Numerous Warning Letters Serve as a Reminder that the FTC is Always Watching

The Federal Trade Commission (“FTC”) has been very active in its enforcement efforts in the past couple of months. In addition to other actions which we have blogged about, the FTC recently sent dozens of warning letters to advertisers in two separate efforts. In September, the FTC sent letters admonishing companies for their failure to make adequate disclosures in an effort dubbed “Operation Full Disclosure.” Then, in October, the FTC sent letters to companies for their potentially misleading “oxo degradable” claims in violation of the FTC’s Guides for the Use of Environmental Marketing Claims (or “Green Guides”).  Operation Full Disclosure Warning Letters

First, in Operation Full Disclosure, the FTC sent warning letters to more than sixty undisclosed companies—including twenty of the largest advertisers in the US—for their failure to make clear and conspicuous disclosures in television and print advertisements. In its press release, the FTC noted that Operation Full Disclosure’s attention to providing truthful disclosures in print and television is in line with the FTC’s recent efforts to address online disclosures via the 2013 release of the revised .com Disclosures.

The ads subject to the warning letters came from a wide cross section of advertisers (including ads from the food, drug, household item, consumer electronics, personal care, and weight loss industries) and involved fine print, easy to miss, and hard to read disclosures that contained material information. Specific issues included:

• Advertising a product price where the conditions for obtaining that price were not adequately disclosed.
• Advertising a product capability or inclusion of an accessory where it was not adequately disclosed that consumers must first own or buy an additional product or service to obtain that capability or accessory.
• Advertising that a product was superior in a product category where the basis of comparison or the class of products at issue was not adequately disclosed.
• Advertising a “risk-free” trial period where the requirement to pay for initial and/or return shipping was not adequately disclosed.
• Advertising outlier results via a testimonial where it was not adequately disclosed that the results were not typical.
• Advertising involving false claims where the advertiser attempted to cure the falsity with contradictory disclosures.

In the warning letters the FTC advised that all disclosures must be clear, conspicuous, and in close proximity to the modified claims. In a blog post about Operation Full Disclosure, the FTC elaborated on what it means to be “clear and conspicuous” by reminding advertisers to focus on the “The 4Ps”:

• Prominence: The disclosure must be big enough, have enough contrast and, for TV, on the screen long enough for the consumer to easily read and understand it. There is no “one size fits all” font, color, or time period. Rather, whether the disclosure is readable and understandable will depend on the circumstances.
• Presentation: Apart from appearance, the disclosure must be set forth in an understandable manner, e.g., it should not be in legalese, should not be buried a block of text, etc.
• Placement: The disclosure should be positioned in manner that the consumer is likely to actually notice and read it, e.g., it should not be buried in a footnote, off to the extreme side of the page, etc.
• Proximity: The disclosure must be in close proximity to the claim it is modifying. This demonstrates, once again, the problem with footnotes. The FTC specifically stated that an asterisk does not solve the footnote problem.

The FTC went on to ask advertisers to make this simple query before posting an advertisement:

 If you find yourself struggling with how to craft an effective disclosure, why not take a step back and consider what the need for a disclosure might be telling you. Perhaps it’s pointing to a potential for underlying deception in your ad claim.

Nothing about Operation Full Disclosure should come as news to advertisers, but the effort does serve as a reminder that that the “clear and conspicuous” maxim is still an important one and that crafting helpful, honest, and readable disclosures is necessary to prevent an ad from becoming deceptive and drawing the ire of the FTC.

Green Guides Warning Letters

Then in late October, the FTC sent warning letters to fifteen marketers of “oxo degradable” plastic waste bags explaining that their oxo degradable, oxo bio degradable and biodegradable claims may be deceptive.

As background, “oxo degradable” plastic is made with an additive intended to cause it to degrade in the presence of oxygen. However, since waste bags generally are not exposed to enough oxygen when in the landfill environment, it is possible that oxo degradable bags will not completely degrade in the time frame expected by consumers. Making an unqualified oxo/bio/oxo bio degradable claim is not permissible under the Green Guides unless the advertiser can prove that the entire product or package will completely break down within one year. The October letters to advertisers questioned whether the advertisers have reliable scientific evidence to support their oxo/oxo bio/bio degradable claims and, if not, recommended that the claims be discontinued.[1]

Since the Green Guides were revised in 2012, the FTC has made significant enforcement efforts and these letters are a clear indication that the FTC remains focused on ensuring that advertisers make reliable and truthful environmental claims. Further, in its press release the FTC noted that companies “should not assume their claims are fine” if no letter was received. This enforcement effort, therefore, serves as a reminder that special attention must be taken when an environmental or “green” claim is made.

Key Takeways

These recent warning letters demonstrate that advertisers must not forget that the FTC is always watching regardless of the industry you are in, the claims you are making, or the medium in which you are advertising. Therefore, thinking, “no one will notice if we do [x, y, or z] … just this one time” is never a safe approach.

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[1] The advertisers had until October 21, 2014 to respond to the letters. We will continue to watch for developments.