Advertising Law

Red Bull’s $13M False Ad Deal Crashes Site

Red Bull may claim to give you wings, but a false advertising settlement with the company apparently couldn’t stop its servers from crashing.

After Red Bull reached a $13 million deal to settle claims that the company falsely advertised its energy drink as capable of improving performance, concentration, and reaction time, the consumer response crashed the compensation Web site.

The plaintiff in the putative class action alleged that Red Bull used terms such as “wings” and “boost” in its marketing to deceive consumers into believing the drinks provided a physical lift or enhancement.

“Even though there is a lack of genuine scientific support for a claim that Red Bull branded energy drinks provide any more benefit to a consumer than a cup of coffee, the Red Bull defendants persistently and pervasively market their product as a superior source of ‘energy’ worthy of a premium price over a cup of coffee or other sources of caffeine,” according to the complaint filed by Benjamin Careathers in a New York federal court, which was consolidated with a similar case filed in California.

In September 2014, the court approved a settlement in which Red Bull agreed to create a $13 million settlement fund to provide persons who purchased at least one Red Bull beverage dating back to 2002 with either $10 in cash or two Red Bull products valued at approximately $15. Class counsel would separately be paid $4.75 million and Red Bull promised to change its ads.

“Beyond monetary relief, although Red Bull denies wrongdoing and believes that its marketing materials and advertising have always been truthful and accurate, it has voluntarily withdrawn or revised the marketing claims challenged by plaintiffs, and will confirm that all future claims about the functional benefits from consuming its products will be medically and/or scientifically supported,” the motion in support of preliminary approval of the settlement stated.

Various news sites reported the settlement which did not require claimants to provide a proof of purchase. Consumers responded in such droves that the more than 4 million visitors crashed the compensation site. As a result, the number of claims will likely decrease the payment amounts, as the settlement provided for pro rata shares based on the number and nature of valid claims.

To read the plaintiffs’ motion in support of preliminary approval for the settlement in Careathers v. Red Bull, click here.

To read the court’s order granting preliminary approval of the deal, click here.

Why it matters: Since consumers are unlikely to save their receipts from the purchase of energy drinks, the settlement did not require proof of purchase. When coupled with the generous 12-year time period in which consumers could have purchased one of the energy drinks at issue, the “no proof” element opens the door for a large number of potential claimants.

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Say Cheese . . . And Hello To Marketing

A privacy controversy is brewing after recent news reports revealed that digital marketing firms are mining photo-sharing sites for data.

According to a story published in The Wall Street Journal, marketing companies scan images posted to social networking sites such as Instagram, Flickr and Pinterest to collect information for large advertisers. The companies use software that scans the images in bulk to reveal labels, logos, facial expressions and scenery and then passes along the information to advertisers who can then send targeted ads, conduct market research, or gauge the popularity of trends.

Can the photos really provide such rich data? According to the marketing companies, yes. A brand may search for a competitor’s logo to try to steal a customer. Alternatively, when companies find their own logos in photos, they can learn how and where their products are used (e.g., on the beach or out to dinner), they can gauge the interests a customer might have, and they can decide whether there are any relevant correlations. By categorizing findings, companies can more narrowly tailor their marketing to consumers who exhibit certain interests and product choices. And storing the images over an extended period of time can allow companies to learn whether their products are increasing or decreasing in favor with consumers.

Privacy watchdogs warned that the gray areas of privacy laws may make the collection and use of such data “ripe for commercial exploitation and predatory marketing. Users should assume that their publicly available photographs are being reviewed by marketing companies,” said Jules Polonetsky, director of the Future of Privacy Forum.

The groups argue that social media sites do not adequately communicate to users that the images they post can be scanned or downloaded for such purposes. In addition, consumers do not realize that taking a selfie with a Starbucks cup could yield an online profile or targeted marketing. “Just because you happen to be in a certain place or captured an image, you might not understand that could be used to build a profile of you online,” Joni Lupovitz, vice president at Common Sense Media, told The Wall Street Journal.

Why it matters: While marketers have already been mining tweets and social posts for keywords and trends, images create an even greater opportunity for marketers to obtain consumer information. Although no statute expressly prohibits companies from analyzing publicly available photos in bulk, the Federal Trade Commission (FTC) could possibly argue that sharing sites engage in deceptive and unfair trade practices when they fail to disclose how their information is shared with third parties. Perhaps the greater risk is the public relations fallout that can ensue if consumers find this sort of behavior “creepy.” Not too long ago Instagram suffered a public relations nightmare when it released new terms of service that would have permitted it to license photos posted on its site to third parties, including advertisers, without obtaining permission from users or paying any fees. After negative feedback and the threat that users would leave the site, it deleted the provision from its terms, proving that consumers do have some input into how their photos are used.

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NARB: Aggregated Consumer Reviews Do Not Support Vacuum Claims

Agreeing with the National Advertising Division (NAD), a five-member panel of the National Advertising Review Board (NARB), the appellate unit of the advertising industry’s self-regulatory system, advised Euro-Pro Operating LLC to discontinue claims that its Shark-brand vacuum cleaners are “America’s Most Recommended Vacuum” and “America’s Most Recommended Vacuum Brand.”

