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Brand Protection & Advertising

Stay ADvised: 2025, Issue 3

Brand Protection & Advertising Law News
01.22.25
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In This Issue:

 

FTC's Final Junk Fees Rule Narrowed in Scope

On December 17, 2024, the Federal Trade Commission (FTC) released its final Rule on Unfair or Deceptive Fees, commonly known as the "Junk Fees Rule." This final rule has a much narrower scope than the initially proposed version, which applied to all industries offering goods or services. The proposed rule was industry-neutral, regulating a wide range of entities including individuals, corporations, partnerships, and other organizations. In contrast, the finalized rule specifically targets only the live-event ticketing and short-term lodging industries.

Key Provisions of the Rule

  • Prominent Total Price Display: Businesses must prominently display the total price, including all related costs, fees, and mandatory purchases, ahead of any other pricing information. The total price excludes limited exceptions such as certain government charges and shipping fees.
  • Clear and Conspicuous Disclosure of Fees: Businesses must clearly and conspicuously disclose any fees that are not included in the total price or final amount. Such disclosure includes details regarding the nature, purpose, and amount of such fees (e.g., shipping charges, taxes) before a consumer agrees to pay.
  • Prohibition of Misleading Practices: The rule prohibits businesses from misrepresenting the nature, purpose, or identity of any fee a consumer might be charged. This includes misleading claims about the goods or services associated with fees and whether those fees are refundable.

The rule does not address the specific types or amounts of fees. Whether the FTC will extend the rule to other industries in the future remains uncertain, particularly under President Donald Trump. Notably, then-Commissioner and now Chair Andrew Ferguson dissented from the rule, stating that the time for rulemaking by the Biden-Harris FTC had passed. He did not, however, comment on the substance of the rule itself. While then-Chair Lina Khan and Commissioner Rebecca Slaughter asserted that the rule should cover more, Commissioner Melissa Holyoak noted that she voted for it because it was narrowed and would have voted against it if the scope had been as originally proposed. Despite bipartisan support, it is possible Ferguson (who does not require Senate confirmation as he was already a sitting commissioner) could seek to have Congress repeal the final rule using its Congressional Review Act authority.

The rule was published in the Federal Register on January 10 and as written is effective May 12. Once implemented, businesses that fail to comply could face civil penalties of up to $51,744 per violation, based on the FTC's 2024 penalty thresholds.

 

FTC Alleges Sitejabber Passed Off Shopping Experience Reviews as Product Reviews

The Federal Trade Commission (FTC) has unanimously approved a final consent order to resolve its complaint alleging that business review platform GGL Projects Inc. dba Sitejabber published misleading reviews and made false representations about those reviews.

Sitejabber describes itself as an "AI-enabled" consumer review platform that collects ratings and reviews for online businesses. However, Sitejabber mostly collects these reviews at the time of purchase and not after the reviewing consumers have had time to form an opinion about the business or its product, yet Sitejabber represents that these reviews reflect consumer opinions about the product or service purchased.

The complaint charges that Sitejabber reviews reflect how consumers felt just after they had completed the purchase (i.e., reflective of the consumer's online shopping experience) rather than how they felt about the purchased service or product itself once experienced. Further, Sitejabber deliberately misled consumers about what the reviews represent; that is, Sitejabber did not clearly and conspicuously communicate to consumers that the reviews did not represent consumers' opinions of the company or product, just of their online shopping experience.

Sitejabber collected two different types of reviews. The company's Instant Feedback Survey (IFS) was an automatic survey that was offered to consumers after checkout, asking them to rate the "overall shopping experience so far" on a five-star scale. Sitejabber published the (mostly glowing) reviews on the business's profile page as the business rating.

According to the complaint, Sitejabber described these reviews as "capturing your customers at their happiest" and getting an "unprecedented volume of positive feedback from your customers."

However, Sitejabber did not clearly and conspicuously disclose that IFS reviews reflect point-of-sale opinions. Rather, Sitejabber "used IFS results to inflate business' ratings and review counts, misrepresenting that IFS reviews and rating" were not made by "customers who actually had the opportunity to experience the product or service purchased." Further, only if a reviewer hovered over the review count could they find an explanation that clarified which reviews were point-of-sale and which were not.

