Hunton Retail Law Resource

This past week, several consumer actions made headlines that affect the retail industry.

App Operator Im-Pacted by FTC Settlement

The Federal Trade Commission has reached a $948,788 settlement with app developer Pact, Inc. over claims that it engaged in unfair and deceptive business practices. Pact users enter into “pacts” to exercise and/or eat better. The app charges between $5 and $50 per missed activity for users who fail to meet their weekly goals. Users who meet their weekly goals were supposed to be rewarded with a share of the money collected from those who did not.

The FTC alleged that Pact charged “tens of thousands” of consumers even if they met their goals or cancelled their participation in the service. Customers had a difficult time getting refunds or even determining how to cancel. The FTC’s complaint alleged violations of the FTC Act and the Restore Online Shoppers’ Confidence Act.

Under the terms of the settlement, Pact must disclose its billing practices, and is prohibited from misrepresenting its billing practices or engaging in unfair billing practices. A judgement of $1.5 million will be partially suspended upon Pact’s payment of $948,788. 

Gatorade Settles California “Anti-Water” Suit

The California Office of the Attorney General has reached a settlement with The Gatorade Company over misleading statements about water in the company’s teen-directed “Bolt!” mobile app. Users who downloaded “Bolt!” controlled a cartoon version of Olympian Usain Bolt who raced recover gold coins. The avatar slowed when touching water and ran faster when touching Gatorade. The game tutorial warned, “Keep Your Performance Level High By Avoiding Water.”

California alleged that by marketing the Bolt! app, Gatorade engaged in false advertising and unfair competition. The settlement enjoins Gatorade from making false claims regarding the benefits of, or otherwise disparaging, water. Gatorade also must disclose endorser relationships in its social media posts, may not advertise its products in media where children under age 12 make up more than 35 percent of the audience. Finally, Gatorade will pay the California AG $300,000, of which $120,000 will be used to fund research or education on water consumption and adolescent nutrition.

Mattel to Modify Barbie App to Better Disclose In-App Advertising

Mattel, Inc. has agreed to modify its “Barbie Sparkle Blast” mobile app to better disclose the app’s in-app advertising. The Children’s Advertising Review Unit of the Council of Better Business Bureaus (“CARU”) made the recommendation after learning about the app through its regular monitoring practices.

App users can play a game to earn in-game “gems,” which can be used to purchase outfits for a virtual Barbie avatar. Players are also given the option to watch short videos to earn additional gems. CARU asked whether it was clear enough that the videos were in fact ads. Mattel has modified the prompt to read, “Watch a video Ad and receive a reward!” rather than its original, “Watch advert. Free Gems.”

NAD Supports Ragu’s Consumer Preference Claims

After a challenge from Campbell Soup Company, the National Advertising Division (“NAD”) has found that advertising claims regarding consumer preferences for pasta sauces were adequately supported by consumer surveys and taste tests. Mizkan American, Inc. makes Ragú pasta sauce. Campbell makes Prego pasta sauce.

Campbell challenged claims that “consumers prefer the taste of Ragú Homestyle Traditional OVER Prego Traditional.” Mizkan relied on a survey comparing all red pasta sauce users, which showed that consumers preferred Ragu over Prego. Campbell had performed a different taste test among users of “traditional” pasta sauce, which showed consumers liked both sauces equally. Campbell argued that Mizkan’s sample was too broad and therefore was flawed.

The NAD found that the product definition preferred by Campbell was too restrictive, and therefore Mizkan’s test provided a reasonable basis to support its advertising claims.

Benefit Cosmetics Mascara Claim Causes NAD to Bat an Eye

The NAD has recommended that Benefit Cosmetics cease claims that its “they’re Real! Mascara” is the best-selling mascara in the US. Rival cosmetics company Too Faced Cosmetics brought a complaint that Benefit’s advertising claims were no longer accurate. Benefit’s claims included “#1 best-selling Prestige Mascara in the U.S.” and “#1 best-selling Prestige Mascara in the U.S. for 3 years.” Both claims cited 2016 NPD Group studies.

Too Faced argued that although these claims had been true in the past, they were no longer accurate due to the most recent research by the NPD Group, which instead indicated that Too Faced’s “Better Than Sex” mascara was the current sales leader in the US.

The NAD found that Benefit’s disclosures were neither clear nor conspicuous. Further, the NAD found that even if the disclosures had been clean and conspicuous, they were still problematic for conveying potentially deceptive information. Benefit has agreed to follow NAD’s recommendation to discontinue the advertising claims.

Reynolds to Alter Advertising Claims about Zipper-Top Bags

Reynolds Consumer Products, LLC has agreed to follow the NAD’s recommendation that it modify or discontinue its claims that Hefty storage bags cost less than Ziploc bags. S.C. Johnson & Son, Inc., the maker of Ziploc bags, challenged claims that “HEFTY COSTS LESS THAN ZIPLOC,” and “Save big. Hefty costs less than Ziploc.” The NAD took issue with the fact that it was not clear what kind of product was being compared. Reynolds argued that it was obvious that because Ziploc makes slider bags, the comparison was about slider bags. The NAD disagreed. Because Reynolds did not prove adequate substantiation for its price claims, the NAD recommended that Reynolds cease making such claims.

The NAD separately considered whether a television advertisement showing a consumer and cashier choosing Hefty over Ziploc falsely disparaged Ziploc. The NAD determined that there was no comparative performance message in the advertisement, and therefore it was not disparaging to Ziploc.