Electronic Retailer - June 2011 - (Page 51)

Marketers who let themselves be lulled into a false sense of security do so at their own peril because NAD is more than willing to refer matters to the FTC, which does have the authority to make marketers pay. the advertiser to promise to correct its advertising. If the advertiser does change its evil ways, then that’s usually the end of it. But if an advertiser refuses to respond to a challenge filed with NAD or continues to make claims that NAD has found to be deceptive, NAD will refer the matter to the appropriate government agency – usually the Federal Trade Commission. The FTC doesn’t always take action based on NAD referrals, but it always takes a close look at those referrals. Often, the FTC does conduct a formal investigation of the advertiser. Sometimes that investigation results in FTC action – as it did here. Our story begins in February 2008, when NAD recommended that Halo Technologies, Inc., the marketer of an ultraviolet vacuum cleaner, qualify its germ-killing claims. NAD also recommended that Halo discontinue certain superiority claims the company used in its advertising. The NAD investigation had been initiated following a complaint by one of Halo’s competitors. NAD recommended that Halo: • discontinue claims that involved traditional vacuum cleaners because of the absence of comparative testing. • qualify any “germ-killing” claims by explaining that ultraviolet light can kill bacteria and allergens after a certain amount of exposure, but it said that Halo should stop implying that the vacuum instantly kills all germs and dust mites embedded in the carpet, reduces or eliminates the incidence of allergies, or provides any health benefit. In May 2008, NAD issued a press release noting that Halo had made some limited changes to its advertising, but that those changes fell far short of what was necessary to correct the claims that NAD had criticized. NAD said that because Halo’s changes were “grossly inadequate and do not constitute a bona fide attempt to comply with NAD’s recommendations,” NAD was referring the matter to the appropriate government agency, in this case the FTC, for possible law enforcement action. In July 2008, Oreck purchased the Halo trademark and certain other assets from Halo Technologies. Oreck’s subsequent advertising for its Halo vacuum continued to make germ-killing claims. Shortly thereafter, a different competitor brought Oreck’s advertising to NAD’s attention. When NAD asked Oreck to respond to the competitor’s allegations, it declined to do so. Oreck told NAD that it had revised its advertising for the Halo with NAD’s recommendations in mind, and had commissioned additional testing (some by independent third parties) to support its claims. According to NAD, Oreck also told it that the company was “presently cooperating with FTC to address its advertising,” and that was why Oreck had chosen not to respond to the second competitor’s NAD challenge. Because Oreck declined to participate in the new NAD proceeding, NAD sent the matter to the FTC once again. It appears from Oreck’s response to NAD that it was already in the soup with the FTC. So the second NAD referral probably didn’t make things much worse. But it’s likely that the first referral back in 2008 did get the agency’s attention. When Oreck bought the Halo, it probably also bought an FTC investigation. The fact that the FTC ended up bringing a case against Oreck indicates that it had some problems with Oreck’s post-acquisition advertising. Oreck may have, in fact, done additional testing and cut back on the claims for the Halo. But it’s obvious that the FTC was not satisfied. There are two lessons to be learned from the Oreck saga. The first one is an old lesson, and one that any advertiser should have learned already: A company must have scientific evidence that matches up very closely with the advertising claims it is making, especially if those claims are health-related. The second lesson is that companies must take NAD decisions seriously. It’s one thing for a company to tell NAD that it will modify advertising in accordance with an NAD decision. It’s another to take a hard look at the claims and make the kind of significant revisions that may be required. Simply slapping on a fine-print disclosure or two may not be enough. It is easy for marketers to believe that the NAD process can be ignored because the body does not have the power to impose monetary penalties. However, marketers who let themselves be lulled into a false sense of security do so at their own peril because NAD is more than willing to refer matters to the FTC, which does have the authority to make marketers pay. In this case, Oreck eventually paid $750,000 for ignoring the NAD process and not cleaning up the Halo vacuum’s advertising before it was too late. Jeffrey D. Knowles and Gary D. Hailey are partners at Venable LLP’s advertising, marketing and new media group. Knowles is chair of the group. Contact Knowles at (202) 344-4860 or at jdknowles@venable.com. Contact Hailey at (202) 344-4997 or at gdhailey@venable.com. 51 June 2011 | electronicRETAILER

Table of Contents for the Digital Edition of Electronic Retailer - June 2011

Electronic Retailer - June 2011
Contents
Calendar of Events
Your Association, Your Bottom Line
Industry Reports
FTC Forum
eMarketer Research
IMS Retail Rankings
Jordan Whitney’s Top Categories
Lockard & Wechsler’s Clearance & Price Index
Ask the Expert
The Evolution of a Global Business
UK Home Shopping Finds Its Niche
Guest Viewpoint
Brendan Condon Wants it All
Managing an Order from Start to Finish
Radio
Legal
Support Services
Fulfillment
Member Spotlight
Advertiser Spotlight
Bulletin Board
Advertiser Index
Classifieds
Rick Petry