Competitor Dyson had challenged the claims, which appeared in television and Web site advertising. In an earlier decision, the NAD said the data relied upon by Euro-Pro – essentially an aggregation of online consumer reviews – was not sufficiently reliable for such broad claims and recommended that the claims be discontinued. Euro- Pro appealed to the NARB on the grounds that the claims included a disclaimer that they were “Based on percentage of consumer recommendations for upright vacuums on major national retailer websites through August 2013, U.S. only.”

Euro-Pro based the claim on a quarterly survey of the Web sites of online retailers (Amazon, Bed Bath & Beyond, Best Buy, Costco, Home Depot, Kohl’s, Lowes’, Sam’s Club, Sears/Kmart, Target, and Walmart) that sell upright vacuum cleaners and also solicit customer reviews. Reviews on all but three of these sites (Amazon, Costco and Target) included a question asking whether the reviewer would recommend the product. After collecting and amalgamating the data – specifically the answers given by consumers regarding whether they would recommend the product under review – Euro-Pro then tallied and compared the percentage of recommendations for various brands.

But the panel agreed with the NAD that the analysis was not based on data from a representative sample of American vacuum cleaner consumers. The evidence showed that “the vast majority of vacuum cleaners – at least 84% – are purchased in brick and mortar stores” and the online reviews primarily reflected consumers who purchased vacuum cleaners online.

The sample was even further flawed because the three significant online retailers representing nearly 50% of all reviews considered by Euro-Pro – Amazon, Target, and Costco – were not included in Euro-Pro’s analysis of consumer recommendations, since those Web sites did not ask consumers whether they recommended the product being reviewed.

The panel also found that the advertiser’s analysis was not sufficiently reliable to support the claim since the questions were not the same on each of the sites, and did not provide consumers with a “don’t know” option, the questions all had “yes” as the first answer (i.e., the “yes” and “no” choices were not rotated), which increased the likelihood of bias, and the different sites had inconsistent policies as to how long consumer reviews were displayed, which raised the possibility that outdated models were reviewed.

To read the NARB’s press release about the decision, click here.

Why it matters:While Euro-Pro failed to substantiate the claims at issue, the NARB highlighted the fact that “traditional consumer surveys are not necessarily the only way to support ‘most recommended’ claims.” With more consumers turning to online reviews, the panel noted that its “. . . decision is not intended to preclude the possibility that web-based consumer review data can be aggregated across websites in support of advertising claims.” In its response statement, Euro-Pro emphasized that the “prevalence of online reviews has changed the way consumers share and process information about products and services,” adding that the company intends to “develop an appropriate alternative way to communicate this important information to vacuum consumers.”

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NFL Wins Publicity Rights Dispute With Retired Players

Former professional football players who opted out of a settlement with the National Football League (NFL) over claims of publicity rights violations had their new lawsuit thrown out of a Minnesota federal court.

The case originated from a class action brought by former professional football players who challenged the NFL’s use of video footage for NFL Films productions. Most of the original plaintiffs resolved their claims with a $42 million settlement deal, which established a fund for the benefit of the former players and appointed a licensing agency to assist those players in exploiting their publicity rights.

Three players – John Frederick Dryer, Elvin Lamont Bethea, and Edward Alvin White – opted out of the earlier settlement and filed their own suit alleging, among other things, that their publicity rights were violated. They argued that the videos – footage of plaintiffs playing in actual football games – were meant to promote the NFL brand and as commercial speech were entitled to minimal First Amendment protection.

But U.S. District Court Judge Paul A. Magnuson disagreed. The films “are essentially compilations of clips of game footage into theme-based programs describing a football game or series of games and the players on the field,” he explained. That the productions generated substantial goodwill for the NFL is not itself dispositive of whether the productions are advertising, the court went on to explain.

In fact, the court found the “productions themselves are not advertising,” as television networks paid the NFL for the right to air those productions and other advertisers had to pay to have their ads inserted into the production broadcasts.

Moreover, the court found that the films tell the story of a football game, or a football team, and in a sense “a history lesson of NFL football.” “The only way for NFL Films to tell such stories is by showing footage of the game – the plays, the players, the coaches, the referees, and even the fans. The NFL is capitalizing not on the likenesses of individual players but on the drama of the game itself, something that the NFL is certainly entitled to do.”

“While the NFL certainly reaps monetary benefits from the sale and broadcast of these productions, the use of any individual player’s likeness – the productions’ display of footage of plays involving an individual player – is not for commercial advantage but because the game cannot be described visually any other way,” the court said.

As noncommercial speech, the films are entitled to First Amendment protections that trump the plaintiffs’ publicity rights, the court concluded. In addition to finding that the footage satisfied an exception for newsworthy events or matters of public interest, the court found that the plaintiffs explicitly or impliedly consented to the NFL’s use of game footage by participating in interviews with the film crew.

To read the decision in Dryer v. NFL, click here.

Why it matters: In approving the November 2013 settlement, the judge indicated that the deal was fair and reasonable in large part because the chance the lawsuit would succeed on the merits was “slim at best.” The decision of these three plaintiffs to opt out and take their chances on a separate lawsuit proved unwise, as the court resoundingly rejected their publicity, copyright, and Lanham Act claims, in large part because the productions at issue were not commercial speech.

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