConAgra. The settlement was approved by the district court.

Law professor M. Todd Henderson filed an objection and appealed the district court's approval, arguing that the original proposed settlement had "all the signs of impermissible self-dealing." On appeal, the Ninth Circuit Court of Appeals remanded the case back to the district court, directing the district court to assess whether the parties had "colluded at the class members' expense." Following that review, the district court nixed the settlement and sent the parties back to the drawing board.

As for the "natural" claims, after ConAgra sold Wesson Oil to the J.M. Smucker Company in 2017 (though that deal later fell through), the company voluntarily removed the label from its products and stopped marketing the claim. According to the Court, "ConAgra maintains that this litigation played no role in either decision."

Key Takeaways

Is there a clear winner here? After more than a decade of litigation, payouts to consumers will be very small, and plaintiff's attorneys will see next to nothing. Still, after such a long and costly litigation, consumers may see this as a win if it serves as a reminder to advertisers to exercise caution when using terms such as "natural," despite ConAgra's insistence that the litigation didn't cause its sale of the brand or the subsequent removal of the "natural" label from the product.

California AG Sues Anti-Abortion Clinics Over Deceptive, Unsafe Abortion "Reversal" Procedures

California Attorney General Rob Bonta has filed a false advertising lawsuit against anti-abortion organizations in the state alleging that they are misleading vulnerable women about the effectiveness and safety of the so-called "abortion pill reversal" (APR) drug protocol.

The complaint against defendants Heartbeat International (HBI) and Real Options (RO) alleges that the organizations deceptively and falsely claim that APR is "safe" and effective at "reversing" a medical abortion performed by taking an abortion pill—in violation of California's False Advertising Law and Unfair Competition Law. The lawsuit seeks to block HBI and RO from falsely advertising APR as safe and effective.

For background, the complaint lays out that medication abortion is the preferred method of terminating a pregnancy in the United States, that it consists of two medications—mifepristone and misoprostol— and that it "has been proven to be incredibly safe" and "incredibly effective."

The APR "protocol" directs a patient to take high doses of progesterone within 72 hours of taking mifepristone to "reverse" the effects of the mifepristone, according to the complaint. The "reversal" has "saved" "thousands of lives," they say, despite no evidence that APR "reverses" medication abortions. The complaint also asserts that the term "reversal" itself is misleading because it does not "accurately convey even the theory underlying APR."

The State of California alleges that this is a dangerous deception: there is no credible scientific evidence that a pregnancy termination conducted via the abortion pill can be "reversed," and in fact the only credible study ever conducted on APR "suggest significant health risks." But the organizations provide no information on possible side effects from APR, including severe bleeding. This has not deterred the defendants, who on their website, hotline, and in their training kits continue to falsely claim that APR can "reverse" a pregnancy termination.

According to the complaint, defendants base their claims on a single scientific study which is flawed and not accepted by the general scientific community. First, it was conducted by the individual who founded the Abortion Pill Reversal Network—which runs the APR website—a glaring conflict of interest. Methodologically, it had so many flaws that three major medical journals rejected the report for publication, and the journal that published the study is sponsored by anti-abortion organizations. Further, separate peer reviewed medical journals found a lack of evidence that the APR method would work.

Additionally, the study on which the defendants rely to market APR only tested the use of progesterone after taking the first part of the abortion pill regiment. Yet defendants also falsely claim that APR can be used after taking both parts of the drug regimen and even when using a different drug regimen which was not tested in the APR study.

Nevertheless, though no credible medical studies have verified the defendants' claims that APR is effective and safe, the marketing for APR continues unabated, with the defendants making false and misleading statements in reliance on one study in particular that AG Bonta alleges defendants know is woefully inadequate.

Key Takeaways

The claims at issue in the case on their face raise health-related issues that are often seen in false advertising cases. Nonetheless, given the subject matter, the case itself raises issues at the intersection of false advertising and politics—not your stuff of typical advertising cases. It bears watching to see if false advertising claims become another battleground between staunchly opposing views.

Perpetrators of Fake Prize Mailing Scheme Sentenced to 20 Years in Prison

In the case of a family printing business gone rogue, the Nevada brothers used theirs to orchestrate the big-time false advertising fraud at the center of a U.S. Department of Justice criminal case. With just a few printers and a couple of catchy titles they put on official notices, perpetrators of a fake prize-notification scheme cost elderly consumers over $10 million, one $20 to $30 check at a time.

Brothers Mario Castro and Miguel Castro of Las Vegas were found guilty of conspiracy to commit mail fraud and multiple counts of mail fraud in violation of 18 U.S.C. §§ 1341 and 1349. They were each sentenced to 20 years in prison, while co-conspirator Jose Luis Mendez was sentenced to 14 years.

