Three recent National Advertising Division (NAD) decisions make clear that the price consumers see must reflect what they will pay. Two of the decisions involved cruise line gratuities, including Case No. 7560 involving Virgin Voyages and Case No. 7561 involving another cruise operator. The third, Case No. 7593, involved subscription-based savings claims for a deodorant product manufactured by Clutch, Inc., d/b/a Carpe.
The cruise line cases. NAD opened both cruise line inquiries through its routine monitoring program. In each, it examined whether the cruise line’s advertising disclosed all charges and conveyed the all-in cost of the vacation. Both cruise lines argued that their gratuities were optional. In Virgin Voyages’ checkout, gratuities did not appear until a later “add-ons” page. The gratuity policy sat behind a “view details” link, and on the final screen the details appeared only if the consumer hovered over an “i” icon. NAD recommended clearly and conspicuously disclosing throughout checkout that gratuities: (i) are nonrefundable if prepaid; (ii) are higher if paid onboard; and (iii) can be modified or removed before the cruise. The second cruise line had already revised its booking flow to label gratuities “optional” on several pages. NAD found that its revised advertising adequately conveyed the all-in cost but recommended two fixes including revising a FAQ page and the final checkout page to make clear that gratuities are optional. Both cruise lines agreed to comply.
The deodorant case. Carpe’s pricing and promotional claims for its Underarm Stick were challenged by a competitor, including “Save Up To 56% Off w/ 4 Free Gifts,” limited-time sitewide promotions, and “free shipping.” NAD recommended that Carpe modify or discontinue most of the challenged pricing claims because: (a) the savings depended on a subscription that the ads did not adequately disclose; (b) the claims measured bundle value, not actual price reduction; and (c) Carpe provided no sales data or third-party pricing showing that the gifts actually sold at the values Carpe assigned them.
Lessons for Advertisers
- “Optional” charges can still be considered material: If most consumers will end up paying a charge, it should most likely be disclosed as part of the final price. Virgin Voyages argued that its gratuities were discretionary. However, NAD found that consumers nonetheless expected to pay them, and that consumers had a financial reason to prepay because prepaid gratuities cost less. NAD therefore treated gratuities as a material term that should be disclosed on the order review page.
- Material pricing terms should appear next to the claim: NAD relied on FTC’s “.com” Disclosures guidance, which says consumers should not have to click a hyperlink to understand the full amount they will pay. NAD also found hover-only “i” icons too subtle. Inconsistent labels exacerbated the problem, such as calling gratuities a “service charge” at checkout. Advertisers should disclose subscription requirements and recurring charges in close proximity to the price claim and describe charges the same way across the checkout flow, FAQs, and contract terms.
- “Free” must mean free, and bundled values must be legitimate: Carpe’s “free shipping” claims were inaccurate because recurring subscription shipments cost $4.95. Meanwhile, its “w/ 4 Free Gifts” claims conveyed savings plus free gifts. However, the advertised percentage already included the gifts’ assigned values, and Carpe disclosed that only in small text on a landing page. NAD also found the gift valuations unsupported. The problems included: (a) “mystery gifts” whose identity and value consumers could not know at purchase; (b) wipes offered in an undisclosed quantity; and (c) a $4.95 shipping value counted as a gift, even though shipping on the first order was already free. Advertisers should therefore remember that if a savings figure includes the value of extras, that should be stated near the claim using genuine and substantiated values.
- Limited time offers must be limited: Seasonal banners, countdown timers, and scarcity language conveyed to consumers that Carpe’s sales would end soon. However, the same up-to-40% “Early Black Friday” offer ran on three dates, each with a new countdown timer, and then rolled into a “Black Friday Special Offer.” Advertisers should avoid urgency messaging unless the deal truly ends and is not immediately replaced by a materially similar offer.
These decisions reinforce both the FTC and NAD’s core position on pricing issues including gratuities, subscriptions, and free gifts: Consumers should understand the true cost of a product or service before they complete the checkout process; and any discounts, savings, or optional charges should most likely be clearly disclosed. As always, our advertising team is happy to help review pricing claims and checkout flows before they go to market.
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