This past week, several consumer actions made headlines that affect the retail industry.
New Suit Claims Coca-Cola Falsely Advertised Health Effects of Sugary Drinks
On January 4, 2017, the Praxis Project, a non-profit health organization, sued Coca-Cola, claiming the beverage conglomerate misled the public as to the negative health effects of its sodas. The suit alleges that Coca-Cola peddled industry-supported research deflecting focus from sugary drinks to balancing a healthy lifestyle with more physical activity and argues that Coca-Cola’s marketing created the impression that sugary drinks are not linked to obesity, type 2 diabetes and cardiovascular diseases. The lawsuit seeks an injunction to stop the advertising practices, to require disclosure of all research on the impact of sugary drinks and to require a corrective public education campaign to reduce public consumption of sugary drinks.
NYC Vaporizes Challengers to the E-Cigarette Ban
On January 3, 2017, a state appellate court held that New York City’s ordinance banning e-cigarette use in restaurants, schools and outdoor public spaces properly amended the Smoke-Free Air Act. Smokers’ rights groups claimed the ban was unconstitutional because it violated state constitutional principles prohibiting legislation lumping different subjects in the same law. Plaintiffs also argued that the intent of the original law was to protect non-smokers from second-hand smoke, but the update to add e-cigarettes changes the purpose of the law to essentially keep people from smoking because e-cigarettes have no negative second-hand impact on non-smokers. The court disagreed, finding that the “one-subject rule” did not apply here because the ordinance was related to the same subject and met all transparency requirements, including public hearings and notifications to the public of the content and purpose of the law.
FTC Economist’s Issue Paper Says Hotel Guests Harmed
On January 5, 2017, Mary Sullivan, an economist in the Consumer Protection Division of the FTC’s Bureau of Economics, released a paper examining the impact of obscured resort fees on consumers, finding that the practice of separating resort fees from room rates without first disclosing the total price is likely to harm consumers. According to the paper, this practice creates additional hurdles for adequate comparison shopping and consumers make a less-informed choice that often results in a more costly room. Hotels collected over $2 billion in resort fees in 2015, up 35 percent from 2014, and this trend is expected to continue. The paper recommended that hotels could avoid the harm to consumers if they: (1) included the resort fee in the advertised price, (2) broke out the component parts of the total price separately and (3) disclosed the total price first.
NAD Slows Down Frontier’s Internet Service Claims
On January 4, 2017, Frontier Communications, Inc., agreed to voluntarily discontinue challenged advertising claims that its Internet service could handle multiple devices, would stream HD video without buffering and is superior to cable competitors. The NAD, after an investigation prompted by Charter Communications, Inc., recommended that Frontier discontinue its performance claims that its DSL product was sufficient for today’s user’s Internet needs. Frontier also agreed to clearly and conspicuously disclose that Frontier DSL Internet service starts at $19.99 per month, but that Frontier’s Verizon-licensed FiOS service is not available at that price.
NAD Enhances Salad Dressing Wars with Kraft Heinz Recommendation
On January 4, 2017, the NAD determined that Kraft Heinz properly supported its claims that its salad dressings have no artificial flavors, but the NAD recommended that Kraft Heinz stop two commercials implying that competing products use artificial colors or flavoring. NAD found that two ingredients – disodium inosinate and disodium guanylate—were considered “flavor enhancers” and not “flavors” by the FDA, but that consumers would consider them to be “flavors” within the context of a “no artificial flavors” claim. Because neither is artificial, Kraft Heinz’s claim stands (a third ingredient, phosphoric acid, was determined not to be a flavor, but rather a shelf stabilizer). Finally, the NAD recommended that two ads be discontinued because they imply that Hidden Valley Ranch, a major competitor, contained artificial colors or flavors that meant the Kraft Heinz products had superior taste.
NAD Trims Mane Choice’s Hair Growth Product Claims
On January 5, 2017, the NAD recommended that Mane Choice, LLC, modify the name of its growth stimulant and multi-vitamin scalp nourishing oil and discontinue any claims suggesting that the product helps grow hair. The NAD’s investigation found that Mane Choice could support claims that the product was physician formulate, improves nutrition and supports overall body health; however, it found that any claims to preserve and restore hair follicles, promote healthy hair growth and slow or reverse baldness were unsupported. Mane Choice agreed to comply with the recommendations, although it disagreed with the conclusions.
Ragu Couldn’t Refuse NAD’s Offer to Discontinue Consumer Preference Claims
On January 5, 2017, the NAD recommended that Mizkan America, Inc., discontinue consumer preference claims in advertisements for its Ragu Homestyle Traditional Pasta Sauce because the advertiser’s preference testing evidence did not fit the claims. Ragu had claimed that “[e]ven Prego users prefer the taste of Ragu Homestyle Traditional over Prego Traditional.” The NAD evaluated the preference testing, and found that Ragu conducted the tests properly, but did not test the correct population—meaning, Ragu’s test group included some “occasional,” not “regular,” Prego users. Using the wrong population skewed the results and led the NAD to find that the consumer preference claims were improper. Mizkan stated that it would comply with the NAD’s recommendation.