Advertisers in the Ring – A Roundup of This Month's Competitor Advertising Challenges: Measuring '#1' and 'Free' Claims

Below, we provide a high-level summary of some of the NAD decisions from the past month. A summary of last month's NAD decisions can be found here.

After a decision-heavy summer, NAD's pace slowed this month. Two of its decisions involved quantifying claims of being "#1" in a product category. Two other decisions examined pricing claims and the level of disclosure required when a "free" offer involves some limitations. Products covered by NAD decisions included telecommunication services, furniture cleaners, and office supplies. 

Who is Number One?

Verizon Communications, Inc.: FiOS, Case No. 5886 (Sept. 25, 20150). Comcast challenged various advertising claims that Verizon made about its FiOs internet service. Verizon advertised that FiOS was "rated #1" in internet speed, reliability, and HD picture quality, a rating  based on customer satisfaction surveys. Comcast argued that Verizon conveyed performance claims that required objective measurements  rather than consumer satisfaction claims. NAD noted that its "prior relevant decisions have emphasized that claims based upon customer satisfaction studies should avoid conveying a message that performance was directly measured or compared." NAD also acknowledged that "[c]laims  about technical  performance statistics differ from claims about customer satisfaction. Both are legitimate  claims. Both kinds of support are appropriate as long  as the advertisement makes clear to consumers what type of claim the advertiser is making." Here, however, NAD found that Verizon's disclosures did not make it clear to customers that the claims were based on customer satisfaction rather than performance testing.

For instance, NAD noted that the claim of "#1 HD Picture Quality" appears in large white type against a black background, "with a mice type disclosure citing to the study on which the claim is based." Likewise, NAD found that voiceovers about the "#1 internet speed" emphasized the faster speed claims so that a consumer viewing the commercial would reasonably take away the message that Verizon internet service is faster, rather than the message that its customers are most satisfied with their internet speeds. NAD recommended that Verizon discontinue its "Rated #1 claims" and "and carefully craft claims based  on  customer  satisfaction surveys  in  the  future to make clear that the claim it is making is a customer satisfaction claim (e.g. Verizon customer are more satisfied with FiOS speed, reliability and/or HD picture quality than customers of competing providers)." After noting that, among other things, the issues had already been reviewed by the NAD twice in the preceding year and that its current advertising relied on NAD precedent from those prior decisions, Verizon stated its intent to appeal "all aspects of the decision" to the NARB.

Newell Rubbermaid Office Products: Paper Mate Profile® Pen, Case No. 5884 (Sept. 23, 2015). BIC USA, maker of the BIC Round Stic® ball point pen, challenged Newell's advertising of Paper Mate Profile® pens as "America's #1 Ball Point Pen."The dispute centered on how to measure the "#1" sales spot—specifically whether to measure by units sold or dollars, and which product configurations to include in the measurement.BIC argued that unit sales were higher for BIC pens than for Paper Mate pens and that Paper Mate's advantage in dollar sales resulted from higher prices rather than from consumer popularity. Newell argued that its pens were number one in both dollars and units sold when considering the purchases most relevant to consumers and excluding larger bulk packages of 36 pens and more. Ultimately, however, Newell made an independent determination to discontinue its claim, and thus NAD never addressed the parties' positions.

Almost Yours, For Free

Sprint Corporation: Advertising by Sprint Corporation, Case No. 5887 (Sept. 25, 2015). T-Mobile challenged advertising in which Sprint offered a free Samsung Galaxy phone for those who signed up for its new "Unlimited Plus" phone service plan. T-Mobile asserted that Sprint's  advertising implied that participants would be given free ownership of a phone, even though Sprint's offer only involved a two-year lease of a phone. In making its decision, NAD considered that phone leasing was a "very new concept" in the wireless phone industry, and concluded that consumers would reasonably take away the message that they would own rather than lease a phone if they signed up for the advertised wireless service plan. Accordingly, NAD recommended that Sprint discontinue its "get a free Samsung Galaxy S6" advertising, but concluded that its claim of offering the "first free phone lease in the wireless industry" was supported. After noting that the "free lease" campaign had already run its course, and that it "respectfully disagree[d]" with NAD's recommendation, Sprint agreed to take the decision into account in future advertising.

SAS Group, Inc.: Dutch Glow™ Amish Wood Milk Furniture Cleaner and Polish, Case No. 5885 (Sept. 24, 2015).  S.C. Johnson, maker of a competing household cleaning product, challenged claims made by SAS about its Amish Wood Milk polish. In particular, S.C. Johnson challenged pricing claims as well as comparative demonstration and performance claims. The pricing claims at issue were "Buy 1, Get 1" and "100% money back. Guaranteed." In smaller type near the "buy 1" claim, a disclaimer stated "plus sap"—referring to the fact that, in addition to paying $10 for the products, consumers had to pay a $7.95 processing charge for each product, plus $2 for on-line orders. NAD found that the disclaimer failed to clearly and conspicuously inform consumers of the separate charges, which amounted to more than the cost of the actual products.  In addition, consumers who exercised their "money back" rights would only get their $10 back, but not the additional charges. NAD considered this guarantee to be "literally false" because "consumers only receive a refund of (at most) 38.6 percent of the purchase price." Upon this rationale, NAD recommended discontinuing the pricing claims. NAD also recommended discontinuing comparative "before" and "after" photos and product demonstrations, finding that they were only supported by anecdotal evidence and that they falsely implied that competing products were entirely ineffective.

Takeaways for This Month

A lesson from this month's cases is that seemingly simple claims like "#1" or "free" can have multiple meanings and may require additional information to put the assertions in context. Particularly if consumers are likely to interpret the advertisement as conveying different or broader benefits than the ones actually offered, "mouse type" disclosures will be insufficient to cure misleading implications. Advertisers should consider how clearly they have conveyed the meaning and basis of superiority or pricing claims the extent to which they will stand up to scrutiny in the face of a competitor's challenge.

---

Other Articles in This Month's Edition:

• Transfer of Personal Data from the EU to the U.S.
  
• Proposed Updates to the Motor Vehicle Safety Act
• A Highlight Reel: FTC's Amendment to Fair Packaging and Labeling Act Rules

---