Weight Watchers/Jenny Craig dispute, early 2010. Core to business is food plans along with weight management services, including behavior modification and support. Jenny Craig: sell pre-packaged meals and meal planning. Teach people how to fish v. sell people fish.
Time: New Year’s Resolution time, which is WW Christmas—key period for weight loss. Comparative ad: Valerie Bertinelli in a lab coat, in a lab surrounded by scientists, and beakers, claiming big news, a major clinical trial run by “serious lab geeks,” finding that Jenny Craig clients lost on average over twice as much than the leading competitor. In fact, there was no head-to-head clinical trial. They took a a trial/interim study examining weight loss results of a group of self-help dieters to Jenny Craig, and compared it to a study examining weight loss results of a group of self-help dieters to WW. But there were different demographics of the self-help dieters. The ad used beakers to compare Jenny Craig and WW directly. Kicker: the WW study was conducted over 10 years before, using a WW program four generations old.
Next steps: assess business goals and needs—stop the ad and stop the harm to the brand on perceptions of efficacy. Assemble a working team of in-house and outside counsel, also experts inside and out—scientists, marketers. Assess the law; TROs are hard to get. Filed on Jan. 19, two weeks after learning about it, and filed for a TRO a day later. Knew they also needed a PR reaction, explaining why WW sued. Prepared for any negative backlash, given that TROs are risky, with seeking expedited PI as a backup.
Results were gratifying: Jan. 20 TRO where the judge said that the ad wasn’t supportable; it was a non-comparison comparison. Proactive PR: announced the TRO live on Fox Business and Jan. 21 went on Good Morning America.
Lessons: be prepared for a crisis by knowing what’s at the core of your business; understand what success means; assemble a cross-functional team to help; don’t be afraid to be aggressive; use PR to assist.
Inside Strategies for Effectively Utilizing the NAD to Resolve Advertising Disputes
Jeffrey A. Greenbaum, Frankfurt Kurnit Klein & Selz PC
Advertising litigation is becoming more central to business strategy. Increased activity with the networks and NAD; people are addressing matters they don’t have the budget to address in advertising. NAD also has a level of predictability. Use NAD cases to prevent problems before advertising—read the cases in NAD reports/NAD online. Understand the cases before you challenge. Fear with a judge is that the judge knows nothing about the industry or the law; NAD has experts who’ve probably dealt with similar issues before. Any crazy claim you want to know about has probably come up before: NAD has opined on the meaning of fresh as well as on the meaning of 100% little black dress approved. More than 50 decisions involving the rental car industry, including the major brands.
Kathryn Farrara, Staff Attorney, National Advertising Division
Some NAD attorneys specialize: green claims, dietary supplements, cosmetics. But we also see a variety of different ads. Sometimes specialization is necessary because some claims are very science-heavy. Once you immerse yourself in a case like that, another challenge might come to you. But it’s also good to have fresh eyes.
NAD issued 120 decisions in 2009, 100 challenges and 20 monitoring cases. 80% decided on the merits, 60% substantiated in whole or in part (typically substantiated and other claims the advertiser agreed to modify them/discontinue them on their own prior to the case being opened); 40% recommendations for modification or discontinuance. 12% were administratively closed, and 8% ended in government referrals.
These challenges have gotten complex over the years—typically 5-7 claims per case. Win/lose depends on your perspective and the importance of the claims at issue; some of the claims aren’t as important as others because sometimes people throw in the kitchen sink.
Beth Kotran, VP, Assistant General Counsel, Cadbury North America
Scientific evidence is increasingly common: have to decide whether NAD is the right forum with the right expertise—can it evaluate the evidence?
Greenbaum: challengers seem to do pretty well.
Farrara: there are a lot of unsubstantiated ads out there. And the challenges are rarely frivolous; when they are, we can pick them out. We see the difference between real issues and the parties giving each other a hard time.
Jay Barnes, Assistant General Counsel, Pactiv Corporation
We consider expense/resources in bringing a claim, so it doesn’t surprise him that a large number of challenges are at least problematic.
Farrara: Main product categories in 2009: appliances and consumer electronics; automotive; computer software; construction and home improvement, cosmetics, beauty products, and toiletries; dietary supplements; drugs, health, and health aids; food and beverages; household products; telecom products and services. You see an increase in challenges when there’s a market shock/new product—then competitors need to figure out the rules of the game and if they don’t have the new product they need to get something out there/change ads to stay relevant.
Monitoring activity focuses on cosmetics, beauty products, and toiletries; dietary supplements; and drugs, health, and health aids.
Greenbaum: can an informal call from a competitor lead to NAD investigation?
Farrara: it depends on the claim. Response might be: open a challenge.
Compliance in 2009: 25 proceedings following up when the challenger says “they haven’t taken their ad down/are still making the same claims they agreed to modify or discontinue,” 56% no further action required, 32% recommended additional changes, 12% referred to government. NAD expects fast action with internet ads, understands that packaging takes longer.
