In This Issue:

• NAD Endorses Compliance With FTC Guide Requirements for Experts
• Plaintiffs Refuse to Walk on Eggshells in Suit Against Eggland's Best for False Advertising
• CFPB Warns Against Deceptive Claims and "Junk Fees" in Money Transfers

NAD Endorses Compliance With FTC Guide Requirements for Experts

Endorsements: Love them or hate them (and social media does love them so), they are subject to ever-increasing regulatory scrutiny, and compliance isn't that cut and dried.

And for good reason, says the National Advertising Division (NAD), especially in the context of what can appear to be editorial content but isn't. Endorsements, when material connections are unclear, can blur the line between editorial content and advertising and confuse consumers who are just looking for some reliable information to make purchasing decisions.

NAD has often addressed and analyzed the need for conspicuous disclosures of material connections in endorsements generally with special considerations for endorsements by experts. This has only become more important against the backdrop of the Federal Trade Commission's Enforcement Policy Statement on Deceptively Formatted Advertisements as well as its updated Guides Concerning Use of Endorsements and Testimonials in Advertising ("Endorsement Guides").

NAD recently initiated a self-monitoring challenge to claims made on the Bare Beauty Babes Blog featuring endorsements by dermatologist Dr. Gabriela Vee giving her views on the five best hyaluronic serums, ostensibly based on her testing of hundreds of the serums—according to NAD. The post appeared on the Bare Beauty Babes Blog as well as in various social media sponsored posts. The Bare Beauty Babes Blog is owned by skincare company Naked & Thriving, which hired an agency to run the blog. NAD found the layers of connections insufficiently disclosed.

To make its case at NAD, Naked & Thriving argued that it took a number of steps to ensure that the posts comply with the FTC's Revised Endorsement Guides. First, it said that it asked the ad agency to execute contracts defining the relationship between the dermatologist and the company and to comply with all applicable law, including by identifying that the post is a promotion.

Second, Naked & Thriving asked the agency to ensure that the dermatologist was providing an accurate endorsement based on their experience. During the pendency of the proceedings it also sent the endorsers the product they'd be referencing in the post as well as competitor products.

NAD concluded that these actions did not comply with FTC requirements for expert endorsements, which provide that "endorsers must have the expertise the endorser is represented as possessing," and that endorsements "must be supported by an actual exercise of the expertise that the expert is represented as possessing."

NAD said there was no evidence on the record about the dermatologist's qualifications, nor about the criteria she used to rank the products and whether she ranked all the products in the category. This fell short of the Endorsement Guide's requirement that an "endorsement be supported by an actual exercise of the expertise that the expert is represented as possessing in evaluating product features." Further, the dermatologist's disclosure that "this was my honest comparison having used these products" did not establish her expert credentials.

NAD additionally found that Naked & Thriving had not shown that Dr. Vee exercised the expertise of a dermatologist in reviewing the products. This is a problem because the Endorsement Guides say that the advertiser should include "examination or testing of the product at least as extensive as someone with the same degree of represented expertise would normally need to conduct" in order to support the claims in an endorsement.

Finally, though the post noted that it was "sponsored," NAD concluded that this was not enough. The advertiser needs to include enough information on the disclosure so that the viewer of the post would know who sponsored the post, particularly where a health professional is endorsing the product.

NAD recommended that the expert endorsement be discontinued and that expert endorsers possess and utilize their expertise when evaluating products based on their expert credentials and they must clearly disclose their connection to the advertiser.

Key Takeaways

As NAD has said a number of times now—labeling content as "sponsored" is just not enough when the "who" of the sponsoring is unclear.

Plaintiffs Refuse to Walk on Eggshells in Suit Against Eggland's Best for False Advertising

A consumer protection-focused law firm has filed two related lawsuits in different jurisdictions and alleging different causes of action against Eggland's Best over its marketing claims.

One suit is a class action out of a Chicago federal court and the other lawsuit was filed by the Organic Consumers Association (OCA) under the District of Columbia Consumer Protection Procedures Act (CPPA). Both lawsuits allege that Eggland's Best deceptively markets its eggs, but each suit focuses on somewhat different representations made by the company in its advertising.

