Stay ADvised: 2025, Issue 1

In This Issue:

• Survey Says … NAD Finds Realtor.com Claims Supported by Survey Despite Industry Changes
• From Cautionary Tale to Success? Court Reconsiders Its Prior Refusal To Dismiss Evian "Carbon Neutral" Class Action
• NAD Finds Drunk Elephant Safety Claims Substantiated, But Influencer Claims Fall Short
• Neutrogena "Plant-Based" Wipes Lawsuit Will Be a Test of Disclosure Adequacy

Survey Says … NAD Finds Realtor.com Claims Supported by Survey Despite Industry Changes

The National Advertising Division (NAD) recently weighed in on the question of whether recent changes in the real estate industry disqualified a survey used to support an advertiser's claims. CoStar Group, which runs the website Homes.com, challenged the claim made by advertiser Move Inc. that its website "Realtor.com is the #1 site real estate professionals trust." Because Realtor.com is affiliated with the National Association of Realtors (NAR), CoStar argued that this claim communicated the message to potential consumers (including non-real estate professionals) that they should trust Realtor.com for their real estate needs.

According to CoStar, this claim was not supported because it was based on a stale and flawed survey from August 2023, taken before significant industry changes "impacting the professionals' trust in NAR and the Realtor.com" site. Those changes stem from the decision in Burnett et al v. National Association of Realtors finding that NAR conspired to inflate commissions.

First, NAD determined that the 2023 survey was methodologically sound and reliable. CoStar had argued that the survey was flawed because the answer choices did not include an option such as "None of these" or "I don't know." Move countered that this type of "no preference" option was unnecessary because the four sites presented in the survey represent most of the market, so there was no "forced choice."

Although NAD cautioned that the absence of a "no preference" option can sometimes be problematic, this was not the case here. The survey asked questions about trust rather than website preference. There was also little risk that the respondents would guess an answer because the respondents were professionals in the industry. Therefore, the lack of a "no preference" option was not a "fatal flaw," found NAD.

CoStar also argued that the survey was flawed because it surveyed real estate professionals' opinions about "brands" rather than websites. But NAD was not persuaded. Yes, the survey could have used more precise language than "brands," but the survey respondents clearly understood that the questions pertained to trust in the named websites. Additionally, the answer options were actual websites such as Realtor.com and Homes.com, even if they were called "brands."

Second, NAD found that the August 2023 survey remained timely despite industry changes. CoStar pointed to the October 2023 Burnett finding that NAR conspired to inflate real estate commissions and must make comprehensive changes to its commission structures. The decision and subsequent leadership turmoil at NAR, as well as the resulting changes to the way Realtors may charge commissions, have put a significant dent in the trust of NAR and Realtor.com, argued CoStar.

In its analysis of this argument, NAD first noted that a professional who uses a website for business may form strong opinions about it which may be long-lasting because opinions about infrequently purchased consumer products are not likely to change in the short term. NAD also found that CoStar failed to show any direct link between the "tumultuous year for NAR and a loss of trust in the Realtor.com website." Although the issue identified by CoStar may have impacted trust in industry professionals, that did not translate to a lack of trust in the Realtor.com website.

Key Takeaways

After Burnett, the effect on the real estate industry (particularly for members of NAR) was indeed significant. NAD stopped short of finding that it was significant enough to affect professional perception of advertising on a website affiliated with NAR. Still, NAD cautioned that the survey would not necessarily remain timely "in perpetuity" and that Realtor.com would need to conduct a newer survey—as is always true for preference, trust, and similar claims. It also asked Move to clearly and conspicuously disclose that the survey was conducted in August 2023 because that information was material to the audience.

From Cautionary Tale to Success? Court Reconsiders Its Prior Refusal To Dismiss Evian "Carbon Neutral" Class Action

The New York federal court that refused to dismiss a class action lawsuit that Danone falsely labeled Evian bottled water as "carbon neutral" has changed course and agreed, on a motion for reconsideration, to dismiss the case (although it has granted plaintiffs the opportunity to amend). In addition to the New York claims, the court has also dismissed the related Massachusetts consumer protection and California Consumer Legal Remedies Act (CLRA) claims.

