This post is in partnership with 24/7 Wall Street. The article below was originally published on247wallst.com.
Advertisements and packaging increase consumer awareness of a product and provide information so that customers can make educated choices. Oftentimes, however, marketing strategies are focused more on raising sales than providing accurate product information.
The Federal Trade Commission (FTC) handles numerous cases each year as part of its goal to protect consumers from unfair or deceptive practices. Last year, the FTC ruled that advertisements and packaging of various lines of clothing from a number of companies — including Sears, Amazon.com, and Macy’s — were misleading and unsubstantiated. In these cases, the companies marketed the products as environmentally friendly bamboo, when in fact the manufacturing process involved toxic chemicals.
This incident is one of a slew of recent confrontations companies have had with a number of groups. Regulators, customers and advocacy groups have especially targeted “all-natural” labelled foods. The growth in such labeling is not surprising given the spike in demand for so-called “natural” products in recent years. Other products under scrutiny have ranged from shoes to cars. Based on recent FTC and media reports, 24/7 Wall St. has reviewed the most misleading product claims.
Due to the high volume of litigations in recent years, the word “natural” is slowly disappearing from labels, despite the lucrative sales growths of products with this label. The Center for Science in the Public Interest (CSPI) is one consumer advocacy group that is at the forefront of lawsuits related to food, beverages and health.
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In an interview with 24/7 Wall St., Stephen Gardner, Litigation Director at CSPI, explained that food and health-related litigation probably get more media attention because “Americans are increasingly interested in eating [healthy foods].” The problem is that the terms used to identify healthy foods are often inconsistent or vague. Citric acid, for example, can be either natural or artificially produced, which means seeing it listed as an ingredient does not tell a consumer very much, Gardner explained.
Kashi, Emergen-C, and Kellogg’s Frosted Mini-Wheats all claimed to be healthier than they actually were. Kashi, which claims to be all all-natural, actually contains artificial ingredients. Emergen-C vitamin C supplement’s effectiveness at preventing or curing the common cold is controversial. Kellogg’s Frosted Mini-Wheats do not improve children’s attention span.
To make matters worse, information found on packaging is often unreliable. These strategies are anti-competitive, Gardner argued. “If people don’t want to buy food with high-fructose corn syrup, they shouldn’t be tricked into buying it.” Additionally, if you are a victim of deceptive practices, “You’re not getting what you paid for, and that’s a failure of the marketplace,” Gardner said.
24/7 Wall St. has identified the major government actions and private lawsuits directed at companies on the basis of deceptive practices or false advertising. In order to be considered, a product had to be involved in some major settlement since the start of last year. We excluded incidents that were related to services rather than specific products, such as cases of predatory lending.
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These are nine of the most misleading product claims.
1. Sears’ Bamboo fabric
> Parent Company: Sears
> Ad changed: yes
> Settlement Amount: $475,000
Sears Holdings agreed to pay $475,000 and remove false advertising from its line of “100% pure bamboo” products, which were anything but. Sears was the find the most out of several large companies, including Amazon.com and Macy’s, that agreed to pay fines totaling nearly $1.3 million for violating for violating the Textile Products Identification Act last year. The FTC charged the companies for labelling clothing products as made of bamboo, when they were actually made of rayon. While using bamboo to make clothing is arguably “green,” rayon — a synthetic cellulose fiber — is manufactured using toxic chemicals in a process known for its hazardous byproducts, the FTC noted. These companies had previously received warnings from the FTC in 2010 but did not alter their marketing strategies until last year, when the settlement was reached.
2. Vibram FiveFinger
> Parent Company: Vibram USA
> Ad changed: Yes
> Settlement Amount: $3.75 million
So-called minimalist running gear has gained popularity in recent years, most notably the Vibram FiveFinger shoe, a close-fitting mimicry of the bare foot. The FiveFinger shoe’s initial reception was lukewarm. The glove-like shoe was simply too weird for many Americans.Since then, the market for minimalist shoes has boomed, due in part to the success of author Christopher McDougall’s best-selling book, “Born to Run,” which touted the benefits and freedom of barefoot running.While the best-selling book did not explicitly endorse FiveFinger shoes, Vibram sales soared after the book was released in 2009. However, following a recent settlement, Vibram has agreed to stop making any claims that its shoes strengthen muscles or prevent injuries, and has agreed to refund customers who bought its shoes. In its settlement, the company noted “Vibram expressly denied and continues to deny any wrongdoing alleged in the Actions, and neither admits nor concedes any actual or potential fault, wrongdoing or liability”
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3. Kellogg’s Frosted Mini-Wheats
> Parent Company: Kellogg
> Ad changed: Yes
> Settlement Amount: $4 million
Approximately five years ago, Kellogg claimed that “Eating a bowl of Kellogg’s Frosted Mini-Wheats cereal for breakfast is clinically shown to improve attentiveness by nearly 20%.” While Kellogg did not admit to false advertising, it did create a $4 million fund last year to reimburse misled customers who bought the cereal between January 2008 and October 2009. The agreement was part of a settlement in a class-action lawsuit charging Kellogg with false advertising. The company settled similar accusations in the past, when the FTC charged Kellogg with misleading health claims on its Rice Krispies cereal. Cereal boxes at that time claimed the food would boost immunity and provide essential portions of healthy nutrients.
> Parent Company: Snapchat
> Ad changed: Yes
> Settlement Amount: N/A
Snapchat is a smartphone application designed to send disappearing photos, or “snaps,” to friends. The FTC, however, charged the company for misleading consumers into believing the photos would actually disappear forever, when there are actually a number of simple ways to preserve the snaps. The FTC also accused the company of misrepresenting the extent to which it collected personal information, including geolocation data. This is not the first misstep for the company. Earlier this year, Snapchat leaked the phone numbers and names of millions of users. The incident was particularly embarrassing for the company as it dismissed a security warning it received shortly before the leak. In January, Snapchat finally apologized for the fiasco, detailing how it would prevent further abuse of its application.
> Parent Company: Kellogg
> Ad changed: Yes
> Settlement Amount: $5 million
Earlier this month, Kellogg agreed to stop including terms such as “nothing artificial” and “all natural” on its Kashi brand of products. The agreement was part of a $5 million settlement filed at the beginning of May. The class action lawsuit accused Kellogg of misleading its customers with claims that its Kashi line of cereal contained “all natural” ingredients. The FDA currently has a vague definition of the term “natural.” According to the FDA, “From a food science perspective, it is difficult to define a food product that is ‘natural’ because the food has probably been processed and is no longer the product of the earth.” Kashi cereal contains pyridoxine hydrochloride, calcium pantothenate, and hexane-processed soy. According to The New York Times, “such ingredients do occur naturally,” but food companies often use synthetic versions of the ingredients.
Visit 24/7 Wall St. to see the remaining claims on the list.
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