NAD Reviews Claims Made in B2B Emails; Recommends Cortec Discontinue Certain Claims Challenged by Northern Technologies’ International

New York, NY – March 27, 2014 – The National Advertising Division has recommended that Cortec Corporation, the maker of vapor corrosion inhibiting (VCI) products, discontinue claims, made in business-to-business email advertising, that were challenged by Northern Technologies’ International Corporation, the maker of Zerust films, competing VCI products.

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

The challenged claims were made in email communications from Cortec employees to potential customers. Claims at issue included:

• “[The tested sample of] green Zerust film failed the VIA and razor blade testing and the FTIR analysis showed only a small peak of carboxylic acids and no VCI products.”
• “[Northern Technologies is] selling counterfeit product.”
• “[Zerust film] does not contain any VCI compound.”
• “[Zerust film] does not pass any standard test for corrosion protection.”
• “[Northern Technologies’ yellow VCI film] uses old VCI technology that is failing due to outdated chemistry and a lack of quality control.”

NAD also considered whether the advertising at issue implied that Zerust film will always fail VIA or other industry standard testing for corrosion protection.

At the outset, the advertiser contended that NAD has no jurisdiction over the claims at issues, which were made in two challenged e-mail communications and directed to distributors who sell the parties’ products to end users.

The advertiser contended that the challenged statements were made in private e-mails to select distributors and representatives. The first e-mail related to a test conducted on a piece of the challenger’s “green” Zerust film, and the second related to a different product, a “yellow” VCI film. The advertiser argued that these were not “paid commercial messages” and that the recipients of the e-mails were not “customers.” Rather, it noted that the e-mail recipients are contractually bound to sell its products, and are not consumers of that product.

NAD found, however, that the challenged claims fell squarely within the definition of “national advertising” delineated by NAD Policies and Procedures §1.1(A), and it retained jurisdiction over the advertising at issue.

NAD noted in its decision that the e-mails were sent by the advertiser’s employees on behalf of the company and that the statements were not part of a scientific discourse regarding the underlying testing or part of internal “private” marketing strategy discussions. Instead, the e-mails were sent to individuals who sell VCI products and contained conclusory statements regarding the qualities of competing products.

Accordingly, NAD determined that the purpose of these e-mails was “commercial” in nature, and formulated “with the purpose of inducing a sale.”

NAD further noted that the advertiser’s statements included very strong claims regarding the lack of efficacy of its competitor’s product. “It is well-established that advertisers can make truthful and accurate advertising claims at the expense of their competitors,” NAD stated in its decision, “but NAD strives to ensure that denigrating claims are truthful, accurate, narrowly drawn so that they do not falsely disparage a competitor’s product.”

Following its review of the evidence in the record, NAD recommended that the advertiser discontinue the claims at issue because the challenged statements were not supported by the tests that it cited.

The company, in its advertiser’s statement, said the company supports the “NAD self-regulatory process, however Cortec has not agreed to the NAD’s substantive review of its email communication complained of by the NTIC … .”

“Further, in response to the NAD’s request for additional information, under Policies and Procedures of the Advertising Self-Regulatory Council (ASRC), Section 2.8, Cortec Corporation explicitly stated that Cortec did not consent to jurisdiction of the NAD. Thus, Cortec did not take part in the substantiation of the substance of its communication.”

The company noted, however, that it will take into account the NAD’s recommendation “should it disseminate similar promotions or emails in the future.”