The Ad Matter by Ashley Brooks: May Edition
What happened in May in the world of advertising law? Check below for some of the highlights.
COPPA applies not only to sites that target kids under 13 but also to sites that have actual knowledge that children use the site or app, as in this case. Any site under the watchful eye of COPPA needs to provide adequate notice and obtain verifiable parental consent before collecting or using children’s data in any way. Further, the FTC noted: “Facilitating other users’—including adults’—ability to identify and communicate with children—even those 13 or over—poses a significant risk to children’s health and safety.” Some US individuals have been accused of communicating or attempting to communicate with minors on these apps and may face criminal charges. Why it Matters. Seeking to collect kids’ data and use it for any purpose whatsoever without the proper safeguards in place will get you in hot water with the FTC or worse. Specifically, with app developers, create a good EULA (End User License Agreement) that ensures compliance and enforcement.
Eat Clean: Just Maybe Not at Panera. A class action suit in California against Panera accuses the popular chain restaurant of false advertising when it comes to their “clean” claims. Panera’s ad campaign features labels using the words “clean” and “100% clean” on signs placards, bags, and other displays in Panera restaurants, stating that there are no preservatives or artificial flavors in the food. According to the plaintiffs, however, the food actually contains glyphosate, the ingredient responsible for killing weeds in Monsanto’s Roundup. Further, the plaintiffs allege that Panera is misrepresenting their products to be of a quality that they are in fact, not. Plaintiffs allege violations of the California Unfair Competition Law, False Advertising Law and Consumer Legal Remedies Act. Why it Matters: FTC has consistently challenged “All Natural” claims on ingredients; alleging something is “clean” will also attract regulatory attention. Ensure that your food and ingredient labels are truthful.
And Now for the Entree….Lotsa Pasta. Riviana Foods brought a claim against Goya Foods for Goya’s statement that its Excelsior brand pasta was “Puerto Rico’s Favorite Pasta”. The claim was brought by Riviana in the National Advertising Division (“NAD”) alleging that Goya had failed to provide data and to substantiate the line “La Pasta Favorite de Puerto Rico”, which appeared on packaging and social media advertising. claims that appeared on product packaging and in social media posts and YouTube videos.
Goya said its saucy pasta claims were only puffery, mere exaggerations that lacked measurable characteristics. Not so fast said the NAD: “‘Favorite’ is defined as ‘[a] person or thing that is preferred to all others of the same kind or is especially well liked,’” the NAD wrote. And by limiting it to Puerto Rico only, the NAD said that this was not puffery, but a claim that reasonably communicated that the brand was in fact preferable over others. NAD wrote, “As NAD recognizes, such brand preference claims are objectively measurable” and that the advertising “reasonably conveys the objectively provable message” about Puerto Rico’s favorite pasta brand.
As a result of these findings, NAD told Goya to discontinue its claims of being the favorite until and when it was able to substantiate the claim with provable and measurable data. Why it Matters: Puffery is a statement that cannot be proved or disproved – the best pasta in the world, the most delicious sandwich in the universe – these cannot be proven. The NAD’s ruling however, points out the limitations of a puffery defense. And as data becomes more and more provable with technological advancements, the use of puffery as a defense may also become less accepted.
Snack Attack. The FTC recently settled a case with a California based company who failed to disclose material terms of a “Free Trial” offer (among other charges). Urthbox, Inc. is a snack company that sends monthly snack boxes to subscribers. According to the FTC, Urthbox failed to inform consumers that after a Free Trial, they were automatically signed up for a six- month membership, and worse, consumers were not aware of the program until the charge appeared on their credit cards.
Urthbox is now paying the FTC $100,000 which the FTC will use to compensate consumers who got caught in the snack attack. In addition to being cited for violations of the Restore Online Consumer Confidence Act (“ROSCA”), which regulates negative options, the company was also cited for misrepresenting positive product reviews as unpaid endorsements, when in fact they were incentivized.
With regard to the negative opinion on their negative options, Urthbox will be required to make certain specified disclosures when they market or sell any good or service with a negative option feature and will be prohibited from using billing information to obtain payment with a negative option feature without first obtaining the consumer’s express informed consent to do so. Further they must provide consumers with a simple, accessible method to cancel any negative option feature. Why This Matters: Any company with subscribers or with a service that is automatically charged to a consumer should understand ROSCA and its regulations pertaining to negative options. Any system you have in place to charge consumers must comply with ROSCA.
If you have any questions about the regulations or cases cited above, contact me at ABrooks@SchroderBrooks.com.