Sitejabber also offered Instant Feedback Product Reviews (IFPR), which were surveys at the point of sale. Business customers of Sitejabber could and in some instances did post these reviews both on their sites and as Google paid product search results. Again, nowhere did Sitejabber disclose that the ratings were obtained at the point of sale and that the reviews did not reflect the actual consumer's experience with the product. Additionally, the complaint alleged that Sitejabber explicitly or impliedly represented that the reviews were from consumers about the actual product or service received.

The approved consent order settles the allegations and prohibits Sitejabber from making misrepresentations like those that got it in hot water in the first place.

Key Takeaways

The allegations here suggest that Sitejabber's entire business model was built on deception. It's an interesting take on the usual deceptive review false advertising action, which tends to allege that reviews were fabricated. Here the FTC doesn't accuse Sitejabber of writing deceptive reviews, but of deceiving consumers about what those reviews actually review and deliberately making it difficult for consumers to figure that out.

 

Beware the Ides of Healthcare Marketplace Enrollment: FTC Sends Marketers Warning Letters

Open enrollment season at the healthcare marketplace has just passed, along with open season for deceptive health marketplace claims. So says the Federal Trade Commission (FTC), which in mid-December sent warning letters to 21 companies that market or generate leads for healthcare plans. The message: when marketing of healthcare plans ratchet up, we are watching to make sure you don't deceive consumers.

Although the letters do not directly accuse the companies of any wrongdoing, they warn that the FTC is aware that some marketers of healthcare insurance may be violating the FTC Act, and they strongly urge compliance with advertising law, including the FTC Act, the Telemarketing Sales Rule, and the Rule on Impersonation of Government and Business. The letters also review the basic tenets of said laws as applicable to healthcare companies and warn the companies that the FTC is monitoring for any untoward behavior.

Although the agency did not name the letter recipients, it did say that they all provide some kind of marketing or advertising, including lead generation, related to the Affordable Care Act Marketplace health insurance and healthcare-related products, such as benefit plans and discount programs.

The FTC warns of the types of relevant consumer complaints it has received, suggesting marketers should, for example, avoid overpromising product benefits (and especially insurance benefits) or misrepresenting that a healthcare product is equivalent to comprehensive medical insurance. The FTC further warns that advertisers should make sure not to downplay the cost of their products, or to promote illusory free offers or incentives.

Signaling that the FTC would consider enforcement, the letters cite specific examples where the agency has taken action against healthcare marketplace-adjacent businesses. For example, the FTC highlighted its $195 million judgment against the lead generation company Symple Health for deceptively advertising limited benefits as comprehensive health insurance. Similarly, against Benefytt Technologies, the FTC said it obtained a consent decree ordering the company to pay $100 million back to consumers for deceptive lead generation practices like charging deceptive fees for unwanted health plan products. And, in a case versus Partners in Healthcare Association, the FTC said it obtained an order prohibiting the company from falsely marketing medical discount cards as health insurance. Finally, the FTC noted that the Consumer Health Benefits Association agreed to pay $7 million in refunds after it pitched false claims about medical discount plans.

Key Takeaways

It remains an open question as to when and where the FTC will seek to flex its enforcement muscle under the Trump Administration. That said, disinformation from healthcare-related industries has been a bipartisan endeavor, so healthcare insurance marketers would do well to heed these warnings.

 

Tooth Whitening Surveys Need Control Groups as NAD Updates Guidance

In yet another case revolving around tooth whitening claims, the National Advertising Division (NAD) recently reexamined the need for negative control groups in studies used to support tooth whitening claims.

Procter & Gamble challenged claims made by GuruNanda, which makes and markets alternatives to traditional mouthwashes as well as tooth whitening products. After GuruNanda discontinued several claims, NAD was left with just two claims to review: that the advertiser's Pulling Oil product offers "natural teeth whitening," and the claim "Dazzle From First Application" that the company makes about its whitening gel.

It was on the "natural teeth whitening" claim analysis that the issue of a control came up. GuruNanda's Pulling Oil is based on a traditional Ayurvedic practice that involves swishing oils such as coconut, sesame, and sunflower between the teeth as an alternative to modern mouthwashes. In support of the claim, GuruNanda submitted a study testing 30 subjects with yellow teeth.

P&G argued that the study was flawed in the absence of a control arm, making it impossible to tell whether whitening resulted from the product or whether there was another variable at play, such as perhaps subjects brushing more than usual or the toothpaste provided to participants. GuruNanda countered that this type of study did not need a control since the baseline yellow teeth are the control.