The case involved allegations that Danone falsely advertised Evian water bottles as "carbon neutral." All Evian bottles contain a seal on the back label and six-pack packaging labeling the product as carbon neutral per the "Carbon Trust."

Plaintiffs alleged that the representation was false because the reasonable consumer would believe the product was carbon neutral. Plaintiffs also alleged that the representations were false because Danone did not disclose how it calculates carbon neutrality, what the Carbon Trust standard means, or how Danone complies with that standard.

In the original motion to dismiss, the judge agreed with the plaintiffs, finding that the reasonable consumer could be misled by the ambiguous "carbon neutral" term. Danone had argued in its original motion to dismiss that no reasonable consumer would think that making and shipping the water bottles would not produce any carbon dioxide. But the court ruled that carbon neutral was a "technical and scientific" term unfamiliar to reasonable consumers. Given the multiple plausible interpretations of "carbon neutral," it could not, as a matter of law, find that the reasonable consumer would not be misled by the claim.

On Danone's motion for reconsideration, the court reversed its position. Reexamining and distinguishing the case law on which it had relied, the court found that a lack of industry convention or government regulation assuring consumers about the veracity of the claim on the front label gave credence to Danone's argument that the back label should have been considered. By doing so, consumers would have found a link to Evian's site with a more detailed explanation of its definition for "carbon neutral." This disclosure "mitigates[s] concerns of consumers being misled at the point of sale." The court found that a reasonable consumer in these circumstances "would be expected to look beyond the front label to learn more about the representation and consult other additional information available."

The court also reversed itself on its original holding that the "carbon neutral" claim was deceptive as described in the FTC Green Guides. It held that "carbon neutral" is more specific than the FTC Green Guides examples of "eco-friendly" and "greener," (which are claims conveying many meanings), but there are only "two codified definitions" of "carbon neutral," and, therefore, a "carbon neutral" claim doesn't fall within the specified guidance in the FTC Green Guides.

On the CLRA claim, the court said that it had overlooked two decisions that changed its analysis. In Moore v. Trader Joe's Co., despite ambiguities in the front label representation, the court relied on the principle that advertising claims should take into account all information available to the consumer and the context in which that information appeared.

The court held that the context of the claims on the packaging that "should have put [the Evian plaintiffs] on notice that their interpretation of 'carbon neutral' was not reasonable."

Additionally, because the front package discloses that the product came from the French Alps, that should have put plaintiffs on notice that there was no way the product could meet plaintiffs' interpretation of what is carbon neutral (and, therefore, plaintiffs' conclusion was unreasonable). Further, the fact that the logo was offered with no further details about it should have clued consumers in to the fact that this absence meant something about the "carbon neutral" claim that was not disclosed. A reasonable consumer was not expected to be an expert on the product, but neither could it expect a seller to "be promising something that is impossible to find."

The court also wrote that it had overlooked the decision in McGinity v. Procter & Gamble, which held that an ambiguous front label can be cured by reference to the back label and that consumers should consider all information available to them. Here, any ambiguity would have been cured by the context clues provided on the front label and by the further information provided in the back label.

Key Takeaways

With the court's reversal, we see the continuation of a trend toward interpreting vague or ambiguous terms such as "carbon neutral," "natural" or "clean" not according to an objective consumer standard but based on the advertiser's own represented definition of the term. It also emphasizes the shift towards putting the onus on the reasonable consumer to look beyond the front label to learn more about the representations. When it comes to ambiguous representations, the reasonable consumer is expected to consider context and not to expect the impossible to be true.

NAD Finds Drunk Elephant Safety Claims Substantiated, But Influencer Claims Fall Short

NAD also issued a decision about claims made by popular beauty brand Drunk Elephant, which bills itself as an "ingredient-conscious" beauty brand.

As part of its routine monitoring program, NAD looked into claims Drunk Elephant made about the safety of its products for tweens and teens. NAD also reviewed the company's influencer posts to determine whether or not they comply with the FTC's Guides Concerning Endorsements and Testimonials (FTC Endorsement Guides). NAD found that the safety claims made by Drunk Elephant regarding its products were substantiated but that there were problems with the disclosures made by Drunk Elephant influencer claims.