7 appeals in 2009, all affirmed by NARB. We do well because we are very careful with the science when writing decisions. Advertiser has automatic right to appeal, but challenger has to show entitlement to second bite at apple. Refused 3 appeals in 2008; typically, the client forces an appeal even though the attorneys knew what was going to happen.
Remember limits on PR surrounding NAD decisions, which affects both what happens when you win and when you lose.
Barnes: NAD is a preferred forum for us; we have a limited ad budget and can’t rush into court. Some parties think they can tread water at the NAD and make their money by the time the NAD rules. You just have to factor that in on whether you want to send a message and head to court.
Kotran: once you use the NAD, the competition knows it has a 4-6 month window to run the ad while the NAD decides; that has to be assessed in a decision about forum. The NAD process is much faster than full litigation, but for the client it’s never going to be fast enough; it will never be off the air tomorrow with NAD. Need to balance client’s desires and costs.
Barnes: the timeframe has begun to stretch because NAD is so busy. Is that taken into account in compliance?
Farrara: we realize the caseload is a little out of control; we’ve hired a new attorney and started to tighten the reins on things like extensions.
Jurisdiction: Regional ads: if we think it’s an important issue or that the advertiser will be rolling out the ads nationwide we will take it. Preemption: many times advertisers say that a federal agency has already approved the ad so we shouldn’t; we require a mandate/law before we will say that we don’t have jurisdiction.
We are looking at blogs, Facebook, not just traditional ads.
Kotran: how to resolve a challenge—should I contact the advertiser first? The NAD looks favorably on attempts to resolve a matter. But there are reasons not to tip them off in certain circumstances.
Barnes: we try to act fast—give them a short deadline so that they don’t have too much time.
Farrara: in the submission, we don’t want to hear too much about how you tried to work it out—we want the relevant facts. We are not presently thinking about making an attempt to work it out a precondition for our action.
Barnes: make sure your own house is in order. Expect reciprocity if you bring a challenge.
Farrara: a lot of people feel that the squeaky wheel gets the grease—if you call every day you get a decision/extension—she doesn’t think so but it depends on the attorney.
Greenbaum: highlighting the other side’s bad behavior may not help very much.
Farrara: the submission is always longer than it’s supposed to be, and that’s not a big deal, but the further along in the process they are the more it irks. If, at the end of the process, the advertiser submits a 3-page advertiser statement past the deadline rearguing its case, she’s going to put the first 3 sentences in the NAD release and be done with it.
If you have 3 claims that you’re really concerned about, put in those 3, not 15 and then get frustrated about how long the decision takes.
Barnes: take advantage of expertise and spend time educating them about the specifics. Don’t risk your credibility. Burden is on the advertiser to substantiate claims—you don’t want to sling claims hoping something will stick, but you don’t need to have incredible amounts of evidence. In his own product testing, they often run comparative tests and have focus groups that mention competitors. And if your results are severely inconsistent with the advertiser’s claims, that’s enough to go to the NAD.
Greenbaum: sometimes people use the NAD as a fishing expedition—to get information they couldn’t otherwise get.
Farrara: we hear about suspicions about attempts to get confidential scientific information; we get arguments about that.
Kotran: yes, we’ve seen that with science heavy stuff, sometimes with an eye towards a lawsuit. But that’s not what NAD is for.
Q: What’s the incentive to participate?
Fararra: we refer you to government agencies if you don’t.
Greenbaum: industry mechanism for resolving disputes. Being a participant in that system is positive. Believing as an advertiser that it’s a good forum with experts involved. FTC has stepped up its interest in referrals compared to its historical practice.
Farrara: half of the companies referred in 2009 to a government agency did return to the NAD.
Audience comments: people are playing more games with the NAD in terms of redacting information; NAD is putting up with it more. It’s more cynical. Clients don’t want to use the forum as much as previously because of the time costs.
Q: a lot of people are on both sides—sometimes as advertiser, sometimes as challenger. If you decline to participate you forfeit the right to bring challenges of your own. Always told his clients: if we don’t play, we can’t turn around and use the forum.
Greenbaum: NAD’s core questions: is a claim being made? (Puffery is part of this.)
Kotran: NAD knows that consumer surveys can be done to come out any way; if you do one, then you need to make sure it’s very hard to attack. Battles of the surveys are difficult to win. You need to feel very confident in the results; NAD will be hesitant to rely on survey evidence.
Farrara: we find consumer perception evidence helpful when the survey is reliable. Alamco Animal Health, Case no. 5134, footnote 92—lays out a full checklist of what NAD looks for in evaluating consumer perception evidence.
Greenbaum: arguing that everyone else is doing it won’t get you very far. Make confidentiality claims when you need to.
Farrara: cautionary lesson: Airborne declined to participate in NAD, and $30 million dollars in consumer lawsuits later maybe they are rethinking whether it would have been better to discontinue unsubstantiated claims.
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