NAD Determines a Money Back Guarantee Conveys Performance Claim

The Princeton Review advertises its MCAT preparation courses with the following copy: Score a 515+ on the MCAT or add 15 points depending on your starting score. Guaranteed or your money back.” Blueprint Test Preparation filed a challenge before the NAD arguing that The Princeton Review must be able to substantiate that its students will score 515+ or add 15 points. The Princeton Review argued that it wasn’t making a performance claim – it was simply offering a money-back guarantee.

Most NAD cases dealing with money-back guarantees have focused on whether the terms of the guarantee are clearly disclosed. NAD has noted, though, that even if those terms are clearly disclosed, a money-back guarantee may also convey a performance claim. The question is what reasonable consumers will take away from an ad. Here, NAD determined that although The Princeton Review had clearly disclosed its guarantee, consumers could still take away a broader message about how they’re likely to perform.

In this case, NAD focused on the specificity of the claim, including the references to a 515+ score or a 15-point increase. Reasonable consumers may understand that there will be a great deal of variance in test scores and not everyone will achieve the score increase, but consumers may also expect such a specific, quantified claim to be supported by evidence that a substantial portion of consumers who take the Advertiser’s MCAT course will be able to achieve the promised results.”

NAD then quoted a FAQ document issued by the FTC more than 20 years ago: Offering a money-back guarantee is not a substitute for substantiation. Advertisers still must have proof to support their claims.” Because The Princeton Review didn’t provide proof that a substantial proportion of consumers will be able to obtain a 15 point increase or a 515+ score on their MCAT exams” by taking the courses, NAD recommended that The Princeton Review stop making the claim.

In its Advertiser’s Statement, The Princeton Review feared that the decision may reduce the number of test preparation courses that are offered with a money back guarantee and/or weaken the money back guarantees that are offered, to the detriment of students.” That fear may extend to companies outside of the test preparation area, too. Companies may not want to leave a money-back guarantee open-ended, but too much specificity can create substantiation requirements.