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November 2nd, 2015
NAD Scotts Decision: Marketers - Not Customers - Are Responsible for Online Review Compliance
Encouraging customers to write product reviews is a common and effective marketing tactic. But the disclosure requirements are significant. And a mistake can rankle competitors and lead to scrutiny by regulators or self-regulatory bodies such as NAD. That's what recently happened to The Scotts Company ("Scotts") when United Industries Corporation ("United Industries"), the maker of the Spectracide line of household insect and weed control products, challenged a sweepstakes promotion for the company's competing Ortho Home Defense, Ortho Bug-B-Gon, and Ortho Weed-B-Gon products. Here's what happened.
United Industries argued Scotts used a sweepstakes incentive to inflate its social media presence and misled consumers by encouraging others to post product reviews without disclosing that an incentive was offered. Scotts had emailed its newsletter subscribers offering them a chance to win a $25 Visa gift card as an incentive to review Scotts' products.The offer led to hundreds of favorable Ortho product reviews on the Scotts website and third party websites, none of which disclosed that they were written as part of a sweepstakes entry. United Industries argued this was a material fact Scotts needed to disclose to comply with the FTC's Guides on Endorsements and Testimonials. United Industries said Scotts should have disclosed the reviews were submitted as a "Sweepstakes Entry Sponsored by Scotts," so that consumers did not believe that reviews posted on third party retailer websites (such as Home Depot, Lowe's and Walmart) reflected those retailers' endorsements of Ortho products.
Not my job? In response, Scotts noted that the Official Rules for the sweepstakes promotion required consumers to disclose that their reviews were submitted as part of a "Sweepstakes entry." However, when Scotts learned that consumers were not including the proper disclosures, the company took the following remedial steps, which the NAD found to be "sufficient and proper" in the circumstances:
1. Scotts reiterated the disclosure requirement in any sweepstakes call-to-action;
2. Scotts directed its customer-review aggregator to apply a "Sweepstakes Entry" tag to each review; and
3. Scotts disclosed on its website where customer reviews were displayed that: "Reviews drafted on or after April 20, 2015 may have been submitted as part of an ongoing sweepstakes."
Voluntary steps. The NAD noted in its decision that it appreciated Scotts' remedial efforts and indicated that it expects Scotts to take similar steps to ensure that consumer reviews clearly and conspicuously disclose the material connection between the endorser and the advertiser in future advertising. The NAD also noted that it is an advertiser's obligation to ensure its sweepstakes rules are followed and to ensure that there is a sufficient and timely disclosure when reviews are incentivized. Here, simply including the disclosure requirement in a link containing the Official Rules was not effective.
Reviewing the reviews. The NAD restated its concern with the reliability of online product reviews - in particular the fact that some third party vendor services used by advertisers to manage consumer reviews do not automatically tag incentivized reviews, and that the practice of disseminating identical reviews across multiple third party retailer websites only compounds this problem. The NAD indicated it would continue to address these issues in future cases.
The take-away. This case marks one of the rare times that a sweepstakes campaign has resulted in an NAD action. However, as companies have begun to use promotions more frequently as a way of interacting with their customers through social media and getting consumer endorsements, these types of promotions will likely necessitate increased oversight and careful thought to avoid running afoul of competitors and regulators alike. For another recent example of enforcement in this area, see our prior alert concerning the Federal Trade Commission's action involving Cole Haan's Pinterest sweepstakes where the advertiser failed to require consumers to disclose that their Pins were incentivized.
If you have questions about the necessary disclosures in sweepstakes promotions, competitor challenges before the NAD, or other advertising compliance questions, contact, Jeffrey A. Greenbaum at (212) 826 5525 or firstname.lastname@example.org, Terri Seligman at (212) 826 5580 or email@example.com, Rayna S. Lopyan at (212) 705 4842 or firstname.lastname@example.org, or any other member of the Frankfurt Kurnit Advertising Group.
Other Advertising Law Alerts
What the Advertising Industry Can Learn from Kim Kardashian’s Settlement with the SEC
On October 3, 2022, the Securities and Exchange Commission (SEC) announced that it entered into a $1.26 million settlement with Kim Kardashian over her social media promotion of the EMAX token without disclosing payment she received from token issuer, EthereumMax. The matter provides important lessons for advertisers. Read more.
October 10 2022
Get Ready for California’s New “Automatic Renewal” Rules
California recently amended its Automatic Purchase Renewals law. The amended statute - effective July 1st -- require marketers to provide consumers of automatic renewal or continuous service offers with more information and easier ways to terminate. Read more.
June 22 2018
“Made in the U.S.A.” Claims Continue to be Scrutinized
In 2016, California amended Section 17533.7 of the California Business and Professions Code ("Section 17533"), liberalizing the standard for selling products labeled "Made in U.S.A" to California consumers. Read more.
June 4 2018