The government's indictment alleged that the defendants sent prize-notification mailers throughout the United States falsely advertising that a multimillion dollar cash prize awaited on the other side of a payment of $20 to $30. In reality, none of the people who sent payment ever received any prizes. According to the government, over an eight-year period beginning in 2010, the defendants printed and mailed official-looking notices that falsely promised significant cash prizes, then turned around and pocketed the money, making millions from their deceptive and materially misleading promises.

To extort money from elderly and vulnerable consumers, the defendants promoted enticing but deceptive promises of wealth using calls to action such as "Immediate Response – Last Chance Voucher," "You Are Officially Sworn To Secrecy Absolutely Confidential," and "Official Awards Notification." The mailers included deceptive material echoing the "dark patterns" that the Federal Trade Commission (FTC) enforces against, including letters meant to look as if they were handwritten, claims that recipients were "confirmed" and "guaranteed" to receive millions of dollars in prizes, and fake "personalized" form letters.

Defendants hid behind fake names and straw corporations and addressed the mailers with the names of fictitious companies like "Imperial Award Services," "Special Money Managers" and "Montgomery Marketing," said the government. The mailings also purported to be signed by individuals who do not even exist with titles such as "President" or "Comptroller." The indictment further alleged that after defendants sorted the mail and distributed the payments, they deliberately added the names of victim consumers to a database in order to target them again with the same fraud.

Though multiple cease and desist orders sent by the U.S. Postal Service did nothing to stop defendants' fraud, the scheme met its end when the U.S. Justice Department issued multiple search warrants and obtained a court order terminating the operation. As of this writing, three remaining defendants await sentencing.

Key Takeaways

This case is a reminder that false advertising can end not just in civil liability but with significant time in prison when the false advertising rises (or sinks) to the level of fraud in violation of criminal law.

Blurred Lines: FTC Warns Against Stealth Ads Targeting Kids

The Federal Trade Commission (FTC) has a piece of advice for advertisers that don't clearly separate advertising from other content marketed to kids: Don't do it.

According to the FTC, "blurred" or "stealth" advertising is the practice of blending advertising into other content, such as an influencer incorporating marketing messages into a video on social media or advertisements hidden in the environment of a mobile game. In a recent staff paper, the FTC maintained that advertisers targeting marketing at children should stop the practice altogether.

The paper found that blurred advertising is a particular problem because children are less likely than are adults to have the ability to differentiate between advertising and editorial content or to recognize advertising in what the FTC sees as a stealth advertising context. It's especially a concern because kids spend a significant amount of time online and consume increasing amounts of digital content, even as much of the advertising that children encounter "blend[s] into the surrounding content."

The FTC outlined potential harms blurred advertising poses to kids, including promoting products that could be physically harmful, children's natural lack of skepticism about ads embedded in the content of people they trust, financial harms such as accidental purchases, privacy harms, and disproportionate effects on certain populations.

In light of emerging research showing the risks of blurred advertising, the FTC proposed a number of steps advertisers can and should take to "reduce the likelihood of young consumers being deceived or otherwise harmed":

• Do not blur advertising: The FTC recommended advertisers clearly separate kids' entertainment content and advertising through the use of formatting techniques and visual and verbal cues that strongly signal to children that they're about to see an advertisement.
• Include prominent "just in time" disclosures: Though disclosures don't usually work to temper stealth ads in advertising to kids, "robust" disclosures can help kids identify ads. That means disclosures that are: (1) timely, (2) provided verbally and in writing, and (3) include important information about the commercial message.
• Create icons to signal advertising: The FTC proposed that advertisers, platforms and content creators create prominent, child-friendly icons to help kids identify when content is or contains advertising.
• Educate: Focus on educating parents, kids and educators about media literacy and digital citizenship. "The more industry standardizes the words and icons used to discuss embedded advertising and develops and utilizes tools for identifying it, the easier it may be for children to grasp the concept across media," said the FTC.
• Special platform considerations: Platforms should consider requiring content creators to identify advertising and offer parental controls that allow parents to limit or block stealth ads.

The paper's findings and recommendations stem from a workshop the FTC held in October of 2022 on "Protecting Kids from Stealth Advertising in Digital Media."

Key Takeaways

While the FTC noted that blurred advertising can violate Section 5 of the FTC Act if it is deceptive, it may be a long road from here to regulation that specifically curtails the style of ads served to children. Still, the FTC emphasized that the onus is not on parents but on advertisers and platforms to ensure "lawful advertising that is free of deception."

Disclosures Should Shine Bright as Diamonds When Marketing Precious Baubles, NAD Says

The National Advertising Division (NAD) recommended that a retailer of lab-grown diamonds (LGDs) modify its advertising to include conspicuous disclosures clarifying that its LGDs are not natural diamonds.

