What is the FTC "Up To"?
Seller Beware: Consumer Protection Insights for Industry
As reported back in March, the FTC settled with five replacement window sellers over claims that their windows would save consumers "up to" a specified amount of energy costs (e.g., "Up to 40% FUEL SAVINGS"). In order to make such claims in the future, the consent orders require the companies to substantiate that "all or almost all consumers are likely to receive the maximum represented savings or reduction." At the time, the FTC was careful to explain that the "all or almost all consumers" requirement was only fencing-in relief and should not be read as a statement as to how the FTC will interpret "up to" claims for other products and services. A follow-up blog post from the FTC was also careful to limit the application of the "all or almost all consumers" requirement to replacement windows.
With the release of the results of a consumer perception study on "up to" claims conducted as part of the replacement windows, the FTC has clarified its position on "up to" claims for other products and services: "[A]dvertisers using these claims should be able to substantiate that consumers are likely to achieve the maximum results promised under normal circumstances." What this statement doesn't clarify is whether the advertiser has to substantiate that "all or almost all" consumers are likely to achieve the maximum results as the prior consent orders require. An FTC Business Center blog post following the release of the report advises advertisers to carefully read the study to avoid deception.
Study participants were randomly shown three different ads with the following claims: (1) "PROVEN TO SAVE UP TO 47% ON YOUR HEATING AND COOLING BILLS"; (2) "PROVEN TO SAVE 47% ON YOUR HEATING AND COOLING BILLS"; and (3) claim #1 with the prominent footnote disclosure, "The average Bristol Windows owners saves about 25% on heating and cooling bills." The report shows that 28.1% of participants shown the ad with claim #1 said that the ad stated or implied that all or almost all users can expect to save about 47% on heating and cooling bills. The result was not statistically different for those shown ads with claim #2 or #3. Over one-quarter (26.3%) of those shown the ad with claim #1 said that in their personal opinion all or almost all users can expect to save about 47% on heating and cooling bills. The result was not statistically different for those shown ads with claim #2. However, statistically fewer (13%) of those viewing the ad with claim #3 said the same thing.
The FTC's Policy Statement on Deception states that to be deceptive the consumer's interpretation of the claim must be reasonable and that interpretation must be likely to mislead under the circumstances. A claim interpretation is reasonable even if only a significant minority of consumers share it. Thus, with 25%-30% of the study participants understanding the "up to" claim for the windows to mean that all or almost all users will achieve the maximum stated savings, under the FTC's policy statement the advertiser should have substantiation for this interpretation prior to disseminating the ad. The study results support the same conclusion even for "up to" claims with a disclosure of the average savings, where between 13% and 22% of participants having the same understanding despite the disclosure.
Although the study only looked at replacement window claims, advertisers should assume that the FTC will apply its findings to other products and services. Before making an "up to" claim, an advertiser should substantiate that all or almost all consumers are likely to achieve the maximum stated benefit. An advertiser could use other claims, such as the average benefit consumers can expect to achieve, which would presumably be easier to substantiate. If an advertiser believes that consumers of its product or service don't interpret "up to" claims in the same way as the FTC's study, it should be prepared to rebut the FTC's study with a comparable one of its own.
© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.