This past week, several consumer actions made headlines that affect the retail industry.
FTC Used Car Lot Sweep Finds 70 Percent Compliance with New “Buyers Guide”
Last month, the FTC announced the results of its compliance sweep of 94 car dealerships in 20 cities across the country, conducted after the FTC’s amended Used Car Rule (the “Rule”) took effect earlier this year. The revised Rule requires dealers to display a revised “Buyers Guide” containing warranty and other important information—such as a new description of an “As Is” sale—on the window of each used car offered for sale. According to the FTC, 70 percent of the 2,300 vehicles inspected displayed a buyer’s guide; over half of those with the guide displayed the updated version. As a follow-up, the FTC sent letters to each dealership inspected, detailing their findings and providing businesses with guidance material to help aid in compliance.
FTC Amends Jewelry Guides
After a multi-year process, the FTC has published revised Jewelry Guides, aimed at better aligning with consumer expectations, technological developments and related changes in industry practice, and providing clarification and flexibility for businesses. The revised Guides address (1) the surface application of precious metals; (2) alloys with precious metals in amounts below minimum thresholds; (3) products containing more than one precious metal; (4) composite gemstone products; (5) varietals; (6) “cultured” diamonds; (7) qualifying claims about man-made gemstone products; (8) pearl treatment disclosures; (9) use of the term “gem”; (10) misleading illustrations; (11) the definition of “diamond” and (12) exemptions in the assay for gold, silver and platinum. The revisions also remove outdated or redundant provisions, provide guidelines for marketing of certain products to more accurately represent their properties, and remove restrictions on marketing that are no longer necessary to prevent deception. The amended Jewelry Guides were approved by the FTC with a 5-0 vote.
CFPB Announces Director of New Office of Innovation
On July 18, 2018, the Consumer Financial Protection Bureau (“CFPB”) announced Paul Watkins as the leader of the CFPB’s new Office of Innovation, an initiative created to promote competition, innovation and consumer access within financial services. Watkins was most recently in charge of Fintech initiatives‒exploring ways to relax regulations on financial services institutions in the Arizona office of the Attorney General. Watkins previously managed the Arizona Attorney General’s consumer fraud, antitrust and civil rights litigation.
NAD Spotlights Telebrands’ “Atomic Beam” Advertising Claims
The NAD recommended that Telebrands, Inc., the maker of the “Atomic Beam USA,” discontinue certain potentially misleading claims that the company’s flashlights were “40x brighter” and more durable than ordinary flashlights, were Made in the USA and were endorsed by the U.S. military. In addition, the NAD examined Telebrands’ buy one, get one (“BOGO”) “double offer.” The NAD picked apart the comparative claims appearing on television, website and product packaging, making clear that while none of these statements were specifically precluded by the decision, “Atomic Beam” would be required to support its claims by comparative testing and clearly disclosing the basis of comparison. The NAD suggested that Telebrands phrase its “self-defense” claim in a different way so that consumers are not left with the impression the “Atomic Beam” repels would-be attackers. Telebrands stated that it would comply with the NAD’s recommendation with the exception of eliminating the BOGO claim, which it will appeal to the NARB.
Claritin May Be Last, but Wins Challenge of Xyzal “Twice as Fast” Claims
The NAD recommended that Chattem, Inc., maker of the antihistamine Xyzal, discontinue claims that its product works “twice as fast” as challenger Bayer Healthcare, LLC’s Claritin. Bayer Healthcare provided evidence of two studies they performed showing that, while the active ingredient in Claritin was slower, the active ingredient in Xyzal was not twice as fast, so it failed to meet the Chattem claim. Chattem attempted to defend the challenge based on prior NAD decisions involving claims for other antihistamines, Zyrtec and Allegra, which found Claritin’s onset of action to be three hours. The NAD clarified that its sole remit in the prior cases had been to review the claims challenged under the facts presented at the time, and that the NAD had not made any scientific findings or determinations that Chattem could rely on to support its claims. Chattem issued a statement that it strongly disagrees with the recommendation, but will comply.
Tyson’s Artistic Liberty in Filming Cold Cuts Defeats Kraft’s Challenge
The NAD found no reasonable basis for Kraft Heinz Food Company’s complaint that ads for Tyson Foods, Inc.’s Hillshire Farm Ultra-Thin Oven Roasted Turkey Breast conveyed a misleading portrayal of the product. Kraft objected to Tyson’s footage that showed their product without an inner plastic bag inside the container, and touted its own patented packaging that does not require an inner plastic bag and allows the product to be “fluffed and folded” to convey the appearance of freshly-sliced deli meat. The NAD found that Tyson’s imagery did not convey a materially misleading message about the product’s packaging, and that there was no basis to believe a reasonable consumer would think the footage implied Tyson’s cold cuts were any fresher, easier to access or otherwise more palatable than competing brands.
College Hunks Hauling Junk Survives NAD Review with Name Intact
The NAD recommended that CHHJ Franchising, LLC, modify claims that its franchise network of movers is a “nationwide” company that offers a “guarantee of the best services.” The NAD found that the “nationwide” claim was not sustained by its presence in 24 states and only one province of Canada, and recommended that CHHJ drop the word “nationwide” from its advertising. The NAD also determined that while CHHJ requires its franchisees to undergo extensive training and licensing procedures, which are important factors in assuring customers receive good service, there may be some customers who receive average or poor service despite CHHJ’s best efforts. The NAD recommended that CHHJ drop the word “guarantee” from its claims.