Stay ADvised: What's New This Week, April 5

In This Issue:

• One Year and 12 Cases In: What We've Learned From NAD's "SWIFT" Program
• Fashion Nova Pays Up for Fashion (Shipment) Faux Pas
• Revised Apple Cider Vinegar Gummies Claims Leave a Sour Taste at NAD
• Boston Scientific Agrees to Pay $188 Mil to Settle Multistate Surgical Mesh Litigation

One Year and 12 Cases In: What We've Learned From NAD's "SWIFT" Program

SWIFT, which limits challenges to narrowly focused cases, lives up to its acronym by promising a decision within 20 business days from opening of the case, by contrast with the 4-6 months associated with a traditional or "standard track" challenge. Advertisers make all submissions online, and although filing fees are higher than for standard cases, the total legal fees to see a case through to conclusion are lower than for cases that go through the regular NAD process. The advertiser's substantive response is limited to five pages and up to five exhibits, each of no more than five pages in length. It is within NAD's discretion whether to hold meetings.

The catch, of course, is that not every claim is appropriate for SWIFT review. The program limits the types of challenges it hears to claims that involve a "single well-defined issue," and which "do not require review of complex evidence or argument." For the initial launch of the program, NAD further limited SWIFT to three categories of cases: those dealing with the sufficiency of disclosures; misleading pricing and sales claims; and misleading express claims that do not require a review of clinical or technical evidence, or consumer perception data.

Once an advertiser initiates a challenge on NAD's online portal, NAD determines if the case meets the SWIFT jurisdictional requirements. At that point, an advertiser can object to the SWIFT process, and the challenger may respond. Challengers may convert matters rejected for deliberation under SWIFT to the regular NAD process. Of the 12 cases initiated thus far, approximately half led to a decision on the merits. The others terminated in voluntary discontinuance of the subject advertising, administrative closure on consent of the parties, and, in one case, a referral to the FTC (which confirmed with the advertiser that it had discontinued the claims, and did not take further action).

The industries covered included three telecom cases, two involving foods or supplements, three challenging consumer product claims, and three involving unusual categories, including a grocery store chain, a kitchen design company, and a security system with do-it-yourself installation. This suggests that SWIFT may be attracting new or less frequent participants to the self-regulatory system.

Since SWIFT's inception a year ago, one question for advertisers has been what NAD's boundaries are for jurisdictional eligibility, in particular what constitutes a single well-defined issue. One year and 12 resolved SWIFT cases later, a picture is emerging of the types of SWIFT cases NAD will hear. NAD's decisions in these cases are instructive for advertisers looking to challenge claims in SWIFT or to object to challengers' eligibility to bring claims before SWIFT.

Jurisdictional Challenges to SWIFT Eligibility

"Single Issue" Does Not Mean "Single Claim"

NAD held that "a single well-defined issue may encompass more than one express claim." In SWIFT Case #6910, the challenge concerned the advertiser's "5G" coverage statements, which appeared in a video on YouTube and on the advertiser's website, and a map used in social media posts and other digital content. The advertiser filed an objection on two grounds: (1) the challenge concerned more than one claim and (2) the implication that the map was a "coverage map" was an implied message not appropriate for resolution via SWIFT.

NAD disagreed on the first point, finding that although the advertiser made multiple statements about the availability of 5G, they were united by a single issue: the adequacy of the advertiser's disclosure that 5G service was available in parts of selected cities. NAD agreed, however, that a challenge to the implied message that the company's 5G service covered the entire map, in the absence of any explicit representation regarding "coverage", was not appropriate for the SWIFT process.

As Foreshadowed, Claims That Do Not Implicate Complex Evidence or Argument (Plus Those That Touch on Familiar Territory) May Be Appropriate for SWIFT

No surprise, a number of the cases over which NAD exercised SWIFT jurisdiction have fallen squarely within the three categories NAD outlined in its program FAQs.

In Case #6938, beauty company PerSé challenged claims that custom-haircare competitor Function, Inc. had "over 110,000 5-star product reviews!" The issue before NAD was whether the advertiser had shown a reasonable basis for this claim when customers were able to review its products only as a combined shampoo and conditioner set, rather than as separate products with separate reviews. NAD found the claim unsupported because at least one reasonable interpretation was that the products had garnered 110,000 "distinct" 5-star reviews.

Similarly, in Case #6962, NAD reviewed under SWIFT a challenge to "lowest prices" claims for a grocery store chain. Notably, NAD found that it also had jurisdiction over region-specific claims, such as "Lowest Prices on Long Island," because these claims were local iterations of the advertiser's national "lowest price" claims.

However, other challenged claims have perhaps come closer to pushing the limits of the SWIFT process. For example, NAD Case #6780 concerned the express claim that Similac baby formula was the "#1 Pediatrician Recommended Brand." NAD determined that this claim was not too complex for SWIFT review because "neither party was challenging the reliability of the pediatrician survey evidence." The legal argument was also simple: "was the advertiser's substantiation a good fit for the challenged claim?"

