National Advertising Division (NAD) — Key Takeaways from the Past Month
The National Advertising Division (NAD) serves as a forum for advertising competitors to challenge advertising claims that are allegedly false or misleading , in an attempt to resolve competitive disputes outside of court. While participating in NAD proceedings and compliance with its rulings are purely voluntary, failure to comply may result in FTC action. Accordingly, NAD decisions are important in their own right, and as a potential barometer for broader trends in advertising challenges and decisions. The below provides a high level summary of NAD decisions from the past month.
Since November, NAD has issued case reports on matters involving food, dietary supplements, internet service and data analytic technology. Food and dietary supplement cases dominated this month, with six of nine reported decisions falling into this category.
NAD recommended discontinuance of claims about two different dietary supplements, citing the FTC guidelines on dietary supplements and criticizing the lack of adequate support in each case.
- In ADD-CARE, LLC (ADD-Care Dietary Supplements), Case No. 5785, NAD Case Reports (Nov. 12, 2014), the Council for Responsible Nutrition challenged ADD-Care's claims that its dietary supplement "may help with symptoms often seen with ADD and ADHD" and that some customers reported "feeling natural for symptoms similar or consistent with ADD/ADHD." The challenger took issue with the express and implied claims that the product treated symptoms of ADD/ADHD. NAD recommended that ADD-Care discontinue these claims as its observational brain-scan study of four subjects failed to meet the requirement of "competent and reliable scientific evidence" as outlined in the FTC guidelines for dietary supplements.
- On similar grounds, NAD recommended discontinuance of claims that LifeCaps (marketed as an emergency food supplement/substitute) provided all the nutrition required to sustain life, finding inadequate support for the claim. LifeCaps Nutraceuticals, LLC (LifeCaps), Case No. 5784 (Nov. 6, 2014).
- In addition, NAD administratively closed a challenge involving tomato diet pills because the Romanian-based advertiser could not be located for a response. Nature4Life (Tomato Natural Weight Loss Capsules), Case No. 5787, NAD Case Reports (Dec. 2, 2014).
NAD decisions this past month also involved several food products.
- In MOM Brands Company (Malt-O-Meal Brand Cereals), Case No. 5782, NAD Case Reports (Nov. 5, 2014), competitor Post Foods, LLC challenged the claim that certain MOM cereals had won national taste tests compared to Post's cereals. NAD recommended that the advertiser discontinue its national preference claims, finding that the subjects selected for the taste test were not sufficiently representative of those likely to actually consumer the product. MOM's test subjects were primarily over 35 years of age, while the majority of product users were under 35 years old.
- Quest Nutrition (Quest Nutrition Protein Bars), Case No. 356, ERSP Case Reports (Nov. 14, 2014) was submitted anonymously to the Electronic Retailing Self-Regulation Program (ERSP). The competitor challenged Quest's claims about the carb content of its protein bars, arguing that claims like "the ONLY true low carb bar on the market" and "the only bar on the market with 4-5 non-fiber carbs" inaccurately claimed a unique status. ERSP found that the advertiser had provided sufficient support for its claims of uniqueness based upon its inclusion of a particular ingredient not used by other bars, or only used in other bars containing more sugar and less protein. ERSP did not address some other claims at issue in the challenge, as the advertiser had permanently discontinued them, and others were the subject of pending class litigation.
- In ConAgra Foods, Inc. (Hunt's Tomato Products), Case No. 5747C, NAD Case Reports (Nov. 20, 2014), NAD opened a compliance investigation because prior challenger, Red Gold, contended that Hunt's was still advertising its tomatoes as "steam peeled v. lye" despite a prior NAD recommendation that such claims be discontinued or modified to make it clear that lye-peeled tomatoes are neither unsafe nor unhealthy. NAD evaluated the Hunt's advertising and found that it differed significantly from the original to avoid disparagement of other brands or the suggestion that chemically peeled tomatoes were unsafe. As such, NAD decided no further action as required.
In addition to food and dietary supplement matters, the NAD also tackled challenges in the internet/cloud computing realm:
- Sumo Logic, Inc. was the subject of a NAD competitive challenge decision, and a follow-up compliance investigation stemming from a prior challenge. In the competitive challenge, Sumo Logic, Inc. (Cloud Log Management), Case No. 5788, NAD Case Reports (Dec. 2, 2014), Splunk, Inc. alleged that Sumo's cloud-based data analysis system advertised misleading comparative claims about Splunk's competing analytics product. Sumo's website featured a list of "six key features" purportedly not available from Splunk, such as "anomaly detection" and "guaranteed query performance." As it had in an earlier dispute between the two companies, Sumo agreed to voluntarily discontinue its claims. The compliance case, Sumo Logic, Inc. (Cloud Log Management), Case No. 5518C, NAD Case Reports (Dec. 12, 2014), related to Splunk's concern that Sumo had not discontinued certain claims as promised following a prior October challenge. NAD contacted Sumo, and determined Sumo had made significant changes to its website and had sufficiently complied with the prior recommendations.
The NAD has been busy this year after a somewhat slower year last year. The case load appears to be moving more quickly, as NAD has taken several steps to speed up decisions. Substantively, key areas of interest include dietary supplement and nutritional claims in the market, with such claims being held to high standards of substantiation. Several cases in the last year have involved such tried and true subjects as national taste tests, which are always tricky to defend. Claims about technological product benefits are also common, and NAD is tending to follow the FTC’s lead in requiring very prominent disclosures of material qualifications to offered services
For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.