Electronic Retailer - June 2011

Electronic Retailer - June 2011 - Electronic Retailer - June 2011 (Page Cover1)
Electronic Retailer - June 2011 - Electronic Retailer - June 2011 (Page Cover2)
Electronic Retailer - June 2011 - Electronic Retailer - June 2011 (Page 3)
Electronic Retailer - June 2011 - Contents (Page 4)
Electronic Retailer - June 2011 - Contents (Page 5)
Electronic Retailer - June 2011 - Contents (Page 6)
Electronic Retailer - June 2011 - Calendar of Events (Page 7)
Electronic Retailer - June 2011 - Your Association, Your Bottom Line (Page 8)
Electronic Retailer - June 2011 - Your Association, Your Bottom Line (Page 9)
Electronic Retailer - June 2011 - Industry Reports (Page 10)
Electronic Retailer - June 2011 - Industry Reports (Page 11)
Electronic Retailer - June 2011 - Industry Reports (Page 12)
Electronic Retailer - June 2011 - Industry Reports (Page 13)
Electronic Retailer - June 2011 - FTC Forum (Page 14)
Electronic Retailer - June 2011 - FTC Forum (Page 15)
Electronic Retailer - June 2011 - eMarketer Research (Page 16)
Electronic Retailer - June 2011 - eMarketer Research (Page 17)
Electronic Retailer - June 2011 - IMS Retail Rankings (Page 18)
Electronic Retailer - June 2011 - IMS Retail Rankings (Page 19)
Electronic Retailer - June 2011 - Jordan Whitney’s Top Categories (Page 20)
Electronic Retailer - June 2011 - Jordan Whitney’s Top Categories (Page 21)
Electronic Retailer - June 2011 - Lockard & Wechsler’s Clearance & Price Index (Page 22)
Electronic Retailer - June 2011 - Lockard & Wechsler’s Clearance & Price Index (Page 23)
Electronic Retailer - June 2011 - Ask the Expert (Page 24)
Electronic Retailer - June 2011 - Ask the Expert (Page 25)
Electronic Retailer - June 2011 - The Evolution of a Global Business (Page 26)
Electronic Retailer - June 2011 - The Evolution of a Global Business (Page 27)
Electronic Retailer - June 2011 - The Evolution of a Global Business (Page 28)
Electronic Retailer - June 2011 - The Evolution of a Global Business (Page 29)
Electronic Retailer - June 2011 - The Evolution of a Global Business (Page 30)
Electronic Retailer - June 2011 - The Evolution of a Global Business (Page 31)
Electronic Retailer - June 2011 - UK Home Shopping Finds Its Niche (Page 32)
Electronic Retailer - June 2011 - UK Home Shopping Finds Its Niche (Page 33)
Electronic Retailer - June 2011 - UK Home Shopping Finds Its Niche (Page 34)
Electronic Retailer - June 2011 - UK Home Shopping Finds Its Niche (Page 35)
Electronic Retailer - June 2011 - Guest Viewpoint (Page 36)
Electronic Retailer - June 2011 - Guest Viewpoint (Page 37)
Electronic Retailer - June 2011 - Guest Viewpoint (Page 38)
Electronic Retailer - June 2011 - Guest Viewpoint (Page 39)
Electronic Retailer - June 2011 - Brendan Condon Wants it All (Page 40)
Electronic Retailer - June 2011 - Brendan Condon Wants it All (Page 41)
Electronic Retailer - June 2011 - Brendan Condon Wants it All (Page 42)
Electronic Retailer - June 2011 - Brendan Condon Wants it All (Page 43)
Electronic Retailer - June 2011 - Managing an Order from Start to Finish (Page 44)
Electronic Retailer - June 2011 - Managing an Order from Start to Finish (Page 45)
Electronic Retailer - June 2011 - Managing an Order from Start to Finish (Page 46)
Electronic Retailer - June 2011 - Managing an Order from Start to Finish (Page 47)
Electronic Retailer - June 2011 - Managing an Order from Start to Finish (Page 48)
Electronic Retailer - June 2011 - Radio (Page 49)
Electronic Retailer - June 2011 - Legal (Page 50)
Electronic Retailer - June 2011 - Legal (Page 51)
Electronic Retailer - June 2011 - Support Services (Page 52)
Electronic Retailer - June 2011 - Support Services (Page 53)
Electronic Retailer - June 2011 - Fulfillment (Page 54)
Electronic Retailer - June 2011 - Fulfillment (Page 55)
Electronic Retailer - June 2011 - Member Spotlight (Page 56)
Electronic Retailer - June 2011 - Member Spotlight (Page 57)
Electronic Retailer - June 2011 - Advertiser Spotlight (Page 58)
Electronic Retailer - June 2011 - Advertiser Index (Page 59)
Electronic Retailer - June 2011 - Classifieds (Page 60)
Electronic Retailer - June 2011 - Classifieds (Page 61)
Electronic Retailer - June 2011 - Rick Petry (Page 62)
Electronic Retailer - June 2011 - Rick Petry (Page Cover3)
Electronic Retailer - June 2011 - Rick Petry (Page Cover4)
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