The Natural Diamond Council (NDC) challenged claims made by Agape Diamonds, which sells natural diamonds, LGDs, and simulants (which aren't diamonds at all but are designed to look like them, such as cubic zirconia).

NDC argued that Agape's marketing violated the FTC's Jewelry Guides, which provide that it is unfair and deceptive to materially misrepresent the origin of a LGD. Per the FTC's Jewelry Guides, marketers cannot use the words "stone" or "diamond" to describe a LGD without preceding the claim with an equally conspicuous disclosure that makes it clear the product is not a mined gemstone.

NDC's arguments centered on Agape's social media and website marketing. It asserted that Agape frequently promotes its products with unqualified uses of the words "diamond" and "stone," or fails to include appropriate disclosures that clarify it is selling LGDs and not natural stones. Noting that the company's name includes the word "diamonds," NDC contended that the fact that Agape also sells natural diamonds only adds to consumer confusion.

To make its point, NDC provided as examples some of Agape's social media ads allegedly containing these unqualified claims, such as a TikTok video using the words "stone" and "diamond" without qualifiers and utilizing the hashtag #diamonds. Another Facebook post shows an image of a diamond ring and the text of the post reads: "2.78 CT Radiant Cut, 18K Gold, Financing – No Credit Check! On Sale $1,960," with no disclosures about the origin or nature of the diamond.

NDC also provided evidence of Agape advertisements featuring diamond images and details but no reference to any iteration of the word diamond: "NDC argued that Agape should not be able to evade disclosing the source of their diamonds by avoiding the use of the word 'diamond' in product descriptions and elsewhere, especially when employing clear visual cues that convey the message that the product contains diamonds."

For its part, Agape countered that its advertising complies with the FTC's Jewelry Guides by repeatedly informing its consumers whether a diamond is an LGD or a natural stone. The company also modified some advertising on its website and social media, specifically by adding the words "Lab Grown" or "Simulated" to preface "Diamond" or "Stone."

Though NAD welcomed these changes, it still found that other Agape online advertising failed to include a clear and conspicuous disclosure about the products' origins. For example, as with NDC's example, some online ads featured images of jewelry with prices but no information on the stone's origins. Likewise, some thumbnails on the company's website featured product images, descriptions and prices, but no information on the product's origins.

Additionally, a drop-down menu on Agape's site allowed users to select the type of stone, LGD or simulant they wish to purchase, but NAD found that this part of the site was "only effective in avoiding a misleading message if consumers . . . receive adequate disclosures before reaching the product page" or if the consumer already understands before landing on the product page that they will build the product themselves by making selections.

NAD recommended that Agape qualify all of its advertising with an appropriate description of the type of product on offer, with the words simulated or lab grown immediately preceding the words diamond or stone in each instance.

Key Takeaways

Advertising of similar but not quite the same products—and the requirement that advertisers ensure consumers clearly distinguish between them—has been a hot topic at NAD. As we covered in a recent Stay ADvised, NAD clarified the obligations of a marketer of laminate floors to ensure its marketing didn't appear to be advertising real wood floors. Here—and not for the first time—NAD weighed in on the importance of marketers conspicuously disclosing whether a diamond is lab-made or not.

NAD Says Trendy Soap Brand Need Not Wash Away "Natural" Claims – But Should Rinse Off "Detergent"

When personal care product maker Dr. Squatch recently launched a marketing campaign for its new Jukebox brand "natural" soaps marketed to women, consumer goods giant Unilever sounded the alert at the National Advertising Division (NAD) about some of the campaign's claims.

Unilever took issue with several of Dr. Squatch claims about its "cold process" Jukebox bar soaps: that they are not made with "detergents," that they are "natural," that they are "made with no harsh chemicals," and the implied claim that Jukebox is a women-owned brand. NAD agreed with some of Unilever's arguments but found other claims properly supported.

First, Unilever argued that Jukebox's claims that "most cleansing bars and body washes on the market are not actually soap – they are detergents" conveyed a misleading and negative message that consumers using competing products like Dove are actually showering "with the equivalent of Tide."

Dr. Squatch countered that this claim was true and not misleading because the FDA classifies products like Unilever's Dove products as synthetic detergents. NAD concluded that although the claim was technically accurate, it was nonetheless misleading," noting as it has many times that a claim may be literally true but still misleading."

"If a technical definition or regulatory classification does not reflect how a term is commonly understood by consumers, the use of that term in advertising may be misleading, and NAD has repeatedly held that consumers have a right to rely on a word's ordinary meaning when used in consumer advertising." Here, consumers unfamiliar with the FDA's classification would rely on the common understanding of the word "detergent" and come away with a misleading and unsupported message that when they use Dove cleansers, they're washing in something like laundry detergent.

