While regulator actions related to the COVID-19 pandemic have understandably received the bulk of consumer protection headlines in recent months, influencer marketing remains a hot topic for the Federal Trade Commission (FTC) and National Advertising Division (NAD). As we continue into the latter half of 2020, we recap key enforcement actions, press releases, guidance, and letters related to endorsements and influencer marketing that brands may have missed during the pandemic.
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ESRB Issues Labeling Requirement for Video Games Containing Loot Boxes
The ESRB, and it’s European equivalent PEGI, have issued new labeling requirements for video games containing loot boxes or other types of in-game purchases with randomized elements. The new labeling designation of “In-Game Purchases (Includes Random Items)” includes, but is broader than, loot boxes. Failure to adhere to this requirement may result in fines. Read
National Advertising Division Launches Fast-Track Swift Process
On April 2, 2020 the National Advertising Division (NAD) launched its Fast-Track SWIFT (Single Well-defined Issue Fast Track) resolution process, promising to resolve single-issue cases in 20 business days. An overview follows.
What is NAD? NAD is an organization within the Better Business Bureau (part of the BBB National Programs) which evaluates the truth and accuracy of national advertising. Matters heard by NAD may be initiated by a competitor or by NAD itself. After briefing and oral argument, NAD issues reasoned opinions with recommendations about whether the advertiser should modify or discontinue the challenged advertising. While compliance is voluntary, brands that do not comply are referred to the Federal Trade Commission (FTC) for a second look. NAD reports a compliance rate of 95%, and the FTC reports that it examines every case referred to it by NAD.
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NAD Reveals Initial Plans for 2020 Fast-Track Process
The National Advertising Division recently revealed its plans to launch a fast-track resolution process to resolve certain false advertising claims in a mere 2-4 weeks. This fast-track process will provide a useful tool for companies that want to quickly and efficiently challenge certain competitor advertising practices.
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Video Game Loot Boxes: FTC Workshop on the Role of Virtual Rewards in Game Play
On August 7, 2019, the Federal Trade Commission convened an all-day workshop to discuss consumer protection issues associated with “loot boxes”—randomized virtual items players can purchase or earn in video games. While the production cost of video games has increased significantly, the average price of console games has largely not changed since the 1970s, and many mobile games are free to download. Panelists observed that loot boxes have helped bridge the gap between this high cost of video game production and their relatively flat sale price.
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National Advertising Division Recommends that Maker of Flashlights Discontinue Comparative Advertising and Made in USA Claims
Takeaways:
- Support any comparative claims and clearly disclose the basis of the comparison.
- Be specific about claims regarding products or components made in the United States.
Last month, the National Advertising Division (NAD), a self-regulatory body, recommended that Telebrands, Corp., discontinue certain advertising claims for the company’s Atomic Beam flashlight, including claims comparing its brightness
National Advertising Division Recommends that VH Nutrition Discontinue Claims for TriDrive Supplement Marketed to Athletes
Takeaways:
- Health-related advertising claims must be supported by competent and reliable scientific evidence, generally consisting of human clinical trials that are methodologically sound and statistically significant to the 95% confidence level.
- Advertising claims must be clearly expressed as ingredient claims if the substantiation addresses only the efficacy of the ingredients in the product, not the product itself.
National Advertising Division Recommends that Perdue Farms Discontinue Ads About Happy, Organic Chickens
The NAD recently recommended that Perdue Farms, Inc. modify or discontinue certain TV and YouTube ads about Perdue’s “Harvestland Organic” chicken. Tyson Foods, Inc. challenged the Perdue ads before the NAD, arguing that they broadly communicated that all of Perdue’s chickens are “happy” and raised “organically” (free-range, non-GMO, 100% vegetarian-fed, and raised without antibiotics). Perdue responded that ads only communicated claims about Perdue’s “Harvestland Organic” sub-brand. The NAD, however, viewed the overall “net impression” conveyed by the ads and found that they communicated broad claims about all of Perdue’s chickens, in part because the ads contained many visual and audio references to the primary Perdue brand, but only fleeting visual references to the Harvestland Organic logo. Perdue announced that it will appeal the NAD’s decision.
Continue Reading National Advertising Division Recommends that Perdue Farms Discontinue Ads About Happy, Organic Chickens
National Advertising Division Recommends that Maker of Reusable Storage Bags Discontinue Unsupported Comparative Advertising Claims
Takeaways:
- Regulators continue to emphasize that relative comparisons in advertising must be supported by fact-based evidence.
- Each claim in an advertisement remains subject to review by the National Advertising Division.