Hunton Retail Law Resource

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

FTC Crack Down on “American Made” Marketing Claims Continues in Settlement with Bollman Hat Company

The FTC announced a settlement in the third case in the last 12 months involving deceptive “Made in USA” claims. Here, the FTC alleged that the Bollman Hat Company and its subsidiary deceived consumers with marketing campaign slogans of “Made In USA,” “American Made Matters,” and “Choose American” for its hats and third-party products, despite more than 70 percent of their hat styles being wholly imported finished products. The FTC also alleged that Bollman launched an “American Made Matters” seal campaign in 2010 that misled consumers in which and how many products Bollman and the companies that leased the seal were actually made in America.

Under the proposed settlement, Bollman and its subsidiaries are prohibited from making unqualified U.S.-origin claims unless they can show the products final assembly or processing—and all significant processing—takes place in the United States, and that virtually all components are sourced in the United States. Furthermore, “qualified” Made in USA claims must have a clear and conspicuous disclosure about their foreign parts, ingredients and/or processing.

NAD Refers StubHub to FTC over Failure to Clearly Disclose Additional Taxes and Fees to Consumers

Following the NAD’s recommendations to more clearly disclose additional taxes and fees consumers see on StubHub’s website, and StubHub’s decision not to comply, the NAD referred pricing claims to the FTC for possible enforcement. In its decision, the NAD noted that “the initial advertising interaction between a consumer and an advertiser should be truthful as this initial contact affects consumer behavior and determines whether the consumer will choose to learn more about the product and ultimately make a purchase.”

StubHub contended that all major online ticket vendors have the same or similar fee-disclosure practices, but the NAD responded that “industry-wide practice alone will not satisfy the requirement for reliable consumer perception evidence as to what a reasonable consumer understands.”

ERSP Targets Misleading Advertising Tied to Dietary, Weight-Loss Supplement

The Electronic Retailing Self-Regulation Program (“ERSP”) targeted Mayfair Industries, Inc.’s advertising of its dietary supplement, Garcinia Cambogia Allure. After an investigation, ERSP found that several claims such as “Start losing fat now!” and “Helps stop fat production” were not supported by the evidence Mayfair submitted.

Despite voluntary changes the marketer made during the course of the investigation, ERSP ultimately determined that those changes were insufficient and the claims at issue should be modified or discontinued. Mayfair stated that while it provided competent and reliable scientific evidence to substantiate the “May Support Healthy Weight Loss” claim, it has elected to no longer sell Garcinia Cambogia Allure or any HCA weight-loss supplement.

ERSP Upholds Portions of Stain Away’s Marketing Claims for Its Power Swabs Teeth Whitening System

Following an investigation of the marketing claims around Stain Away’s Power Swabs Teeth Whitening System, ERSP determined that the marketer’s whitening claims are supported by clinical studies, but found other claims surrounding the product’s reduced sensitivity and cost savings should be modified or discontinued. Marketing claims ERSP took issue with included: (1) “Clinically proven to reduce sensitivity while whitening”; (2) “Most advanced teeth whitening system”; (3) “Unlike those normal whitening strips and trays you won’t be screaming in pain”; and (4) “The Power Swabs literally saved my pocketbook $7,500.00 when preparing to replace my 25 year old four (front-teeth) Porcelain Veneers.” In response, Stain Away committed to ensuring that ERSP’s recommendations are taken into account in future advertising.

Suit Challenging KFC’s Ban on Franchisees’ Religious Claims about Meat Dismissed

On January 23, 2018, an Illinois federal judge granted KFC’s motion to dismiss a suit brought by a franchisee challenging KFC’s policy that franchises cannot make religious claims about their meat. Afzal Lokhandwala, who owns multiple KFC franchises, alleged that he relies on his ability to offer halal-certified chicken at his KFC locations, which are located in predominantly Muslim communities in Chicago.

The district court dismissed Lokhandwala’s claims, holding that there was an enforceable franchise contract in place that gave KFC corporate the power to control franchisees’ advertising and promotional material. The court thus recognized a 2009 policy that prohibited franchise restaurants from making religious claims about KFC products. KFC explained that it did not allow religious claims in franchisee advertising because “there are different interpretations of these terms within the same religious faith” and “KFC cannot certify that in-restaurant preparation and cooking processes meet religious guidelines, for example restricting contact with non-halal or non-kosher food.”