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September 29, 2014

FTC Warns Sellers to Make Disclosures “Clear and Conspicuous”

Filed under: Internet,Retail — Edgar (aka MrConsumer) @ 5:08 am

 For the past two weeks MrConsumer has been ranting about retailers that don’t disclose key information in their ads in a “clear and conspicuous” manner. Last Tuesday, the FTC must have heard his yelling and screaming, and sent letters to over 60 companies warning them to clean up their ads. (We asked the FTC for a copy of the letter, but they refused.)

From their blog, here (only slightly excerpted) is the FTC’s message to companies about their obligation to make disclosures in their ads “clear and conspicuous.”

If the disclosure of information is necessary to prevent an ad from being deceptive, the disclosure has to be clear and conspicuous. That shouldn’t be news to any advertiser and certainly not to the 60+ companies – including 20 of the 100 biggest advertisers in the U.S. – that received warning letters as a part of the FTC’s Operation Full Disclosure. But whether your company heard from us or not, there are lessons to learn from our latest effort to ensure advertisers abide by time-honored legal principles.

Operation Full Disclosure included TV ads, print ads, ads in Spanish, and ads for a wide range of products and services – food, drugs, household items, consumer electronics, personal care products, weight loss products. It ran the gamut. And here’s what we found: A lot of ads included potentially misleading statements that advertisers tried to “fix” with problematic fine print.

Some ads quoted prices, but didn’t adequately disclose the strings that were attached. Others showed optional accessories, but didn’t adequately disclose that people had to buy extras to get the advertised benefit. Still others featured best-case-scenario consumer testimonials, but didn’t adequately disclose the results people could generally expect to achieve. We also spotted ads that included on-camera demonstrations without adequately disclosing material alterations. And that’s just for starters.

Here’s a practical way to think of it. If a disclosure is truly clear and conspicuous, consumers don’t have to hunt for it. It reaches out and grabs their attention. One mnemonic we use – The 4Ps – can help sharpen advertisers’ focus on four key considerations:

Prominence. Is the disclosure big enough for consumers to read easily? The fine-print “disclosure” and its TV cousin, the fleeting super, have long been the subjects of FTC law enforcement. Consumers shouldn’t have to scan an ad with a magnifying glass to pick up on material details of the deal. TV advertisers face the additional wild card of varying screen sizes. Regardless of whether a person is looking at the ad on a home theater system or a handheld device, small type can be easy to overlook. Furthermore, consumers shouldn’t have to be speed readers to grasp the message. FTC cases have challenged supers that flashed for just a brief period, lines of fine print on a single screen, and hard-to-read sentences over multiple screens. Consider contrast, too. White text on a light or variegated background isn’t likely to be noticed. Nor will a fine-print statement that has to compete with a dynamic and distracting image.

Presentation. Is the disclosure worded in a way that consumers can easily understand? Using legalese or technical terminology reduces the likelihood that consumers will get the message. Burying important information in a dense block of text is another common tactic that signals “don’t read me.” In one FTC settlement, for example, material information about the terms of the transaction appeared after an advertiser’s long litany of trademark information. In another case, a company used an intricately embellished all-caps font. That may be fine for the logo of a heavy metal band, but it’s not a presentation designed to convey critical information to consumers.

Placement. Geography matters. Is the disclosure where consumers are likely to look? An FTC settlement challenged as ineffective a key disclosure that ran down the side of a print ad perpendicular to the main text. Another case dealt with information conveyed in small type in the upper left corner of a full-page newspaper ad. And given all the talk about footnotes, the bottom of the page or screen isn’t a place most consumers will look.

Proximity. Is the disclosure close to the claim it modifies? Tiny type aside, another problem with footnotes is their distance from the prominent headline or splashy text designed to draw the consumer in. If you need to include key qualifications or conditions, remember this maxim: What the headline giveth, the footnote cannot taketh away. And don’t think an asterisk will always solve the problem. There’s a reason it’s called an aste-risk.

Now for the nitty-gritty. So just how big does a disclosure have to be? 4 point, 8 point, 12 point? What’s better: Times New Roman? Helvetica? How many seconds does it have to be on the screen? We get those questions all the time. But there are three reasons why advertisers who focus on the details may be missing the big picture.

“Clear and conspicuous” is a performance standard, not a font size. A disclosure is clear and conspicuous if consumers notice it, read it, and understand it. Do you really want the FTC staff dictating the specifics of your ad campaign? We didn’t think so. Aside from a few rules that mandate detailed disclosure standards, the “clear and conspicuous” ball is in the advertiser’s court. As long as consumers looking at the ad come away with an accurate understanding, companies have substantial leeway in how they communicate their marketing message. That’s why we think it would be a mistake to impose a one-size-fits-all approach.

