Hunton Retail Law Resource

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

Regulatory Actions

FTC Releases Newly Approved Energy Labeling Rules, Considering Other Changes

The FTC has approved changes to the Energy Labeling Rule, which it says are designed to improve access to energy labels and the labeling for refrigerators, ceiling fans, central air conditioners and water heaters. The labeling is designed to help consumers understand the energy cost of consumer products and make it easier for consumers to compare different product models.

The FTC also is seeking comment on proposed changes that would eliminate provisions for plumbing products, and new labeling for portable air conditioners, large-diameter and high-speed small-diameter ceiling fans, and instantaneous electric water heaters.

Victims of Telemarketing Scam to Receive More Than $1.3 million in Refunds from FTC

The FTC is sending out more than 6,000 checks totaling more than $1.3 million to individuals defrauded by Oro Marketing, Inc. The individuals receiving checks were victims of a telemarketing scheme that, according to the FTC, “targeted Spanish-speakers with false promises that they could make money by reselling high-end goods such as Gucci and Ralph Lauren.” The company allegedly charged more than $400 per package of goods, but delivered only poorly made, off-brand products.

According to the FTC, the victims of this scam will get about a third of their money back, averaging $216 each. Oro Marketing is also permanently barred from all telemarketing to consumers and must turn over their assets to pay for the refunds.

Consumer Litigation

CVS to Face Suit Related to Alleged Useless or Even Dangerous Vitamin E Pills

A putative class action against CVS Caremark Corp. over the company’s alleged promotion of its Vitamin E supplements’ “heart health” benefits has been reinstated by the First Circuit.

The court reversed a district court’s finding that the lawsuit was preempted by the Food, Drug and Cosmetics Act (“FDCA”), “[f]inding that federal law does not preempt [the plaintiffs] effort to maintain this action under New York’s consumer protection law.”

The First Circuit found the FDCA did not prevent a plaintiff from alleging that a manufacturer had made false or misleading statements about a supplement’s structure and function. The court said, “If Vitamin E's actual role is both to support and to harm heart health, depending on the dosage actually supplied, then a label on a product presented in the harmful dosage yet revealing only the former aspects of the vitamin’s role relative to health is incomplete in a way that could be material to the consumer's exercise of choice in deciding whether to buy the product.”

Twinings is Winning

Tea maker Twinings North America Inc. scored a second victory in a California putative class action lawsuit. Plaintiffs initially were seeking damages and an injunction that would prohibit Twinings from claiming its teas were a “natural source of antioxidants.”

Twinings argued it had previously ceased making these claims on its products and the Internet, and agreed it would not use such claims in the future. A California federal judge, who previously had denied the plaintiffs’ claims for damages, dismissed the case entirely, agreeing with defendants and finding that plaintiffs lacked standing because they “made no showing that Twinings will resume its use of the offending label statements or that [they] intend to purchase Twinings’ tea again in the future.”

Another Retailer Hit with Lawsuit Over Allegedly Misleading Outlet Prices

A putative class action suit was filed against AM Retail Group Inc., parent company of G.H. Bass & Co., in a California federal court over allegedly misleading outlet merchandise pricing.

The lawsuit alleges that shoppers visit Bass outlet stores in California based on the “commonly understood” idea that consumers can purchase merchandise that first appeared in non-outlet retail locations, but at a discounted price.

However, according to the allegations in the suit, the merchandise in Bass outlet stores were never sold at the alleged retail price or in any location other than a Bass outlet store. Thus, consumers are misled into believing that they are receiving a discount versus the “compare at” or “original” price even though the goods have never actually been sold at that higher price, and any represented savings is purely illusory. The complaint alleges defendant has engaged in a false advertising “campaign calculated to lure consumers into purchasing products they believe are significantly discounted,” and is in violation of California law.

The lead plaintiff has also filed similar suits recently against the parent companies of Van Heusen and BCBGMAXAZARIA.

Babyganics Sued Over Alleged “Organic” Products

KAS Direct LLC, the maker of Babyganics products, has been sued in a federal putative class action filed in New York by consumers alleging its infant products were organic, when in fact they were not.

According to the complaint, plaintiffs allege they purchased the company’s mineral-based sunscreens under the belief that it was organic and mineral-based, only to discover the product contained a number of synthetic ingredients.

The complaint alleges, “In reliance on defendant’s claims that the products are organic, plaintiffs were willing to pay more for the products than similar products that do not claim to be organic and in fact did pay a premium for the products.”

Plaintiffs allege they were principally misled by the company’s name, Babyganics, and the packaging which is white and green and dotted with plant graphics. As an example, plaintiffs point to the Babyganics’ mineral-based sunscreen, which in fact contain synthetic ingredients that are not approved for use in products labeled “organic,” including glycerin and butylene glycol.

Plaintiffs do not appear to allege that the packaging does not list the actual ingredients on the product, or that the ingredient list is misleading.