Top 5 FTC False Advertising Cases That Cost Brands Millions

Why they got sued by FTC and how to avoid it for your company

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I'm willing to BET that most of the small business ads on the internet are NOT compliant.

Sp today we'll look at some of the recent FTC(Federal Trade Commission) cases to learn what not to do, have some laughs and feel good because we didn’t get sued.

#1 Volkswagen Repaid More Than $9.5 Billion To Buyers Deceived by “Clean Diesel” Campaign

This settlement marked the end of the largest consumer compensation program in U.S. history.

Volkswagen and Porsche have repaid over $9.5 billion to customers since 2016, following FTC orders related to deceptive "clean diesel" advertising.

The FTC accused Volkswagen Group of America of misleading consumers through advertising that falsely promoted its "clean diesel" Volkswagens and Audis.

Volkswagen had secretly fitted these vehicles with software that made them appear to meet emissions standards during government tests while actually exceeding pollution limits by up to 4,000%.

Over 86% of the affected car owners chose to return their vehicles through a buyback or early lease termination rather than opting for a modification to comply with emissions rules.

To avoid similar issues:

  1. Transparent Advertising: Accurately represent a product's features and performance in marketing campaigns.

  2. Regulatory Compliance: Ensure vehicles meet emissions standards without using deceptive software.

#2 Google Pixel 4 Deceptive ads

In 2019 and 2020, Google and iHeartMedia were accused by the FTC of launching about 29,000 deceptive ads on radio. These ads, featuring radio personalities, falsely promoted Google's Pixel 4 smartphone, suggesting these people had used and enjoyed the phone. However, most had never even handled the Pixel 4.

Script excerpt:

“The only thing I love more than taking the perfect photo? Taking the perfect photo at night. With Google Pixel 4 both are a cinch.

It’s my favorite phone camera out there, especially in low light, thanks to Night Sight Mode.

I’ve been taking studio-like photos of everything . . . my son’s football game . . . a meteor shower . . . a rare spotted owl that landed in my backyard. “

The FTC and state authorities have settled the allegations, prohibiting Google and iHeartMedia from making similar false endorsements in the future. As part of the settlement, both companies had to pay a total of $9.4 million in penalties and take measures to ensure their compliance.

Key lessons here:

  1. Truthful Endorsements: Make sure any endorsements accurately reflect the experience of the individual giving them.

  2. Provide Real Products: Provide the actual product to endorsers so they can form genuine opinions.

#3 Replace your job by driving Uber

Uber Technologies, a ride-hailing company, agreed to pay $20 million to settle allegations from the FTC accused Uber of misleading potential drivers with exaggerated claims about their potential earnings and financing options under its Vehicle Solutions Program. This settlement will provide refunds to affected drivers.

Uber claimed that drivers could earn high incomes (e.g., $90,000 per year in New York) and access favorable car financing. However, fewer than 10% of drivers actually earned those amounts, and financing costs were much higher than advertised.

For example, from at least May 2014 until August 2015, Uber published a statement from the CEO on its website titled, “An Uber Impact: 20,000 Jobs Created On The Uber Platform Every Month.” In this post, Uber claimed that its UberX drivers’ “median income is more than $90,000/year/driver in New York and more than $74,000/year/driver in San Francisco.” 

In August 2015, Uber revised the CEO’s entry on its website so that the post reads: “The potential income a driver on uberX can make in a year is more than $90,000 in New York and more than $74,000 in San Francisco.”

Key lessons here:

  1. Accurate Earnings Claims: Ensure any income claims reflect what most workers realistically earn.

  2. Transparent Financing Terms: Clearly outline the costs and conditions of financing programs, ensuring that claims are accurate.

#4 - $21 Million Yogurt Law Suit

In 2011 FTC finalized a settlement with The Dannon Company, Inc., for exaggerating the health benefits of its Activia yogurt and DanActive dairy drink.

Dannon claimed in that DanActive helps prevent colds and flu, and that one daily serving of Activia relieves temporary irregularity and helps with “slow intestinal transit time.”

The settlement prohibits Dannon from claiming that Activia relieves temporary irregularity unless they clearly state that three servings per day are required to achieve this benefit. Alternatively, Dannon must have scientific evidence proving fewer servings are effective. 

They also can't claim that DanActive or any other probiotic products prevent colds or the flu unless this is approved by the FDA.

Dannon has agreed to pay the states $21 million to resolve these investigations.

To avoid similar issues:

  1. Evidence-Based Health Claims: Ensure that any health claims are backed by reliable scientific research.

  2. Clear Labeling: Make sure any necessary conditions for achieving benefits are clearly disclosed.

#5 “27% Larger. I promise”

ExtenZe, an herbal supplement claiming to promote "natural male enhancement," settled a class-action lawsuit for $6 million in 2010 over false advertising. The lawsuit alleged that Biotab Nutraceuticals, Inc., the manufacturer, falsely claimed that ExtenZe could increase penis size without credible scientific evidence to support this.

Earlier, in 2006, Biotab Nutraceuticals paid $300,000 to Orange County, California, for deceptive marketing and false advertising after the company could not substantiate claims that its pills enlarged the penis by 27%. Customers who reported adverse effects to the Better Business Bureau prompted further investigation by the district attorney.

Key lessons for businesses to avoid similar issues include:

  1. Accurate Claims: Ensure health or performance claims are backed by credible scientific research.

  2. Regulatory Compliance: Adhere to advertising standards to avoid penalties and reputational damage.

  3. Consumer Safety: Respond promptly to consumer complaints and adjust practices to maintain trust.

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