What’s Up with Up To Claims?

For years, the generally accepted principle at the Federal Trade Commission (“FTC”), the Better Business Bureau (“BBB”) and the National Advertising Division (“NAD”) has been that an “Up To Claim” (i.e. ‘save up to 50%’ or ‘experience up to a 50% difference’) is substantiated if approximately ten percent of consumers actually experience the touted results. This standard applied whether the Up To Claim was made in connection with a savings/pricing claim or a performance claim. Specifically, the FTC rule has been that an “appreciable” number of consumers under normal purchasing circumstances must be able to experience the maximum results claimed in the ad. The BBB, in its Code of Advertising, and the NAD, in numerous decisions, have put that vague rule into concrete terms—both state that the “maximum savings should comprise a significant percentage, typically 10%.” The FTC has never quarreled with the 10% standard. Well, not until recently. FTC developments in the last year indicate that the old standard is no longer applicable, at least in certain circumstances. In fact, a recent study the FTC commissioned seems to suggest that “up to” can be a meaningless qualifier for certain types of claims. In a group of settlements from February 2012 (the “Settlements”), the FTC narrowed the appreciable number standard in a significant manner by requiring that the advertiser have “competent and reliable scientific evidence to substantiate that all or almost all consumers are likely to achieve the maximum savings claimed” (emphasis added).  The Settlements were with five window companies regarding their energy savings claims (e.g. “Reduce your energy costs by 50% - Guaranteed!”, “Save Up to 50% on Your Energy Bill”) (collectively, the “Settlement Ads”). Three of the five complaints in the Settlements alleged that the advertisers made various Up To Claims; the other two complaints contained savings guarantees, but did not contain any Up To Claims.

Then, in June 2012, the FTC released a report summarizing the results of a research study it commissioned to determine how consumers view Up To Claims in various advertising contexts (“FTC Study”).  The FTC’s decisions in the Settlements were based on the FTC Study, which found that consumers “are likely to believe that they will achieve the maximum “up to” results” (emphasis added). The FTC Study details what a test group of consumers thought about ads for replacement home windows that purportedly would provide up to 47% savings in energy costs (e.g. “proven to save up to 47% on your heating and cooling bills!”) (the “Study Ad”).

The FTC Study asked:

• Do people take away an unqualified savings claim from the Study Ad (i.e. “Save 47%!”)?
• Does the Study Ad give the impression that a substantial portion of consumers, e.g. 50% or more, will achieve these savings?
• Does inclusion of the qualifying “up to” language have any impact on the net impression of the Study Ad?
• Does a disclosure that typical savings are less than 47% have any impact on the net impression of the Study Ad?
• Do people believe that the advertiser had done tests to support the message(s) conveyed by the Study Ad?

The FTC Study found:

• Over a third (specifically, 36%) of participants took away an unqualified savings claim (i.e. “Save 47%!”) from the Study Ad even when it contained the qualifying phrase “up to” and less than a quarter thought that such an ad implied qualified savings (i.e. “Save up to 47%”).
• Nearly half of the respondents exposed to the qualified “up to” version of the Study Ad thought that at least 50% of consumers would experience unqualified savings of about 47%--similar to the results for the version of the ad that did not contain “up to” language.
• When participants were exposed to an unqualified savings claim (i.e. the Study Ad did not include “up to” language), 48% of the participants found that this implied unqualified savings of 47% (versus 36% where an Up To Claim was used in the Study Ad- see the first bullet above).  The FTC Study argued that this difference (48% versus 36%) was not statistically significant.  In other words, the FTC Study asserts that the inclusion of “up to” language had no meaningful impact on a consumer’s interpretation of the Study Ad. According to the report, the FTC Study showed that about 40% of respondents believed that they would save 45-50% on average on their heating and cooling bills regardless of whether an Up To Claim was included.
• When a disclosure was added to the Study Ad, there was some impact on the consumer’s interpretation of the ad, but not one that was significant according to the findings in the FTC Study.
• Finally, nearly 46% of respondents believed that the advertiser in the Study Ad had done tests to support the claims.

In the press release accompanying the report, the FTC stated that the FTC Study “reinforces the FTC's view that advertisers using [Up To Claims] should be able to substantiate that consumers are likely to achieve the maximum results promised under normal circumstances” (emphasis added). As such, the FTC Study echoes the position taken in the Settlements that all or almost all consumers should be able to achieve the maximum promised results.

These actions by the FTC seem to indicate that the old “appreciable number” standard for Up To Claims is on its last legs.

In May 2012 (after the Settlements’ public release, but before the release of the FTC Study), however, the NAD applied the old “appreciable number” standard to Up To Claims in four separate case reports:

• In two separate matters reviewing the advertising of Booking.com and Expedia, the NAD explained that “advertisers making “up to” percentage savings claims must be able to demonstrate that at least 10 percent of the rooms offered in each advertised city on its site are available at the highest savings.”
• In a matter reviewing L’Oreal USA’s (“L’Oreal”) Visible Lift® Smooth Absolute Foundation (Case #5458, May 15, 2012), the NAD applied the “appreciable number” standard to L’Oreal’s performance claim: “See up to 10 years disappear…in a stroke.” The NAD found that L’Oreal could support a modified version of the claim as an appreciable number could see the promised results, but only in certain categories, e.g. appearance of fine lines.  As such, the NAD recommended that L’Oreal modify its claim to make clear that such results were only attainable in certain categories.
• The NAD reviewed Discover Financial Services LLC’s (“Discover”) Cash Back Programs (Case #5464, May 24, 2012) where Discover claimed that consumers could receive “Up to 1% cash back on ordinary everyday purchases.”  Once again, the NAD reiterated the “appreciable number” standard in connection with this performance claim.  Nonetheless, the NAD found that Discover had failed to substantiate the claim to the extent that the class of consumers who could actually achieve 1% cash back was limited to those who had made $3000 in qualifying purchases. Because Discover failed to “clearly and conspicuously” disclose this fact, the Up To Claim could not be substantiated.

