Claiming that your product is “#1” in its category can be highly impactful, but as illustrated by the National Advertising Division (NAD) Case #7544, it can also lead to competitor or regulatory challenges when not properly supported.
In Case #7544, Owlet challenged Nanit’s social media advertising describing its Wi-Fi-connected baby monitor as the “#1 smart baby monitor” and the “#1 baby monitor” without any qualification or citation to supporting sales data in proximity claims. Owlet challenged these claims on the basis that Nanit could not provide the requisite sales data to support them. The challenge was accepted for NAD’s Fast-Track SWIFT process because it “did not require the review of complex evidence or argument”.[1]
In support of its challenge, Owlet submitted data showing that Nanit’s baby monitor does not have the highest sales volume in the relevant market, whether measured by unit or dollar sales. Further, Owlet alleged that even if the baby monitor category was more narrowly defined to “smart” baby monitors, one of Owlet’s monitors, the Owlet Dream Sock, still outsells the Nanit monitor in both unit and dollar sales. In response, Nanit contended that the Owlet Dream Sock should not be considered within the more traditional baby video monitor category, and that Nanit “has the highest market share within its self-defined relevant product category – video baby monitor products that are sold at $99 or higher.”
After review of the evidence, NAD determined that Nanit should discontinue its unqualified “#1” claims, primarily on the basis that consumers did not understand the claims to be limited to only “video baby monitor products that are sold at $99 or higher.” NAD determined that a reasonable consumer could interpret the claims as applying to the broader categories of “baby monitors” or “smart baby monitors” for which Nanit did not possess data showing it has the highest sales volume in the market.
Key Takeaways
NAD’s analysis underscores several legal and practical principles to keep in mind when making “#1” claims:
- You Are Responsible for All Reasonable Interpretations: Advertisers bear responsibility not only for their intended message but for all reasonable interpretations of a claim. An unqualified “#1” claim is generally understood by consumers to mean sales superiority across an entire product category, unless clearly limited by context or qualification. Advertisers should therefore anticipate that regulatory bodies and competitors will interpret claims broadly, from the perspective of the average consumer. It is generally not enough to rely on intended meaning; all reasonable interpretations must be considered.
- It is Important to Define the Relevant Category: When making a #1 claim, it is important to define the product category in a manner that aligns with consumers’ reasonable understanding, not just how the advertiser wishes to segment the market. An Advertiser generally cannot create an arbitrary or artificially narrow product category to fit their “#1” claim.
- Claims Need to be Supported with Sales Data:A #1 claim is generally understood to mean that the product enjoys the highest market share in its category. Substantiation for such a claim must therefore generally be based on credible sales data, from an appropriate timeframe, covering all relevant products within the defined category. Thus, if a claim refers to being “#1” in a general market, such as “baby monitors,” the supporting data must consider every product consumers reasonably associate with that term, including those with different features or formats.
- Qualify Claims when Necessary: Advertisers should appropriately qualify their “#1” claims when referring to a narrower sub-category. For instance, if a claim is based only on video baby monitors over a certain price point, the advertisement should clearly state this limitation, so consumers understand the scope of the claim. Transparency regarding the basis for the claim (including the source of data and any category limitations) can be crucial to avoid misleading consumers and to withstand regulatory scrutiny.
NAD’s decision offers a reminder that unqualified “#1” advertising claims require thorough substantiation and must reflect the category as understood by consumers. As such, the safest route is to properly define the category for your #1 claim, ensure that your claim is supported by reliable sales data, and qualify the claims, as necessary.
Footnotes
- NAD also noted that “claims that products are the “#1” seller in a category are often well-suited for resolution in Fast-Track SWIFT”.
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