NAD Extinguishes Spark Card Testimonials

Advertising Law

The National Advertising Division (NAD) snuffed out Capital One’s Spark Cash Card’s use of consumer testimonials in a case brought by competitor JPMorgan Chase Bank.

Chase challenged the use of two stories about small-business owners that appeared in 15-second and 30-second television commercials. In “Good Start Packaging,” owner Ken Jacobus says, “I’m Ken Jacobus, and I switched to the Spark Cash Card from Capital One. I earn unlimited 2 percent cash back on everything I buy.” As images of his employees are displayed, he adds, “And last year, I earned $36,000 in cash back, which I used to offer health insurance to my employees.”

The other ad featured “Farmgirl Flowers” owner Christina Stembel, who stated that she earned $115,000 in cash back with her Spark Card. The Jacobus ad contained no disclosures regarding typical customer experience, while the Stembel commercial featured the statement, “The actual amount of cash back you earn will depend on your credit limit, payment history and purchase activity.”

Chase argued that Capital One needed to disclose the typical cash back expected for Spark Card users, because the testimonials described rewards outside the norm. To earn the $36,000 referenced by Jacobus, a small-business owner would need to spend $1.8 million per year; to reach the $115,000 mark, a company would need to spend $5.75 million per year on their Spark Card.

The challenger provided data on small-business credit card usage for 2018 that the top 10 percent of spenders average $228,271.

Capital One countered that no disclosure is necessary because small-business owners can do math and understand how to achieve the cash back rewards described in the testimonials.

Noting that Jacobus and Stembel are endorsers, triggering the requirements of the Federal Trade Commission’s (FTC) endorsement guides, the NAD expressed concern that credit limits directly impact the amount that businesses can charge to their Spark Card—a fact not conveyed in the ads.

“Although prospective card holders may understand the amount charged to achieve that cash back, there is no information about how commonly business owners reach these cash back levels or how these particular business owners worked within their own credit limits (i.e., how often they paid down their balance) to reach such impressive cash back rewards,” the NAD wrote. “The only evidence in the record on business card charges shows that these cash rewards far exceed what might be earned by even the top 10 percent of business credit card users.”

Endorsements should describe the limited and truly exceptional circumstances under which the endorser achieved his or her results or, alternatively, disclose the results that are “typical,” the generally expected performance in the depicted circumstances or the limited applicability of the endorsing consumer’s experience, the self-regulatory body said.

“In order to cure the misleading message that the experience of the endorser is typical, the disclosure should provide information about what ‘typical’ cash back is earned,” the NAD concluded. “As a result, NAD recommended that the advertiser modify its advertising to describe the exceptional circumstances in which these results are achieved or clearly and conspicuously disclose the generally expected performance in the depicted circumstances or the limited applicability of the endorsing consumer’s experience.”

The advertiser agreed to comply with the NAD’s recommendations.

To read the NAD’s press release about the decision, click here.

Why it matters: The decision from the NAD provides an important reminder to advertisers that when using a testimonial where the experience of the endorser has not been shown by credible evidence to be typical, the advertiser must disclose the generally expected performance in the depicted circumstances or the limited applicability of the endorser’s experience. The NAD determined that although the commercials for the Spark Card provided general information that the Spark Card provides 2 percent cash back on all purchases, not all business owners have sufficient expenses and income to reach the cash back touted by the endorsers featured in the commercials, and that the commercial failed to describe the limited and exceptional circumstances in which all of those expenses can be charged to the Spark Card. The NAD noted that, based on the data in the record, the endorsing business owners charged far above the average of even the top 10 percent of small businesses. Yet, it remained unclear under what circumstances a Spark cardholder would have a sufficient line of credit or even the ability to make a sufficient number of intermittent payments to maximize the cash back achieved with the card.

Further, the NAD concluded that the disclosure, “The actual amount of cash back you earn will depend on your credit limit, payment history and purchase activity,” is unlikely to be noticed, read and understood. The NAD noted that the disclosure is in small type and appears onscreen while the endorser-business owners are moving, talking and providing detailed information about their business and cash back earned, which is likely to distract consumers’ attention away from the intended message. In addition, although the disclosure highlights some limitations on the ability to earn cash back, it contains no information about typical cash back results. In order to cure the misleading message that the experience of the endorser is typical, the NAD recommended that the advertiser modify its advertising to describe the exceptional circumstances in which these results are achieved or clearly and conspicuously disclose the generally expected performance in the depicted circumstances or the limited applicability of the endorsing consumer’s experience.

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