Then, in December 2012, in its review of Fareportal, Inc.’s claims on CheapOair.com and CheapOstay.com, the NAD stated: “the FTC has reiterated that advertisers making “up to” claims ‘should be able to substantiate that consumers are likely to achieve the maximum results promised under normal circumstances’” while citing to the FTC Study. Nonetheless, the NAD then discussed the continuing applicability of the 10% standard (but went on to decide whether the claims should be modified based on a different Department of Transportation standard applicable to air fare prices).

It appeared the NAD was still willing to apply the old standard to both pricing and performance claims—even after the FTC had indicated that 10% of consumers achieving the maximum promised result was no longer sufficient to support an Up To Claim.

Each of these 2012 NAD reports begged the question: is the old “appreciable number” standard still alive and well?

It was not until May 2013 that the NAD seemingly adopted the new “all or almost all” standard in its report regarding Nest Labs Inc.’s claim that a feature of its programmable thermostat “cuts AC runtime up to 30%” (Case #5595, May 29, 2013). In recommending that the advertiser discontinue or modify its claim the NAD noted that although “a 10% rule has been recognized in the sales or inventory arena. . . the recent [FTC Study] . . . suggests that in some contexts (e.g. energy savings), advertisers may be required to demonstrate that a majority of consumers using the product under ordinary operating conditions will achieve the maximum touted results” (emphasis added). The decision contained no further discussion of the FTC Study or the Settlements. This statement seems to indicate that, even in the energy savings context, the NAD has not strongly adopted the “all or almost all” standard. Notably, the NAD stated only that a “majority” – rather than all or almost all – of consumers must experience the greatest performance results. The statement also indicates that the NAD plans to stick to the ten percent standard in the savings/pricing realm. However, there has not been an NAD report involving an Up To Claim in the pricing context since the December 2012 Fareportal report, so it may be too early to tell.

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It may not have been the FTC’s intention to completely abandon the appreciable number standard. In fact, the Settlements emphasized that they were part of the FTC’s broad effort “to ensure that environmental marketing is truthful and based on solid scientific evidence.” Likewise, in the analysis accompanying the release of the Settlements the FTC stated that the Settlements “should not be interpreted as a general statement of how the [FTC] may interpret or take other action concerning representations including the words “up to” for other products or services in the future.”

Additionally, when taken as a whole, the Settlement Ads do not necessarily represent typical Up To Claims. First and foremost, the Settlements address highly fact-specific scenarios and are in a targeted area as far as recent FTC enforcement is concerned (i.e. environmental marketing and energy savings). Second, the Settlements are distinguishable from ordinary Up To Claims as each of the Settlement Ads that contained an Up To Claim also employed a savings guarantee (e.g. “Save up to 47%-guaranteed” and “47% Fuel Savings Pledge”). Thus, each of the Settlement Ads is coupled with a guarantee that arguably magnifies the deceptive nature of the claims. This issue is not discussed in the Settlements, but the FTC and NAD have always looked at the net impression of the advertisement at issue, so the impact of the overall impression of the Settlement Ads should not be ignored. Especially when one considers the atypical nature of the Up To Claims at issue in the Settlements, it remains to be seen whether the FTC will apply this heightened standard beyond claims in the environmental marketing realm (e.g. gas and heating costs and energy efficiency).

When FTC staff members have publicly discussed the Settlements, they have indicated that the Settlements and FTC Study relate to fact-specific performance claims in the environmental marketing realm and that the “all or almost all” standard will not be automatically assumed in all cases. Representatives from the FTC also suggested that the Settlements and the FTC Study do not represent a shift in the FTC’s enforcement strategy. The FTC has consistently pursued performance claims, but has not actively pursued pricing claims for many years (and has no stated intention of doing so going forward). And, lately, the FTC has shown great interest in pursuing enforcement of green and environmental marketing claims. Thus, it should come as no surprise that such a heightened standard would be introduced in the context of an environmental marketing, performance-based Up To Claim.

Given the uncertainty and heightened attention to Up To Claims, they should be made with caution. And, in all cases, the limitations (i.e. the specific circumstances in which the savings or performance benefit can be realized) on the touted results should be explicitly and clearly disclosed in the advertisement to help ensure that the advertisement is not deceptive or misleading. The Settlements, the FTC Study and the recent decisions of the NAD make clear that an advertiser employing an Up To Claim that may only be achieved under specific circumstances “must disclose those circumstances clearly and prominently in close proximity to such representation, guarantee, or pledge.” Further, “up to” may not be an adequate qualifier, even with a disclaimer, in certain circumstances (i.e. performance-based Up To Claims or claims in highly sensitive areas, e.g. environmental claims or, potentially, health-related claims).

We will continue to watch how Up To Claims are analyzed by regulators and the NAD.