Who knows better than advertisers how to convey information clearly and conspicuously? The “clear and conspicuous” standard allows advertisers to use their limitless creativity to integrate important information into the overall campaign. Even so, we often hear them say “But we don’t know how to make a disclosure clear and conspicuous.” Our response: Really? Really? Advertisers’ stock in trade is the ability to use the tools at their fingertips – text, sound, visuals, contrast, or color, to name just a few – to convey information effectively. One practical observation: Consider looking at it from another perspective. How would you send the message if you really wanted to, rather than because you think you have to? Approaching the disclosure as a key piece of information you want to convey may make it easier to ensure it’s clear and conspicuous.

When in doubt, rethink your ad claim. 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 may be telling you. Perhaps it’s pointing to a potential for underlying deception in your ad claim. Sometimes all it takes is a slight wording change to make a disclosure unnecessary in the first place. And just think how refreshing consumers would find an ad free of fine print.

• • •

September 22, 2014

Don’t Give Companies a Free Pass for Tricky Ads

Filed under: Retail — Edgar (aka MrConsumer) @ 6:00 am

 MrConsumer has been a consumer advocate for over 35 years, and he is always astounded by the number of sneaky (and potentially illegal) practices that not only companies will use, but that shoppers will put up with, or even defend.

The comments on this blog are often a reflection of that attitude, and I find that troubling. It suggests that consumer advocates have not educated the public enough about what are acceptable practices and which ones cross the line.

Some consumers and too many businesses think that as long as they make a disclosure or disclaimer SOMEWHERE that that is all that is necessary.

The Staples story we brought you last week is a perfect example. It is not okay to run an advertisement for goods at a stated sale price but fail to mention IN THE AD that you have to buy other goods totaling $50 in order to get the goods at the advertised price. Too many commenters and the company itself thought it was enough just to let shoppers know before they checked out that there was a catch in the offer.

thumb dirve

That is not what the law says in Massachusetts (and probably in some other states). One of the primary principles in consumer law is the requirement of disclosing key facts upfront. What needs to be “clearly and conspicuously” disclosed? Anything that might mislead the prospective purchaser or induce him or her not to enter into the transaction.

“It is an unfair or deceptive act for a seller to fail to clearly and conspicuously disclose in any advertisement any material representation, the omission of which would have the tendency or capacity to mislead reasonable buyers or prospective buyers.”

“A disclosure is not clear and conspicuous if any material terms of the offer that affect the price of an item, impose conditions on acceptance of the offer, … are not disclosed in the advertisement itself…”

“Even though the true facts are subsequently made known to the buyer, the law is violated if the first contact … is secured by deception.”

Here are some examples of specific requirements of the law (at least in MA), and how they might apply to various advertising practices.

Example 1:

Under the law, important disclosures must be “clear and conspicuous.”

“Clear and conspicuous … means that the material representation being disclosed is of such size, color, contrast or audibility and is so presented as to be readily noticed and understood by a reasonable person to whom it is being disclosed.”

*MOUSE PRINT:

Proactiv

Is it clearly disclosed that by ordering ProActiv for $19.95 that you will also be signing up for regular monthly deliveries of the product? Is the average TV viewer likely to have even noticed that small disclosure for the few seconds it was on the screen?

Example 2:

“Clear and Conspicuous, is not clear and conspicuous unless such material representation … appears in type which is a minimum of eight point type;”

*MOUSE PRINT:

fine print

Burying key information in a fine print footnote is frowned upon. The above footnoted disclosures (note: the type size above may appear larger on your computer screen than it actually is) are actually part of a single paragraph where each line is 20 inches long, spanning two pages in a multi-page circular. The type size is five point type, not the minimum of eight point type required assuming there is something important in this footnote that is required to be clearly and conspicuously disclosed. Few if any human beings can read straight across a densely packed 20-inch line of type, with about 90 words per line, line after line, to understand what is trying to be conveyed. This is a perfect example of the belief that as long as a disclosure is made, no matter how or where placed, that that is sufficient.

Example 3:

A disclaimer can’t be used to change the meaning of the original claim.

“It shall be an unfair or deceptive act or practice for a seller to use a disclosure set apart from the primary claim to which it refers, such as by use of an asterisked footnote, if such disclosure imparts a meaning that contradicts or materially alters the meaning of the term, statement or claim to which it refers.”

*MOUSE PRINT:

entire store 50%

You’re across the street from this store and you see that everything in the store is half price. But as you walk closer, you see the disclaimer that certain items are excluded. Did you lose anything other than a few seconds, no. But stores can’t try to lure you in with a false claim, even if the truth is made known in an asterisked disclosure. The sale claim should have been worded to be true on its face.

