Hunton Retail Law Resource

This past week, several consumer actions made headlines that affect the retail industry.

Eleventh Circuit Stays FTC Order in LabMD Case

The Eleventh Circuit Court of Appeals stayed an FTC Final Order requiring the now-defunct LabMD to implement numerous compliance measures stemming from a 2008 data leak. In July, the FTC ordered LabMD to establish an information security program and notify those affected by the data leak. LabMD closed in January 2014, citing prohibitive costs related to the FTC litigation. An Eleventh Circuit panel found that “[t]he costs of complying with the FTC’s Order would cause LabMD irreparable harm,” noting that the company has under $5,000 cash on hand, a pending $1 million judgment against it and is no longer operational. The court granted LabMD’s motion to stay the Order pending appeal.

Federal Judge Rejects FTC’s Request for $26.5 Million from Amazon

A U.S. District Judge denied the FTC’s request for $26.5 million in monetary damages from Amazon in a case involving charges for unauthorized in-app purchases made by children. The FTC arrived at this amount by calculating an “unauthorized charge rate” from the rate of password failures as compared to the total number of password prompts issued for in-app purchases. However, the court found that this method failed to account for the fact that not every password failure was linked to an unauthorized charge. The court also found that a notice-and-claims procedure, rather than lump-sum payments, was the proper form of relief and would eliminate “uncertainty” about the disputed lump sum amount.

FTC Wins $30 Million Judgment Against Bogus Green Coffee Marketer

The U.S. District Court for the Middle District of Florida granted summary judgment for the FTC and entered a $30 million judgment against the promoters behind “Pure Green Coffee,” who deceptively marketed the product using phony weight-loss claims, fabricated testimonials and fictitious news snippets to mislead consumers. The FTC alleged that the defendants exploited the green coffee bean fad diet popularized by “The Dr. Oz Show,” using mastheads of fake media organizations and logos from real news outlets to provide a cloak of legitimacy for their product. The court also permanently enjoined one of the defendants from engaging in the deceptive advertising methods that the FTC challenged in this action.

Federal Judge Cuts Off Hair Dye Class Action Suit

A Missouri federal judge put the lid on a proposed class action lawsuit alleging that using “Just For Men” hair products put the potential class members at risk of developing a skin sensitivity to the chemical p-Phenylenediamine. The plaintiffs asserted a “medical monitoring” claim against Just For Men’s manufacturer in an attempt to obtain compensation for future testing to determine whether the plaintiffs had developed an allergy to p-Phenylenediamine. But the court noted that “medical monitoring is not an independent cause of action under Missouri law.” The case was dismissed with prejudice because the plaintiffs failed to file a motion to amend their complaint, did not submit a proposed amended complaint and did not bother to explain how they would amend their complaint to state a viable cause of action.

National Advertising Division OKs Toothpaste Claim

The National Advertising Division (“NAD”) found that Colgate-Palmolive Company can substantiate a claim that the company’s Enamel Health Mineral Repair toothpaste “[s]trengthens weakened enamel 4x better” than ordinary fluoride toothpaste “by replenishing it with vital minerals.” The NAD conducted an inquiry into this claim, but Colgate-Palmolive provided product testing results for the toothpaste and an explanation describing how the particular formulation of ingredients neutralizes food acid and strengthens tooth enamel. The NAD also recommended that Colgate-Palmolive adapt its advertising to draw attention to the fact it’s comparing this toothpaste to fluoride brands and not to other “enamel health” brands, and recommended that the company stop using a visual advertisement that suggested broader enamel strengthening claims than the evidence supported. Colgate-Palmolive agreed to comply with the NAD’s recommendations.

Best Queso Scenerio: Chipotle Dodges GMO Class Action

A federal judge in Florida dismissed a proposed class action against Chipotle alleging that the company misled consumers about its use of GMO ingredients. The plaintiff took issue with the fact that Chipotle serves meat and dairy products produced from animals that eat feed containing GMOs, and Chipotle argued that a reasonable consumer would not believe that this means the ingredients that it serves contain GMOs. Judge Marcia G. Cooke of the United States District Court for the Southern District of Florida entered summary judgment for Chipotle, denied the plaintiff’s motion for class certification and dismissed the case with prejudice.