Regarding the "natural" claims, Unilever argued that because the natural ingredients in the product undergo a significant chemical reaction during the process of saponification, the soaps are not natural and therefore this claim is not supported. Dr. Squatch submitted the products' ingredient lists as substantiation and asserted that 96% of its soaps are made with natural ingredients and that it complies with FDA standards on "natural" products. The company also noted that saponification is an ancient process and that consumers would understand that the "simple" process doesn't convert something natural into something that is not natural.

NAD agreed, finding Dr. Squatch's "natural" claims substantiated. Though typically NAD holds that all ingredients which "undergo significant chemical alterations" are not natural, in this case NAD held that the saponification process involved minimal processing and was "consistent with consumer understanding and expectations of a product labeled natural."

To make its case, Unilever had relied on a matter in which NAD recommended that an advertiser discontinue its "natural" claims for a fat substitute made from sugar and soybean oil because the end ingredient underwent a chemical transformation that rendered it no longer natural. But NAD distinguished that matter, citing another case which NAD said stood for the "operative principle" that it's "not the fact of processing but the nature and extent to which the processing is consistent with consumer expectations of a product labeled as natural."

Here, the saponification process involved minimal processing and was simple enough to be performed in a kitchen. It was just the "kind of minimal processing that would be consistent with consumer understanding and expectations of a product labelled natural." Indeed, saponification was an ancient process without which there would be no such thing as soap, added NAD.

Examining the "made with no harsh chemicals claims," NAD found that this claim was not supported because the product was "made" with lye, which is a harsh chemical. Even though no traces of lye are found in the finished product, use of this ingredient during processing rendered the claim "made with no harsh chemicals" inaccurate, especially in light of how Jukebox used the claim in a comparative context. By contrast, the claim "no harsh chemicals" made in a monadic context was truthful and did not convey the implied message that other soaps use harsh chemicals.

Finally, NAD asked Jukebox to modify the claims "Who runs the world? Girls" and "From our world-class natural perfumers and in-house artisan soap makers to our bubbly leadership, we're a band of music & soap-lovin' ladies," to avoid conveying the misleading message that Jukebox is a women-owned and women-run brand. NAD found that taken together and in context, that was one reasonable message that was conveyed and that the evidence did not support this claim. Though women did lead certain Jukebox teams, nothing in the record showed that they were the primary decision-makers in the company.

Key Takeaways

Lots of interesting takeaways here. For starters, NAD reminds us that common consumer understanding matters—even in the face of a technically accurate claim, a bit of a twist on the literally true, impliedly false mantra. Additionally, the case provides some useful guidance when substantiating a "natural" claim regarding the type and degree of processing that won't deprive advertisers of the natural label—again focusing on a consumer's reasonable understanding.

Hey Dude, Suppressing Negative Reviews Will Cost You About $2 Million at the FTC

Retailer Hey Dude agreed to pay the Federal Trade Commission (FTC) $1.94 million to settle allegations that it suppressed negative customer reviews on its website and misled consumers about shipping times in violation of the FTC Act and the Mail, Internet, or Telephone Order Merchandise Rule (Mail Order Rule).

The FTC complaint alleges that shoemaker Hey Dude, which was acquired by Crocs in February 2022, rejected most reviews under five or four starts from 2020 until June 2022, when the company learned it was under investigation by the FTC for these alleged actions.

According to the complaint, Hey Dude happily let 5-star reviews flow freely on its site but applied special individualized review to lower-starred reviews. All in all, it allegedly rejected more than 80 percent of all one-, two- or three-star reviews.

To ensure it had mostly positive reviews, the company allegedly had written policies and procedures instructing its employees to publish certain types of reviews only if they were positive.

Hey Dude also engaged in questionable shipping practices, says the FTC. It misrepresented its shipping speed in its marketing, promising 2- and 1-day shipping and rarely delivering. Hey Dude also often failed to ship all or part of an order, or it shipped materially different goods than those that customers had ordered.

Even when the orders were partially shipped or not shipped, Hey Dude failed to cancel orders and provide customers with prompt refunds. When it did provide refunds, they often weren't for the full price. Indeed, the FTC alleges that sometimes Hey Dude provided gift cards for unfulfilled or canceled orders instead of refunding the order via the payment method used.

In addition to the monetary component, the settlement requires Hey Dude to cease the alleged wrongdoing in the future and bars it from further violations of the Mail Order Rule. It further prohibits the company from making misrepresentations about customer reviews and from suppressing customer reviews (with limited exceptions).

Key Takeaways

This case is yet another in the FTC's ongoing activity with respect to reviews—the solicitation, use, and presentation of them remain at the forefront of FTC's regulatory focus.

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