The bottom line is this: you are entitled to full and clear disclosure upfront in advertising. Don’t settle for less. And don’t give advertisers a free pass when they fail to do this.

• • •

September 15, 2014

Oh, Did We Forget to Say You Need a $50 Minimum Purchase?

Filed under: Electronics,Internet,Retail — Edgar (aka MrConsumer) @ 6:28 am

  In the last few weeks, Staples.com appears to have begun misleading customers about the price of some of its back to school sale items. Here is one of their recent advertisements:

Staples ad

When one clicks on that thumbdrive, for example, it takes you to a page like this:

lexar thumbdrive

Wow, you think it must be your lucky day, it is actually only $7 instead of $8. You are promised “instant savings” of $12.99, so you add it to your cart.

Upon going to your cart to check out, you get a nasty surprise.

*MOUSE PRINT:

Staples cart

The price is almost three times what you expected. Why? It says you didn’t make the required $50 purchase. What $50 purchase? If you look carefully at the middle graphic above, you will see a box that states that the thumbdrive “special buy” only applies with a minimum $50 purchase. Where did that come from? It wasn’t in the original ad!

Similarly, the other paper items in the ad above are more expensive without the $50 purchase, as are a few others on its website.

That’s not all. Let’s say you had not seen the ad, but had just gone to Staples.com looking for a 16-gig Lexar thumbdrive. You search for it and find this product listing in the search results.

*MOUSE PRINT:

Lexar 3

You were even smart enough to click the “see details” link, and you’re told the item is $7 and there is no mention of any required $50 minimum purchase. So, you add it to your cart. And just as above, when you go to checkout, you will see that you are being charged $19.99, the full regular price, because you did not make a $50 minimum purchase that you were never told was required.

In our view, this practice is reprehensible, if done deliberately. We can only hope it was a careless oversight on Staples’ part.

Under Massachusetts law, sellers are responsible for clearly and conspicuously disclosing all material facts in their advertising the omission of which might mislead a consumer. “A disclosure is not clear and conspicuous if any material terms of the offer that affect the price of an item, impose conditions on acceptance of the offer, … are not disclosed in the advertisement itself, but require reference to an outside source..”.

It is certainly misleading in our view to fail to disclose upfront that a particular sale price only applies when a $50 minimum purchase of other goods is required.

We asked the company to explain why they created these misleading price representations and whether they would automatically refund money to customers who bought these items and unknowingly paid full price during the sale period.

Staples’ senior PR manager responded late yesterday:

“Staples works hard to ensure our customers have the information they need to make informed purchasing decisions. In the examples provided, the terms and conditions of our Less List offers were clearly displayed prior to the customer checking out.”

Staples indicated that it might update its comment today, so please check back here later today.

• • •

September 8, 2014

Honestly, Could They Make the Disclosure Any Smaller?

Filed under: Health,Internet,Retail — Edgar (aka MrConsumer) @ 5:36 am

 While watching TV the other night, MrConsumer saw a tiny disclosure at the end of a baby products commercial for The Honest Company. (That’s really their name.) It went by so quickly, and was so small and faint in color, it was very hard to read:

The Honest Company
Click ad to see commercial.

Here is what it says about their “free” trial.

*MOUSE PRINT:

*Only $5.95 for shipping and handling. You’ll be automatically enrolled in our monthly service. Cancel the service at anytime.

Their website gives more details.

*MOUSE PRINT:

*With your Discovery Kit, you’ll be enrolled as a member of The Honest Company. You have 7 days following receipt of your Discovery Kit to cancel your membership at any time, for any reason. We will remind you about your membership options. If you choose to not cancel, you’ll be charged $79.95 /month for the Diapers & Wipes Bundle, $35.95/month for the Essentials Bundle, or $39.95/month for your Health & Wellness Bundle (plus shipping & handling).

Basically, this company founded by actress Jessica Alba offers (among other things) a book-of-the-month-type service for baby supplies, shampoo and detergent, and vitamins. You will keep getting automatic deliveries every month, starting after seven days following receipt of your samples unless you cancel.

While their website makes clear that this is a monthly plan with monthly charges for these packages of goods, why do their TV commercials hide that fact particularly when they call themselves The Honest Company? Their television ad also seems to run counter to what their statement of principles claims:

Create a Culture of Honesty

We are serious about honesty – both as it applies to the integrity of our relationships and in being true to you. And, it’s a standard we encourage throughout our staff, stakeholders, and customers. But, that’s just the beginning. In all we do, we want to make each day a little more fulfilling, inspired, and downright better.

