New York, NY – June 20 2013 – The National Advertising Division recommended that Nest Labs, Inc., modify or discontinue certain advertising claims made by the company for its Nest Programmable thermostats. The advertising at issue, which appeared in print and Internet advertising, point-of sale and promotional materials, and on product packaging, was challenged by Honeywell International, Inc., maker of competing programmable thermostats.

NAD is an investigative unit of the advertising industry’s system of self-regulation. It is administered by the Council of Better Business Bureaus.

NAD examined advertising claims that included:

•  “Only 11% of [other] programmable thermostats are programmed to save energy.”
•  89% of other programmable thermostats are not programmed because they are so complicated that most consumers do not bother to program them.
•  Other programmable thermostats waste energy.
•  “Most thermostats waste 20% of your heating and cooling bill. Nest stops the waste.”
•  Nest’s “Airwave” feature “automatically lower[s] air conditioning costs up to 30%” and “cuts AC runtime up to 30%.”
•  “As you turn on cooling, Nest’s Airwave technology can cut your AC runtime up to 30%.”
•  “Nest works in 95% of homes with lower voltage systems.”
•  “Adding a common C wire is not required in 99% of [Nest] installations.”
•  Each of the following features is “exclusive” to the Nest programmable thermostat:

– works with multiple system types (e.g. forced air, radiant, heat pump, etc.)
– adjusts heat pump systems to balance efficiency and comfort.
– adjusts radiant heat systems to give a predictable schedule and even heat.
– turns heat on “early” to have temperature adjust to pre-set level by pre-set time.
– turns air conditioner’s compressor off before target temperature is reached.
– gives notice to change furnace filter based on system runtime.
– incorporates a built-in level to aid in installation.

NAD noted in its decision that both parties sell high-quality thermostats that offer consumers advanced means to control the heating and cooling of their homes and both companies have received industry recognition for their technology and products. Each company employs a different technology.

NAD noted that the advertiser voluntarily discontinued claims that the Nest Learning Thermostat “can automatically lower air-conditioning costs up to 30%,” as well as exclusivity claims regarding its “System Match,” “Filter Reminders” and i“Built-in Level” features, action NAD considered necessary and appropriate.

NAD concluded that Nest provided a reasonable basis for its claim that the Nest Learning Thermostat “works in 95% of homes with low voltage systems.” However, NAD recommended that the advertiser clearly and conspicuously disclose that its claim is based on the results of the data from online users of its Compatibility Checker.

As substantiation for its 11% and 89% claim claims, the advertiser relied primarily on a study by the Lawrence Berkeley National laboratory that concluded that 89% of Americans rarely or never program their thermostats to save energy.

However, following its review of the evidence, NAD recommended that the advertiser discontinue its unsupported specifically quantified claims that, “Only 11% of [other] programmable thermostats are programmed to save energy”; 89% of other programmable thermostats are not programmed because “they’re so complicated that most people don’t bother to program them” and “other thermostats waste energy.”

NAD further recommended that the advertiser discontinue the specifically quantified claim that its “Airwave” technology “cuts AC runtime up to 30%,” and the use of a comparative bar graph on its website comparing AC (compressor) run time without Airwave to AC (compressor) run time with Airwave.

NAD further recommended that the advertiser discontinue its claim that “[a]dding a common C wire is not required in 99% of Nest installations.”

Regarding its exclusivity claims, NAD recommended the advertiser modify:

•  Heat Pump Balance claims to more accurately convey the message that its Heat Pump Balance feature uses Nest Lab’s exclusive technology (or algorithm), to adjusts heat pump systems to balance efficiency and comfort.
•  True Radiant claims to more accurately convey the message that, rather than being a feature exclusive to Nest, its True Radiant feature employs Nest Lab’s exclusive technology or algorithm (which is like no other) to provide a predictable schedule and even heat for homes with in-floor radiant or boiler-and-radiator systems
•  The claim associated with its “Early-On” feature to more accurately convey the message that “Early On”, rather than being a feature exclusive to Nest, employs Nest Lab’s exclusive technology or algorithm that takes into account current real-world weather conditions and what Nest has learned and adapted about a particular user’s individual home through past performance, to calculate the right time to turn on the heating or cooling system.
•  Modify its exclusivity claim with respect to Airwave to limit the exclusivity to its technology that allows for a more variable time period for the fan to operate after the compressor shuts down based on its “learning capability” as outline above.

Nest Labs, in its advertiser’s statement, said the company was disappointed that NAD “disagreed with the company regarding consumer interpretation of some of the claim language, and that the voluminous amount of evidence submitted by Nest Labs supporting other claims – such as the addition of a common C wire is not needed in 99% of Nest installations – was considered inadequate substantiation for those claims. While we strongly disagree, Nest Labs recognizes the mission of NAD and accordingly intends to modify its advertising taking into account NAD’s recommendations.”