Hunton Retail Law Resource

Since the U.S. Supreme Court’s 2014 decision in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), numerous courts across the country have applied its holding to narrow the permissible bounds of the exercise of general jurisdiction over companies in jurisdictions without a connection to the specific claims in the case. On August 29, 2016, in Bristol-Myers Squibb v. Superior Court, No. S221038 (Calif. 2016), the California Supreme Court left many wondering what Daimler may mean for the exercise of specific jurisdiction in cases involving nationwide courses of business conduct affecting both resident and nonresident plaintiffs. 

As retailers continue to look for new and innovative ways to maintain communication and “touch points” with their customers, many are looking to technology-infused or “smart” packaging and advertising materials. There are many ways to drive customer interaction and web traffic through smart packaging and advertising materials, including through the use of hyperlinks, quick response (“QR”) codes and near field communication (“NFC”) chips. 

This past week, several consumer, self-regulatory and regulatory actions made headlines:

Starbucks’ Glass Half Full: Coffee Purveyor Wins Underfilling Dismissal

On August 22, 2016, a U.S. District Court Judge in the Central District of California dismissed with prejudice class plaintiffs’ claims that Starbucks defrauded customers by overfilling its cold beverages with ice and underfilling with the ordered beverage. The Court found that the reasonable customer understands that ice displaces liquid and that some portion of a customers’ iced beverage would, indeed, contain ice. The Court defended Starbucks’ practice, saying that transparent cups plus the lack of advertising that the cold beverages would contain a specific number of ounces of actual liquid precluded class plaintiffs’ claims. Despite the dismissal, Starbucks still faces several similar underfilling class suits nationwide.

In this post-Spokeo world, a defendant facing the all-too-common “no-injury” putative class action might be tempted to seek dismissal of the lawsuit on Article III grounds. But a panel of Ninth Circuit judges recently gave a compelling reason why defendants should strongly consider otherwise. In Polo v. Innoventions Intern. LLC, a Ninth Circuit panel reversed the dismissal of a putative class action based on a lack of jurisdiction, with instructions to remand the case to state court. We previously reported about this possibility following the issuance of Spokeo, into which a Ninth Circuit panel now has breathed life.

This past week, several consumer and regulatory actions made headlines:

Federal Guidance

D.C. Federal Judge Vacates Part of FDA Tobacco Guidance

A D.C. federal judge vacated a portion of FDA guidance relating to the labeling of tobacco products. The key issue before the court was whether changing a tobacco product’s label to a distinct new label creates a new tobacco product subject to FDA approval. The court also considered the question of whether changing a product’s quantity resulted in the creation of a new tobacco product subject to the FDA’s “substantial equivalence review process.” The court found that while a change in the existing product’s label did not create a new tobacco product, a change in a product’s quantity did.

The issue of religious background has generated substantial discussion during the current election cycle. Recently, the federal government highlighted the issue of religious discrimination and accommodation in the workplace. 

The National Advertising Division (“NAD”) was busy this past week. The organization recommended that several companies modify or discontinue claims made for the following consumer products.

NAD Refers Infrared Grill Ads to FTC for Review

The NAD passed along its concerns over certain ads for infrared grills to the FTC. Char-Broil LLC, a competitor of NexGrill Industries, maker of “Evolution Infrared Plus” grill, asked the NAD to investigate NexGrill’s advertising claims. The NAD referred the matter to the FTC after NexGrill failed to fully respond to the NAD’s inquiry.

This past week, several consumer and regulatory actions made headlines:

FTC Warns Marketers of Zika-Prevention Products: Claims Must Be Substantiated

The Federal Trade Commission has issued warning letters to 10 marketers of products that purport to protect users from Zika infection. The letters remind marketers that health-related claims must be supported by competent, reliable scientific evidence. Specifically, the FTC warned that claims as to the efficacy of the various products must be supported by “well-controlled human clinical testing using the species of mosquitos that carry the disease in question, and must demonstrate that the effects last as long as advertised.” Additionally, claims that a product applied to a specific part of the body will confer full-body protection must be supported by scientific evidence. The FTC has urged the marketers to review their ads and to alter or remove any unsupported claims.

