What does it mean when an organization endorses a company's products? What is the claim that is communicated — and what substantiation is required? That was the issue in a recent lawsuit against AARP.
Some consumers sued AARP, alleging that AARP misled them into joining the organization by making them believe that they would have access to insurance that was specially selected by organization because of the quality of the policies. The plaintiffs said that, instead, AARP recommended insurance products just based on how much the insurance companies were willing to pay for the recommendations.
The plaintiffs alleged, for example, that United Healthcare's website included an endorsement by AARP which stated, "AARP endorses the AARP Medical Supplement Insurance Plans . . . . United Healthcare Insurance Company pays royalty fees to AARP for the use of its intellectual property." The endorsement by the AARP on the New York Life website stated, "AARP Life Insurance Program from New York Life . . . . Exclusively for AARP members ages 50-74."
The plaintiffs alleged that these endorsements, taken together with statements that AARP makes in its own advertising about its non-profit status and advocacy role, misled consumers into believing that the endorsements were "AARP's actual stamp of approval . . . when in fact it is only a stamp indicating the winner of the bidding war." The plaintiffs said that they believed that these endorsements were given based on objective standards, and not based on AARP's profit motive. Significantly, the plaintiffs alleged that these endorsements communicated to consumers that the insurance products endorsed by AARP were the "best for seniors."
The plaintiffs sued for false advertising under California law, which prohibits any "unfair, deceptive, untrue, or misleading advertising." To state a cause of action, the plaintiffs had to plausibly allege that reasonable consumers are likely to be deceived by the advertising. The reasonable consumer standard requires "a probability that a significant portion of the general consumer public or of targeted consumers, acting reasonably in the circumstances, could be misled."
Statements of product superiority, that are merely puffery, are not actionable, however. "Puffery" is "exaggerated advertising, blustering, and boasting upon which no reasonable consumer would rely."
Here, the United States District Court for the Central District of California held that, if AARP's endorsements communicated that the insurance products chosen by AARP were the "best for seniors," then that claim was non-actionable puffery, since there were no express representations about what AARP meant by "best." The court wrote, "'Best' is a problematic word because it is vague, highly subjective, and lacks the specific or absolute characteristics required to state an actionable misrepresentation."
The plaintiffs also alleged that they believed that AARP's endorsements communicated that its recommendations were made regardless of the organization's profit motive. The court agreed that, if this claim were communicated, it could be actionable. The court did not agree, however, that the advertising actually communicated such a claim. Pointing to the fact that the advertising did disclose that the insurers paid royalties to AARP, and the fact that the plaintiffs did not allege that AARP promoted that the policies were picked on some other basis, the court wrote, "it would not be reasonable for a consumer to believe that AARP was not engaged in revenue generating activities."
The Federal Trade Commission might have evaluated these issues a bit differently. The FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising state that endorsements by organizations, especially expert ones, are viewed as "representing the judgment of a group whose collective experience exceeds that of any individual member, and whose judgments are generally free of the sort of subjective factors that vary from individual to individual." This means that, at least according to the FTC, before an organization gives an endorsement, it must be reached by "a process sufficient to ensure that the endorsement fairly reflects the collective judgment of the organization." Moreover, if the organization is represented as being an expert, then the organization is expected to have used its special expertise to judge the merits of what it is endorsing.
Notwithstanding the plaintiffs' loss here, third party seals and other endorsements can certainly communicate specific claims requiring substantiation. So, when using them, it's important to consider what is being communicated and whether you can back those claims up. While consumers may very well expect that organizations get paid to grant certifications and other seals, it is important to ask the question whether consumers are also going to believe that the organization has actually evaluated the product or service and chosen it based on certain criteria. It very well may be that the court would have decided the AARP case differently had the plaintiffs' pled it differently, instead of just relying on an implied "best" claim that the court easily dismissed as puffery.
