NAD Recommends Sprint Discontinue Express, Implied Claims that Consumers Take Ownership of ‘Free’ Samsung Galaxy S6 Phones with ‘Unlimited Plus Plan’

New York, NY – Oct. 7, 2015 – The National Advertising Division has recommended that Sprint Corporation discontinue claims that state or suggest consumers will take ownership of a “free” Samsung Galaxy S6 telephone when signing up for the company’s “Unlimited Plus Plan.”

However, NAD drew a distinction between claims that promoted a “free” telephone and claims that promoted Sprint’s “free” mobile phone leasing model and determined that Sprint could support advertising claims that its “Unlimited Plus Plan” offers the “First FREE phone lease in the wireless industry.”

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 claims at issue were challenged by T-Mobile USA, Inc., a competing provider of wireless services, and included:

  • “Get a Free Samsung Galaxy S6 when [consumers] sign up for the new Unlimited Plus Plan.”
  • “Get a FREE Samsung Galaxy S6.”
  • “Sign up for the new Unlimited Plus Plan and get a Samsung Galaxy S6 Free.”
  • “Get a free Samsung Galaxy S6 and pay just $80/mo.”
  • “First FREE phone lease in the wireless industry.”

Sprint asserted that it is the first major mobile service provider to offer mobile phone leasing, a competitive business differentiator that affords customers unique and comparatively inexpensive access to the newest smartphones.
Under the terms of the “Unlimited Plus Plan,” Sprint customers lease a Galaxy S6 for two years, subject to an $80 monthly service fee.  After this two-year period, subscribers can return their phone to Sprint, purchase their phone, or continue their lease on a month-to-month basis.

The advertiser explained that the comparative affordability of its leasing program is one of its key selling points and argued that it should be permitted to make truthful comparative pricing claims promoting an important marketplace advantage.

The key issue before NAD was whether the challenged advertising conveyed the message that consumers will take ownership of a free Galaxy S6 when they sign up for the Sprint’s Unlimited Plus Plan, or whether consumers would understand that they are leasing a phone in connection with the service plan.

In making its determination, NAD carefully considered the results of a consumer perception survey, commissioned by the challenger, which was designed to measure consumer expectations stemming from challenged Internet advertising. The survey’s results showed that more than 50 percent of participants believed they could own and keep a Galaxy S6 by switching to Sprint’s Unlimited Plus Plan and indicated that participants often reported confusion over the advertiser’s “free” phone claims, resulting in a net confusion between test and control groups exceeding 50 percent.

NAD determined that the survey sample size was adequate, relevant, geographically representative, and that the relevant advertising was tested.  NAD further determined that the questions were appropriately structured. NAD considered, but was not persuaded by, the advertiser’s argument that the survey was materially flawed.

NAD determined that the challenged Internet advertising reasonably conveyed the message that consumers who signed up for Sprint’s Unlimited Plus Plan would receive ownership of a Samsung Galaxy S6 for free, a claim that is not accurate.

NAD also evaluated the “free” claims as they appeared in the advertiser’s television advertising.  NAD determined that the advertising reasonably conveyed the unsupported message that consumers could receive ownership of a free Samsung Galaxy S6 when they signed up for the Unlimited Plus Plan based on the bold and prominent references to a “free” Galaxy S6 in sharp contrast to the  fleeting references to a “lease.”  NAD also observed that the disclosures in the television advertising were several lines long, again making them difficult to read and understand.

Following its review of the evidence in the record, NAD recommended that the advertiser discontinue its “Get a FREE Samsung Galaxy S6” claim.  However, NAD determined that the claim “First FREE phone lease in the wireless industry” was supported.

The challenger also took issue with a comparison pricing chart.  The advertiser advised NAD in writing that, instead of submitting substantiating evidence, it had elected to permanently discontinue the comparative pricing chart.  In reliance on the advertiser’s representation that the comparison chart had been permanently discontinued, NAD did not review the claim on its merits.  NAD noted that the voluntarily discontinued comparison chart will be treated, for compliance purposes, as though NAD recommended its discontinuance and the advertiser agreed to comply.

Sprint, noted in its advertiser’s statement that the claims at issue had, as NAD noted in its decision, run their course prior to the conclusion of NAD’s review.

“Sprint respectfully disagrees with NAD’s recommendation that Sprint should discontinue the claim ‘Get a FREE Samsung Galaxy S6,’ but Sprint will take NAD’s decision into consideration when formulating future advertising,” the company said.

Note: A recommendation by NAD to modify or discontinue a claim is not a finding of wrongdoing and an advertiser’s voluntary discontinuance or modification of claims should not be construed as an admission of impropriety. It is the policy of NAD not to endorse any company, product, or service. Decisions finding that advertising claims have been substantiated should not be construed as endorsements.