The Department of Justice has cleared Anheuser-Busch InBev’s (“AB InBev’s”) acquisition of SABMiller. Approval of the $107 billion deal came with substantial divestitures, including SABMiller’s U.S. business. That business, which includes the Miller Lite and Miller High Life products, will be sold to Molson Coors for $12 billion. As part of the approval, AB InBev is also prohibited from conducting incentive programs that would discourage independent distributors from selling competitors’ import or craft beers. According to the Department of Justice, this will preserve the ability of small brewers, such as craft brewers, to compete against AB InBev.

On August 8, 2016, the Federal Trade Commission sued 1-800 Contacts, alleging that it entered into anticompetitive bidding agreements with 14 of its rivals. According to the administrative complaint, these bidding agreements are an unfair method of competition because they unreasonably restrain competition for bidding on online search advertising auctions and restrict truthful, non-misleading ads. Previously, 1-800 Contacts alleged that its rivals had engaged in trademark infringement by purchasing advertising space from online search engines when consumers searched for “1-800 Contacts.” Most of 1-800 Contacts’ rivals agreed to settle or avoid lawsuits by entering into the allegedly anticompetitive bidding agreements, which prohibit parties from bidding on their rivals’ trademarked terms. Additionally, all but one of the contracts also require the use of “negative keywords,” which will prevent an advertiser’s name from appearing if a rival’s name is used as a search term.

This past week, several consumer protection and regulatory actions made headlines:

Mars Petcare Settles With the FTC Over False Advertising Claims

Mars Petcare U.S., Inc., (“Mars Petcare”) has agreed to settle FTC allegations that the company falsely advertised its Eukanuba dog food.

The FTC’s complaint alleges that, in 2015, Mars Petcare claimed in TV, print and Internet ads that its dog food could increase a dog’s lifespan by 30 percent or more. This claim was allegedly based on a 10-year study of dogs who were fed Eukanuba. According to the FTC, the claim was false or unsubstantiated.

Last month, legislation seeking to reduce private litigation under Title III of the Americans with Disabilities Act (“ADA”), regarding accessibility barriers for disabled citizens in public accommodations, passed the House Judiciary Committee by a vote of 15 to 6. Industry sources applaud the proposed legislation as a defense against serial nuisance suits by unscrupulous lawyers and plaintiffs, while advocates of the disabled claim it is an unfair new hurdle to private action under the ADA.

The National Advertising Division (“NAD”) was busy this past week. The organization recommended that several companies modify or discontinue claims made for the following consumer products.

On July 29, 2016, President Obama signed into law a bill that will establish federal standards for labeling of food products that contain ingredients from genetically modified organisms (“GMOs”). Several consumer advocates opposed the bill, as it preempts more stringent labeling requirements in states like Vermont. However, several advocates on the other side favored the notion of national, uniform standards, as opposed to a patchwork of individualized state labeling laws.

As reported on the Privacy & Information Security Law blog, on July 29, 2016, the FTC announced that it had issued an opinion and final order concluding that LabMD, Inc. (“LabMD”) violated the unfairness prong of Section 5 of the FTC Act by failing to maintain reasonable security practices to protect consumers’ sensitive personal information. The unanimous decision reverses a November 2015 administrative law judge’s initial decision that, as we previously reported, dismissed the FTC’s charges against LabMD for failing to show that LabMD’s allegedly unreasonable data security practices caused, or were likely to cause, substantial consumer injury.

This past week, several consumer protection and regulatory actions made headlines:

Court of Appeals Rules Spokeo Requires Actual Harm

A three-judge appellate panel dismissed the case in Hancock et al. v. Urban Outfitters, a putative class action against two retailers, Urban Outfitters and Anthropologie, who were alleged to have violated District of Columbia consumer protection laws by seeking consumers’ zip code information.