First, NAD analyzed whether certain influencer promotional posts by a paid influencer sufficiently disclosed the material connection between the influencer and the brand. NAD found that the paid disclosure was not sufficiently and conspicuously disclosed. Influencer Alix Earle posted a complimentary video about the brand. The text accompanying the view featured the hashtag #drunkelephantpartner and was only visible if the viewer clicked on the "more" hyperlink.

In keeping with the FTC Endorsement Guides standard, NAD found that the hashtag disclosure's lack of visibility within the main claim was problematic. Further, because the words in the disclosure ran together, it was possible viewers would not understand it. Finally, NAD noted that endorsements relying on video images should make the disclosure in the video itself. NAD recommended that the post be modified or deleted, that future posts ensure the hashtag is clearer and appears without having to click on the hyperlink, and that a clear and conspicuous disclosure be made in the video itself.

In the second endorsement analyzed by the NAD, Sophia Pauline, who was not a paid influencer but received fee product, did not disclose any connection to the brand. The NAD reiterated that receiving a free product is still a material connection possibly affecting how a viewer weighs an endorsement. Drunk Elephant said that it would take reasonable steps to encourage influencers receiving free products to disclose that material connection, and NAD asked the company to ask Sophia Pauline to disclose that she gets free products.

NAD then determined that the safety claim that provided a "list of our products that are safe for kids and tweens to use" was substantiated. Drunk Elephant submitted evidence that it evaluated the safety of its products via the European Commission Scientific Committee on Consumer's Safety Cosmetic Safety Standard (SCCS Safety Standard) and that this standard is known as the most stringent safety standard in the industry. It also submitted evidence that under the SCCS Safety Standard, the 18 products mentioned in the claim were rated well above what the SCCS Safety Standard considers safe for use.

Additionally, Drunk Elephant's expert explained that the SCCS Safety Standard does not require additional safety testing of skin products on children over six months of age. The SCCS Safety Standard bases this decision on the fact that children's skin "possess all the skin structures of adult skin" as well as the same absorption and that its own opinion found no need for a total ban on parabens for children over 6 months of age. Drunk Elephant also submitted a study showing that none of the 18 products listed in the claim caused any irritation. NAD concluded that the safety claim on the use of these products on children was substantiated.

Key Takeaways

With respect to the safety claims, NAD found sufficient substantiation in the opinion of a stringent safety standard and a study that showed the product did not irritate skin—even children's delicate skin. As for disclosure of material connections by influencers, it was business as usual for the NAD (and, for that matter, the FTC).

Neutrogena "Plant-Based" Wipes Lawsuit Will Be a Test of Disclosure Adequacy

October was a rough month for J&J's "plant-based" wipes, as both the Aveeno and Neutrogena brands were targeted by plaintiffs alleging that the "plant-based" claims were false because the products also contain mostly synthetic ingredients. Based on the inclusion of synthetic ingredients, plaintiff Chelsea Garland alleges that J&J's use of "plant-based" on the Neutrogena towelettes is false and a violation of California's false advertising, unfair competition laws, and a breach of warranty.

Although Garland attempts to broadly cast Neutrogena's label as a blatant display of "green-washing," close review of the label makes clear the steps that Neutrogena took to qualify the "plant-based" claim. Specifically, the front of packaging includes "25 Plant-Based Compostable Towelettes" in the net quantity disclosure, in the second-largest font size on the front of pack. The back of pack likewise includes a callout that the towelettes are "Made with 100% plant-based, home-compostable cloth." Neutrogena makes no representation about the liquid on the cloth but, of course, does disclose the ingredients in the liquid consistent with cosmetic regulations. Based on this, would a reasonable consumer understand that everything about the product is plant-based or would she understand that it is only the towelettes?

Key Takeaways

This case is one to watch because it will test whether J&J's efforts to limit its plant-based claim were sufficient to withstand the constant scrutiny of the plaintiff's bar. As regular readers may know, some courts have been increasingly skeptical of plaintiffs' exaggerated readings of claims such as "clean" and have credited the advertiser's efforts to limit interpretation of those claims by granting a motion to dismiss, see, e.g., Finster v. Sephora, while many other courts have allowed such complaints to proceed. Here, it appears that J&J anticipated a potential challenge to "plant-based" and took similar steps to limit its applicability to only the towelettes. Stay tuned to see whether the court thinks this was enough.