NAD agreed with P&G, reinforcing its requirements for supporting these types of claims. Although NAD has generally and recently required a negative control for whitening studies, the failure to include a control has not necessarily been a fatal flaw in the past. NAD noted that some older case decisions accepted studies without a control; however, "underlying these cases was the assumption that without a whitening product a control would simply verify that the control would not whiten teeth and that the baseline served the same purpose." But times have changed, said NAD. Since the days when some older decisions let studies without a control slide through, recent evidence showed that even nonwhitening toothpaste may have some whitening effect.

The study suffered from additional flaws as well, such as instructing participants not to drink tea or coffee during the study period. Again, NAD acknowledged that it had in the past allowed exclusions for tea and coffee, which are known to stain teeth, but no longer viewed those exclusions as reasonable given the requirement that the study must be consumer-relevant.

GuruNanda submitted an additional study in support of its whitening claims. This one did have both a negative control and a positive control (Listerine mouthwash), but NAD found other issues. Mainly, the study noted that it was intended for "exploratory purposes." As a result, the study did not conduct a sample size calculation, which meant the study size might have been underpowered for reliable results.

In addition, the study participants were individuals with oral hygiene issues in an Indian hospital, so that participants were not necessarily stand-ins for the American consumer given differences in culture, ethnicity, food, and water.

NAD also asked GuruNanda to discontinue the claim "Dazzle From First Application," finding that in the context of a teeth whitening gel it might convey the message that the product whitened from first use when that was not supported by the evidence.

GuruNanda agreed to discontinue "Dazzle From First Application" but appealed the remainder of NAD's recommendation to the NARB.

Key Takeaways

This case will be an interesting one for NARB. GuruNanda, in its advertiser statement, essentially argues that the decision stifles young companies and new market entrants who won't yet have the kinds of substantiation that NAD is looking for. The company stated that the decision provides a heightened standard for what constitutes a reasonable basis to support a claim that is unreasonable for such companies—especially for general, noncomparative claims. Will NARB agree with NAD? Time will tell.

 

Quaker Oats "Simply Granola" Class Action Is "Unreasonable," "Fanciful," and Dismissed

Plaintiffs attempting to argue that Quaker Oats Company falsely advertised its "Simply Granola" product have an "unreasonable" and "fanciful" interpretation of the front label, and their allegations of false advertising are toast after an Illinois federal judge dismissed the complaint.

The complaint alleged that Quaker's "Simply Granola" front label was false advertising because it led consumers to believe that the product contained only oats, honey, raisins, and almonds, as shown on the front.

"Yet no reasonable consumer would think that these were the only ingredients in the product merely because the product label featured the name 'Simply Granola' alongside the words 'oats, honey, raisins & almonds,'" said the judge.

Granola is not the type of food that has a standard ingredient list, he added. Even if it did, using the word "simply" to describe "granola" would not communicate to the reasonable consumer that the product contains only those four ingredients.

"Images on the front of packaging would be crowded indeed if reasonable consumers interpreted images to contain every single ingredient in the product," wrote the court.

Nor did plaintiffs allege that the product did not contain those advertised ingredients, meaning that the ingredients list was also consistent with the front label.

Addressing Quaker's argument that the claims were preempted in case the argument arose again as the judge (skeptically) gave plaintiffs leave to amend their complaint, the court found that they were not.

Quaker contended that they were allowed to depict the granola's flavor under federal labeling law and that the plaintiffs were seeking to impose requirements that conflict with federal law. The plaintiffs responded that their claims were not about Quaker's characterization of flavors, meaning that federal flavoring law was not at issue. The court found that, as held by the 7th Circuit, the FDCA's preemption provision means that "while states may not require sellers to add further labeling that is not required by federal law, they may prevent sellers from voluntarily adding deceptive content that is not required by federal law. … So when a plaintiff seeks more detail on a label than federal law requires by invoking a state law, then such a claim is barred by federal law. … But the FDCA does not completely preempt state law claims: state law claims are not preempted in a case like this one, in which the Plaintiffs allege that an affirmative statement made on a label is deceptive." [citations omitted] Here, although the claims failed as a matter of law, the court found that they were not preempted.

Key Takeaways

As followers of this area know, courts have been increasingly open to arguments that consumers must look beyond the front of packaging to further consider the full label and, specifically, whether it clarifies any ambiguities in front-of-pack claims. This case is yet another example of that and, for industry's sake, hopefully a continuing trend.

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