In NAD Case #6666, NAD exercised SWIFT jurisdiction over the advertiser's "unqualified '5G' claim," noting that NAD has regularly reviewed advertising for services that are launched with limited availability, and concluding that "consumers can be misled if the material limitations on that service are not clearly and conspicuously disclosed." As such, NAD found that the express claim would not require a review of complex evidence or substantiation. NAD also rejected the advertiser's contention that the challenge concerned an implied claim, noting that the "5G" was explicit and that NAD had explicitly contemplated SWIFT challenges to deficiencies in disclosures.

NAD Case #6738 concerned claims that Clif Energy Bars are "a better performing bar ... for sustained energy," which claim appeared as the top Google AdWords result for an internet search for either "Kind Bars" or "energy bars." The challenger maintained this was an express "sustained energy" performance claim, comparing Clif Energy Bars to Kind Bars and all others on the market, requiring head-to-head product testing as support. The advertiser objected to the SWIFT process, arguing the claim was puffery or in any case non-comparative, a determination of which would require consumer perception evidence.

NAD held the challenge appropriate for SWIFT, noting the advertiser did not intend to submit head-to-head testing, although it did make sustained energy arguments based on its label ingredients. Nonetheless, NAD found the evidence was straightforward and did not call for NAD to evaluate complex product testing. NAD determined the evidence was not a good fit for the claim, but carefully noted that it was resolving only this single claim in this singular context of a Google search result.

Key Takeaways

• Multiple claims may still meet the "single well-defined issue" bar when they all implicate the same issue.
• Cases that appear "complex" may still be ripe for review under SWIFT if they concern an issue or industry familiar to NAD.
• Though not every SWIFT case featured a jurisdictional analysis, NAD has generally found most cases to be appropriate, in whole or in part, for the SWIFT process.
• Advertisers wishing to argue that a claim is inappropriate for SWIFT should make it clear that they are challenging the reliability of complex evidence; and/or (2) that the challenger's claim concerns only implications, and not the basis for an express message.

Fashion Nova Pays Up for Fashion (Shipment) Faux Pas

Promises made must be promises kept, especially to those expecting quick shipment. Businesses regularly marketing shipping speed as an incentive to purchase and blaming snail mail is no defense when the Federal Trade Commission (FTC) investigates failure to follow its Mail, Internet, or Telephone Merchandise Rule (Mail Order Rule).

For fashion fans and customers of online fashion retailer Fashion Nova that means it is time to check your PayPal accounts. The FTC has announced it is sending out $6.5 million in redress payments to some 500,000 consumers affected by Fashion Nova's alleged failure to notify them and to give them the chance to cancel their orders when it failed to ship merchandise in a timely manner.

Fashion Nova agreed last year to pay $9.3 million to settle the FTC charges that it grossly misrepresented shipping times in violation of the FTC's Mail Order Rule. The rule regulates seller representations to consumers about shipments—prohibiting sellers from soliciting orders unless they can reasonably expect to meet advertised shipping times and requiring that in the event of shipping delays, sellers offer the right to cancel with a full refund, not just a gift card or store credit. The Mail Order Rule applies equally to merchandise sold online, via mail or telephone.

It took some time, but the checks are now in the mail and serve as a warning that companies that promise and promote fast shipping, as prominently and aggressively as the FTC alleges Fashion Nova did, must make good on its promises, for example, of "Free 2-Day Shipping," "Fast Canada Shipping," and "Fast International Shipping." The FTC's complaint further alleged that some consumers even paid additional costs for the expedited shipping they did not receive. And, when there were shipping delays, Fashion Nova failed to alert consumers and to give them an opportunity to cancel their orders.

The company website also promised that the company would process orders within 24 hours. Instead, not only did it allegedly routinely fail to meet its advertised shipping times, it often failed to ship items altogether, or shipped customers "materially different" items. Finally, when customers complained about late orders, Fashion Nova issued gift cards instead of the refunds it was legally required to provide.

Key Takeaways

What is old is new again. As then director of the FTC's Bureau of Consumer Protection explained regarding this case, "The same rules that we have enforced for nearly 50 years against catalogers and other mail-order companies also apply to online sellers."

Revised Apple Cider Vinegar Gummies Claims Leave a Sour Taste at NAD

More than ingredient studies and the old adage to eat an apple a day are necessary to support wide-ranging claims for Goli Nutrition's apple cider vinegar gummies. The National Advertising Division (NAD) has recommended that the advertiser discontinue claims that its small, chewy "health" treats can increase energy and improve skin health, in response to a challenge by competitor Pharmavite, which markets the "Nature Made" brand.

What makes this case particularly interesting is that the advertiser agreed to discontinue most of the seven-page long list of health-related challenged claims, and agreed to modify the remaining 12 or so claims. With the exception of four of those claims, as modified, the challenger had no further issues. NAD chose to review the modified claims with which the challenger took issue, but treated the remaining modified claims as if the case were closed on consent of the parties.

