Claim Your Product Is No. 1? This Group Will Judge

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Until recently, sports fans looking to play daily fantasy sports had the choice of two “No. 1″ websites. Both FanDuel and DraftKings plastered the Internet with advertisements claiming to be the biggest daily fantasy site in existence. Given that this can’t be true,  FanDuel managed to produce some numbers to back its case before it appealed to a higher power.

The organization in charge of policing this dispute and the several dozen like it in the U.S each year is the National Advertising Division. There are laws against the publication of misleading advertisements, and in the early 1970s it seemed as if pressure from Ralph Nader-style consumer groups would bring greater regulation. “There are ticking sounds that we hear in all the pressure groups, congressional hearings, and other forums that are meeting to decide our fate,” said Victor Elting Jr., chairman of the American Advertising Federation, at the time.

So the advertising industry founded the National Advertising Division in 1971. While various federal agencies and state attorneys general have authority to regulate misleading advertising, the division is the way the industry tries to handle things before they get to that level. Cases often originate with one company complaining about a competitor’s claims. NAD holds hearings and asks fibbers to cut it out. While it has no enforcement power, it has an agreement whereby the Federal Trade Commission will look at any case in which the violator doesn’t change its ways. That threat is usually enough to keep companies in line.

Overly enthusiastic claims are relatively common, according to NAD’s Linda Bean. The division handled about 25 cases last year in which a company claimed some edge over a competitor but couldn’t back it up. This doesn’t include what’s known as puffery—a claim so vague that it can’t be verified in any reasonable way. Puffery is acceptable.

So far this year, NAD has asked a company called ISatori to stop saying it was the “#1 Best Selling Energy Pill”, and it told Pharmavite to stop making sourceless claims that its supplements were the “#1 Pharmacist Recommended” products. The absolute claim to be paramount at something goes beyond vague bragging rights.

DraftKings’ claims to be the top daily fantasy website have annoyed FanDuel for most of this year. About two months ago, FanDuel went to NAD with numbers from independent Web analytics companies showing that it received twice the monthly visits of its competitor; last week, NAD announced that DraftKings has agreed to stop making such claims.

DraftKings says it had stopped running such ads even before the agreement was reached. Nigel Eccles, FanDuel’s chief executive, disagrees: ”It sounded like they got their hand caught in the cookie jar and then said, ‘I didn’t even want a cookie.’”

The squabbling between the companies isn’t likely to stop. DraftKings announced on Monday that it had purchased DraftStreet, a third daily fantasy site. It will shut down DraftStreet send users to its own site. Femi Wasserman, a spokesperson for the company, says it is now just as big as FanDuel. Disputing this, Eccles says that—measured by total users—he expects the new company to be less than one-half the size of his company, largely because many DraftStreets users were already using both sites. While FanDuel publishes information about its user base and revenue, DraftKings does not. Marc Edelman, a lawyer who follows the fantasy sports industry, says that the new DraftKings probably has only about 30 percent of the market and is a “clear No. 2.”

Eccles won’t be able to rely on NAD to mediate further, however, because DraftKings says it will keep any boasting out of its advertisements. “We don’t plan to reinstate the claims we used to make,” says Wasserman.

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