Hunton Retail Law Resource

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.

New Guidance from the FDA on Supplement Safety Notification

The FDA has issued draft guidance for dietary supplement manufacturers to assist in the preparation of new dietary ingredient (“NDI”) notifications as required under the Federal Food, Drug, and Cosmetic Act. The guidance is intended to help manufacturers and distributors of dietary ingredients and/or supplements determine whether to submit a premarket safety notification to the FDA. The guidance addresses several frequently asked questions including: (1) What qualifies as an NDI? (2) When is an NDI notification required? (3) What are the procedures for submitting an NDI notification? (4) What types of information does the FDA recommend a manufacturer or distributor of a dietary ingredient and/or supplement consider when evaluating the safety of NDIs and dietary supplements containing NDI? (5) What does the FDA recommend including in the NDI notification?

Federal Action

FTC Wins False Advertising Case Against Gray Hair Supplement Maker

A federal judge in Wyoming granted the FTC’s motion for summary judgment of its litigation against COORGA Nutraceuticals Corporation for falsely claiming its Grey Defence supplement reversed or prevented the formation of gray hair. The court found that COORGA’s claims were unsubstantiated by scientific evidence.

Auto Dealers Pay Civil Penalty to Settle FTC Charges of Deceptive Advertising

Three Dallas-area auto dealers agreed to pay an $85,000 civil penalty to settle charges that they violated a 2014 FTC consent agreement that prohibited misrepresenting the costs of leasing or purchasing a vehicle. The FTC alleged that the dealers concealed sale and lease terms that added significant costs to the advertised prices. For example, in a TV ad, material terms that increased the advertised cost of the vehicle were only disclosed in briefly-appearing fine print. Additionally, material terms that increased the advertised cost were included in fine print in a print ad and could not be read without magnification.

Harley-Davidson Agrees to Pay $15 Million to Settle Defeat Device Claims

In an agreement with the EPA, Harley-Davidson agreed to pay $15 million to settle claims related to the production and sales of engine “tuners.” The tuning devices are designed to increase a motorcycle’s power and performance, but cause the motorcycle to produce higher emissions than the original engine configuration certified by the EPA. In addition to the payment, Harley-Davidson agreed to stop selling the devices and to purchase back and destroy those it already sold.

Litigation

Judge Denies T.J. Maxx’s Motion to Dismiss Reference Pricing Claims

A California federal judge denied T.J. Maxx’s motion to dismiss class action claims that it misled consumers using “compare at” pricing on its labels without basing the compare at price on fact or actual sales. The judge quoted the movie The Princess Bride with reference to T.J. Maxx’s definition of “compare at” found in the fine print of its website: “You keep using that word. I don’t think it means what you think it means.” The court found T.J. Maxx’s definition of “compare at” was not clearly communicated to consumers in such a way that they would understand from the price tag that the price comparison is not between the same item, but between like items.

California Federal Judge Rejects Settlement of ‘Made in USA’ Claims

A California federal judge rejected a class-action settlement of claims against Dutch LLC, a denim manufacturer that allegedly falsely claimed it manufactured its jeans in the United States. In its second attempt at settlement approval, Dutch agreed to provide the class members a $20 e-gift card and a tote bag worth $128. Dutch also agreed to a $250,000 cy pres award and $175,000 in plaintiff’s attorney’s fees with a “clear sailing” provision attached – both of which were included in the previous settlement attempt. The judge found, for the second time, that the cy pres award was not directed to a charity with a charitable purpose designed to help the class of harmed consumers, and that the clear sailing provision created “at least a danger of collusion during settlement negotiations which was not refuted by the record.” Because the second attempted settlement did not address the judge’s concerns articulated with the first settlement, it was again denied.

Equitable Claims for False Advertising Against Homeopathic Remedy Maker Dismissed

A California federal judge dismissed two claims that Hyland’s, a homeopathic remedy maker, had allegedly deceived tens of thousands of customers regarding the effectiveness of its products. After a jury returned a verdict in favor of Hyland’s, two equitable claims under California’s Unfair Competition Law and False Advertising Law remained. The court, relying heavily on the jury’s findings on the legal claims, found that inasmuch as the equitable claims relied on the same facts as the legal claims, the plaintiffs failed to meet their burden of showing that Hyland’s products cannot perform as Hyland’s had represented.

Industry Self-Regulation

SlimFast Changes Disclosure in Print Advertising after NAD Inquiry

After the NAD inquired into the disclosure found on SlimFast Advanced Nutrition products, which was displayed in white font against a gray background, the company decided to change the disclosure to appear in larger black type providing a sharper contrast to the gray background. The NAD subsequently closed its inquiry.

CARU Recommends Kellogg Revise Product Packaging

The Children’s Advertising Review Unit (“CARU”) has recommended that Kellogg Company revise the packaging on its Kellogg’s Fruit Flavored Snacks featuring colorful cartoon characters, images of fruit and the claim “Made with REAL FRUIT.” CARU was concerned that child consumers interpret the snacks as containing more fruit content than actually exists in the snacks. Kellogg agreed to modify its packaging out of deference to the self-regulating process, but not because it agreed with CARU’s findings.