A New NAD Case Reveals Limitations on Disclosure Use

Brands often use disclosures to ward off the specter of false advertising actions. And disclosures often do just that. But a recent NAD decision highlights that using a disclosure to spell out significant limitations is not always protective. 

In a decision reviewing advertising by DREO, NAD found fault with a series of “No. 1” claims. DREO advertised itself as the "No. 1 Fan and Heater Brand in the U.S." across a variety of platforms. Lasko Products, a competitor, begged to differ.

Both parties understood that “No 1” claims must be based on sales data. That much was uncontroversial. The issue before NAD, however, was whether DREO could define the universe of competitors when making this “No. 1” claim. DREO backed its claims with sales data showing DREO to be “No. 1” when looking only to Amazon sales. DREO even called out its approach in a disclosure: “Stackline data for Amazon U.S. Retail Sales of Space Heaters from Jan. 2023 – Dec. 2023.”

Lasko insisted that Amazon sales were not representative of the broader market. It submitted data from a market research firm that—accounting for both online and brick-and-mortar sales—show that Lasko sales outpaced DREO’s when viewing both online and brick-and-mortar together. 

NAD found that the “No. 1” claim communicated that “DREO is the overall sales leader” including both online and offline sales. It noted that “a disclosure cannot be used to contradict the main message communicated.” The main message here was about “overall” sales.

This “cannot be used to contradict” phrase appears in dozens of NAD decisions. Of course, the line between a disclosure that “contradicts” and one that “clarifies” can be murky. Here, NAD gives some direction. When making broad, market-wide claims based on sales data, it is often best to avoid using disclosures to limit the claim to certain sales channels.