Mouse Print* asked the company twice to comment about their use of such a small disclosure and on this seeming contradiction of their corporate philosophy. We are still waiting for their response and will post it here… honestly.

• • •

September 1, 2014

Some Online Stores Make Shoppers Buy Vitamins Blindly

Filed under: Food/Groceries,Health,Retail — Edgar (aka MrConsumer) @ 5:57 am

 A few months ago we stressed the importance of reading the ingredients statement on vitamin bottles because some store brands that claim to be comparable to the name brand simply are not. (See our CVS vs. Bausch + Lomb story.)

While it is relatively easy to compare bottle labels in a store aisle, the same cannot always be said about shopping online for vitamins. A review by Consumer World and Mouse Print* of major online retailers that sell vitamins reveals that several of the biggest companies publish little or no information about the ingredients in their products.

EquateFor example, Walmart sells the Equate brand as their store brand. If you were interested in getting their version of Centrum Silver because it is $10 a bottle cheaper, you would find it impossible to know in advance whether it really was equivalent because Walmart does not publish the ingredients listing. All Walmart says on their website with respect to ingredients for Equate Multivitamin Active Adult 50+ is (*MOUSE PRINT:) “This multivitamin supplement contains vitamin D, K, B12, as well as calcium.” The real Centrum Silver has about 30 vitamins and minerals. While the Equate version may or may not have all the vitamins in the same amounts as Centrum Silver, you would have to make a trip to store to find out.

And even if they published the so-called “Supplement Facts” for Equate — the box on the back of vitamin bottles showing each vitamin, the amount in each pill, and what percentage of the daily requirement was provided — you couldn’t compare it to the list for Centrum Silver because Walmart’s website doesn’t disclose that brand’s contents either.

Walmart is not alone in failing to publish these ingredients lists. A brief review of Target’s website and that of Rite Aid reveals they are missing complete vitamin ingredients labels in many cases too.

For example, Target’s Up & Up store brand of Gummy Prenatal Multivitamins claims to be comparable to Vitafusion Prenatal. All it says in the description is that it “Contains 800 mg of Folic Acid as well as 50 mg of DHA per serving.” Target’s website does not disclose the ingredients in the brand name either other than to say it contains folic acid and DHA. The real Vitafusion Prenatal product has these ingredients according to the company’s own website:

*MOUSE PRINT:

supplement facts

Some other vitamins on Target’s website, like the Up & Up version of Centrum Silver, seemingly lists all the ingredients, but only for three of the over 30 ingredients does it disclose how much of that particular vitamin or mineral is contained in each pill.

Moving onto the big three drug chains in the United States, while both CVS and Walgreens disclose all the “supplement facts” for their vitamins, Rite Aid does not. Their store brand of Centrum does not disclose even one of the vitamins in the bottle, but it does disclose all the inactive ingredients/fillers:

*MOUSE PRINT:

Microcrystalline Cellulose, Gelatin, Croscarmellose Sodium, Stearic Acid, Polyvinyl Alcohol, Titanium Dioxide, Polyethylene Glycol, Magnesium Stearate, Silicon Dioxide, FD&C Yellow 6 Lake.

For Centrum itself, Rite Aid’s website offers this helpful information:

*MOUSE PRINT:

Centrum

We asked Walmart, Target, and Rite Aid why they don’t always disclose the content of vitamins they sell online, and whether they would begin doing so to help shoppers know what they are buying and enable them to compare one product to another.

Walmart responded:

[paraphrasing] Suppliers did not always provide the ingredients to us, but our company is committed to getting complete ingredient information on the website. — Walmart.com spokesperson

Target responded (in disappointing, non-apologetic PR speak):

“At Target, we strive to comply with all applicable regulations. We continually evaluate and make enhancements to the product assortment and information provided on Target.com.” — Target spokesperson

Rite Aid responded:

“Improved product descriptions, including ingredient listing, is a section of our website that we have already identified as an area for improvement. We are currently in the process of developing additional solutions, which we expect to launch in the near future, that will provide more product details to our online shoppers, enhancing their shopping experience and allowing them to make informed purchases.” — Rite Aid spokesperson

The Food and Drug Administration does not require “supplement facts” disclosures on websites, saying, “The FDA does not generally specify how online sellers of dietary supplements should display information about dietary ingredients in their products on websites.”

When examples of online sites failing to make full disclosure of vitamin contents were shown to the FDA, their spokesperson indicated it would probably take an act of Congress to get the agency to require ingredients listings online.

Let’s hope that online companies will recognize the inexplicable disservice they are currently offering and that they all begin making full ingredient disclosures to shoppers voluntarily.

• • •
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