More specifically, NAD noted:

Because a challenge is limited to the claims disputed by the challenger, when claims have been modified during the course of the challenge and the challenger has no objection to the modified claims, NAD will not review the modified claims. … The voluntarily discontinued claims and unchallenged modified claims will be treated, for compliance purposes, as though NAD recommended their discontinuance or modification and the advertiser agreed to comply.

The case is important not just because NAD then went on to recommend further modification or discontinuance of the remaining claims, but because NAD both considered the claims, as modified, and explained how it would treat modified claims regarding which the challenger took no issue. This is an area previously considered somewhat murky in NAD practice.

Regarding the challenged but modified claims, NAD recommended Goli further modify its claim "Vitamin B12 to help support energy production" to avoid conveying the message that consumers would feel more energetic after taking the B12-infused ACV gummies. Pharmavite had challenged the claim on the ground that consumers could take away the implied message that the ACV gummies' B12 would cause consumers to "feel more energetic."

NAD disagreed with Goli's counter-argument that the claim clearly referred to "energy production" and would not deceive consumers. NAD precedent requires that advertisers are responsible for all reasonable interpretations of a claim, even if they do not intend to convey such messages.

Stepping into the shoes of the ACV gummy-eating consumer, NAD agreed with Pharmavite that, standing alone, the claim could reasonably convey that consumers would feel more energetic after eating the ACV gummies, a message not supported by the evidence (two articles regarding B12, neither of which involved testing on the Goli product itself). NAD recommended the advertiser revise the claim to convey that it refers to solely cellular energy as indicated by the submitted articles.

NAD next examined the modified claim that "folic acid supports skin health" and the modified claims that folic acid and vitamin B9 support healthy skin. There, too, it found the evidence presented did not substantiate the claims and recommended Goli discontinue them.

For those wanting more detail on the support, NAD has stated repeatedly that the "gold standard" for substantiating product performance claims is testing on the products themselves. Here, Goli submitted reports or studies that, at best, discussed the ingredients in the ACV gummies, but not necessarily ingredients identical "in composition and dosage" to those in the advertised product itself, and that is a problem for product claims.

Key Takeaways

In addition to tried and true NAD principles of claims substantiation, this case provides a roadmap for advertisers looking to modify (not just discontinue) their claims mid-challenge and thereby avoid a full NAD review of the original claims as well as a NAD review of any modified claims with which the challenger has no further issue, and, with luck and proper modification, get NAD's approval of any remaining modified claims.

Boston Scientific Agrees to Pay $188 Mil to Settle Multistate Surgical Mesh Litigation

Drug maker Boston Scientific has agreed to pay $188.6 million to settle multistate litigation with attorneys general from 47 states and Washington, D.C., alleging the company falsely marketed its surgical mesh products as safe while failing to disclose serious health risks.

The complaints and settlement agreements follow a multistate investigation that alleged the company failed to disclose the risks it knew to be inherent in the product. According to the complaints, during the approximately 10 years Boston Scientific marketed the surgical mesh, the company misrepresented "the full range of risks and complications associated with the devices."

These included multiple life-altering risks such as heightened infection, mesh shrinkage, scarring, bleeding, defecatory dysfunction, and other complications. Boston Scientific allegedly also failed to disclose these risks in comparison to those of other surgically implantable materials.

The complaints further allege that by entering the market under a less rigorous Food & Drug Administration (FDA) standard of review, Boston Scientific was able to market and sell the surgical mesh without adequate testing. Instead, according to the allegations, the company chalked up these complications—which began occurring at an alarming rate—to physician error, surgical technique, or operative risks.

Only after the FDA ordered manufacturers of surgical mesh devices to stop selling the products and determined that Boston Scientific had not "demonstrated a reasonable assurance of safety and effectiveness" for the devices did the company cease marketing and selling surgical mesh in April 2019.

The settlement imposes limitations on the company's marketing of surgical mesh going forward. Boston Scientific must also include a list of complications in all marketing materials.

The settlement further lists multiple marketing claims Boston Scientific cannot make about the product, including that the product risks are just as likely in other types of surgeries, that the complications can be eliminated by surgical experience alone, that the product does not increase the risk of infection, and more. Additionally, the company must disclose any safety concerns that arise to medical providers as soon as possible.

Among the states which took part in the litigation and will receive payouts from the settlement, New York will receive $6.3 million, Washington will receive $8.8 million, and Maryland $5.6 million. Boston Scientific issued a statement saying the settlement is not "an admission of misconduct or liability, but in the best interests of the company and its shareholders."

Key Takeaways

The Boston Scientific surgical mesh settlement is the largest such settlement thus far in the multistate suits filed by attorneys general alleging marketing misrepresentations about defective surgical mesh devices.