The class action lawsuit in Illinois alleges that Eggland's Best falsely and deceptively marketed their egg products by claiming that they contain "25% Less Saturated Fat than Regular Eggs" when laboratory testing shows the opposite is true. According to plaintiffs, Eggland's Best eggs contain more, not less, saturated fat than other branded eggs, making the label's claims deceptive in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act and the Uniform Deceptive Trade Practices Act.

The Organic Consumers Association (OCA) also includes allegations related to the "25% less saturated fat" claims, tying the claims to what the suit says are false representations that the eggs are nutritionally superior to ordinary eggs. The OCA suit does not stop there, however. OCA further accuses Eggland's Best of greenwashing its animal welfare and recycling practices. The complaint alleges that Eggland's Best falsely claims its "Flocks are always handled and transported humanely." According to the OCA, the reality is very different—it claims "Eggland's Best hens [are] kept in conventional cages [and] are raised inhumanely under conditions of extreme confinement."

OCA also attacks Eggland's Best's website, which contains a "SUSTAINABILITY" pledge to deliver its products to consumers "in the most environmentally-friendly way." But OCA's complaint calls out what it says are Eggland's Best's false sustainability representations, arguing that the products are far from being "sustainable" and "recyclable." Indeed, OCA notes, most recycling facilities do not accept the polystyrene foam cartons that Eggland's Best uses to package its eggs. The complaint says that in a landfill, these polystyrene cartons "can take 500 years to decompose and can leach chemicals into the surrounding environment," and the material is barred in many states. OCA alleges that Eggland's Best's claims about its environment-friendly products are deceptive and misleading by creating the impression in reasonable consumers that the products have environmental benefits that they don't have.

Key Takeaways

By filing two separate false advertising lawsuits, Richman Law & Policy aims to hit Eggland's Best with a multi-pronged approach across multiple jurisdictions. Perhaps by attacking on multiple fronts the Plaintiffs think, or rather Richman Law & Policy thinks, they will be able to sustain separate lawsuits and to change the advertiser's practices more broadly.

CFPB Warns Against Deceptive Claims and "Junk Fees" in Money Transfers

The industry facilitating international money transfers seems to have a false marketing problem, at least according to the Consumer Financial Protection Bureau (CFPB), which recently warned international money transfer companies against engaging in a slew of allegedly deceptive marketing tactics and expressed concern over a lack of "transparency and accuracy" that the CFPB says are in violation of federal law.

A new CFPB circular, a policy statement that provides information to parties with authority to enforce consumer financial law, lays out what the CFPB considers the prevalent use of junk fees. The billion-dollar remittance industry also makes other problematic marketing claims, according to the CFPB, including about the cost and speed of sending remittance transfers and about transfer conditions.

The CFPB also believes these actions may be in violation of the Consumer Financial Protection Act (CFPA), which makes it illegal for providers of consumer financial products to engage in deceptive practices if they mislead consumers, and may also run afoul of the Remittance Rule under the Electronic Fund Transfer Act, which the CFPB enforces.

The Remittance Rule requires money transfer providers to disclose certain information to consumers before they pay for a transfer, but the circular notes that it does not take away from their obligation to refrain from misleading marketing practices under the CFPA.

The circular clarifies some of the ways in which remittance providers may be engaging in deceptive and unlawful actions through marketing claims about:

• speed of remittance transfers, which may violate the CFPA when the actual delivery time is longer than advertised.
• money transfers having "no fees"; if the provider charges fees, it is a type of expressly misleading price claim that violates the prohibition on deceptive practices.
• promotions of offers that don't "sufficiently" clarify that they are available only for a limited time.
• money transfers being "free" when they are not, which is a type of unlawful deceptive statement.

Fine print disclosures are a no-go as well, wrote the CFPB. "Consumers may be reasonably misled when financial service providers fail to clearly and conspicuously disclose material terms in advertising, such as when and by how much charges will increase."

The agency emphasized that this type of deceptive marketing may be unlawful when done in person or via digital wallet providers. In either case, the CFPB said it issued the circular to protect senders of international money orders—often immigrants sending financial support to family abroad or expats and students living abroad.

Key Takeaways

The CFPB continues its campaign against fees. The last circular that the CFPB issued on deceptive marketing practices focused on negative option marketing, reflecting the focus in regulatory circles at the time. Likewise, this circular takes aim at "junk" fees, which have been on the minds of regulators at the Federal Trade Commission (FTC) and state legislatures recently.

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