Hunton Retail Law Resource

We previously reported on the U.S. Food and Drug Administration’s (“FDA’s”) request for public comment concerning the use of the term “natural” on food labels, and we noted that businesses should consider seeking a stay of any pending lawsuits challenging their use of the term “natural” on food labels under the primary jurisdiction doctrine. The Ninth Circuit, home of the infamous “Food Court,” has now invoked that doctrine and has ordered the stay of a pending “natural” mislabeling class action in Kane v. Chobani, LLC, No. 14-15670.

On April 12, 2016, the Federal Trade Commission announced a package of four settlements and one lawsuit against the marketers of sunscreen, body lotion and hair care products. Each of these matters was brought in the FTC’s administrative forum and allege a single count: that the products could not be considered all natural because each product contained at least one synthetic ingredient.

This past week, the following regulatory and consumer actions made headlines:

FDA Scratches Out Shionogi’s Misleading Labeling on its Children’s Head Lice Lotion

On April 1, 2016, the Food & Drug Administration (“FDA”) hit Shionogi & Co. Ltd. with a warning letter stating that it had mislabeled its Ulesifa children’s head lice lotion because the labeling failed to inform patients that it should not be used on children under six months old and that it does not eliminate lice eggs. The labeling was in Shionogi & Co.’s recently issued customer co-pay assistance voucher that offered patients discounts to bring their co-pays down to $10. The FDA acknowledged that the voucher’s fine print stated it was only indicated for children over six months of age, but the FDA said that was not enough to avoid mislabeling violations. The agency requested that Shionogi & Co. cease the mislabeling immediately and submit a written response within two weeks.

This past week, the following regulatory and consumer actions made headlines:

U.S. Supreme Court Rejects Procter & Gamble’s Challenge on “Snake Oil” Claim

Procter & Gamble’s (“P&G’s”) efforts to get the U.S. Supreme Court to review an Ohio federal judge’s class certification finding ended when the high court denied certiorari in The Procter & Gamble Co. v. Dino Rikos, thereby upholding the Sixth Circuit’s 2-1 decision.

On March 29, 2016, the Federal Trade Commission (“FTC”) filed suit against Volkswagen Group of America (“VW”), which includes Volkswagen of America and Audi of America, for its “Clean Diesel” advertisements.

The complaint alleges VW’s “Clean Diesel” ads made various deceptive claims, including that its diesel technology produced “30% fewer emissions” and reduced “nitrogen-oxide emissions by 90%.” The FTC alleges that the vehicles with VW’s “Clean Diesel” technology were also equipped with a “defeat device” designed to calibrate the vehicle’s emission system to produce legally-compliant emissions during standard emissions testing.

This past week, the following consumer protection actions made headlines:

Litigation Halted:

Jury finds Pom Wonderful Failed to Prove Coke Misled Customers

A California federal jury found that Pom Wonderful failed to prove by a preponderance of the evidence its claims under the Lanham Act that Coca-Cola misled customers into thinking that Minute Maid’s “Enhanced Pomegranate Blueberry Flavored 100% Juice Blend” contained more than 50 percent of pomegranate and blueberry juice combined. Pom Wonderful had sought $77.5 million from Coca-Cola, claiming that the company had stolen its business by tricking consumers into buying its juice.

This past week, the following consumer protection actions made headlines:

Retail Pricing: Class Action Complaint Against Gap Dismissed

A putative class action, alleging that The Gap, Inc.’s deceptive advertising in stores confuses customers as to what products are actually discounted and tricks many into buying products at full price, was tentatively tossed by a California state judge last week. The Court granted Gap’s demurrer in part because the named plaintiff failed to identify particular advertisements relied upon in her purchases and, more importantly, could not allege that she was actually injured by Gap’s alleged practices. In fact, the Court stated that being “psychologically committed” to an item such that the named plaintiff did not return it was not enough to state a claim. The court gave the plaintiff one last chance to allege an injury.

For the past several years, the industry and the plaintiffs’ bar have been litigating over what is “natural” and what is not when it comes to food products. This issue hit home with retailers with news of multimillion dollar settlements resolving claims concerning use of the term “natural” on food product labels. The issue certainly became blurred when it came to modern processing methods and advances in biotechnology, particularly with respect to ingredients like high fructose corn syrup or genetically modified fruits and vegetables. Late last year, however, in response to four consumer petitions, the U.S. Food and Drug Administration (“FDA”) requested public comments concerning the use of the term “natural” on food labels. Whether and how the FDA ultimately defines the term “natural” will surely impact cases in the long-run. But the FDA’s decision to request comment has more immediate effects. It arms defendants with potential means to bring pending litigation to an immediate halt.

This past week, the following consumer protection actions in federal courts and agencies made headlines:

The Ninth Circuit

The Ninth Circuit was busy addressing consumer protection issues this week. Two proposed class actions brought against Apple, Inc. were decided in favor of the company. In the first action, Hodges v. Apple, Inc., a three-judge panel affirmed a lower court’s dismissal of a putative class action alleging deceptive practices in the advertising and sale of Apple’s MacBook Pro with retina display computers. The plaintiff was dissatisfied with the quality of his retina display screen, but the Ninth Circuit agreed with the lower court that Apple had not misled consumers about the retina displays in its advertising. In the second case, a three-judge panel again upheld a dismissal of a proposed class action against Apple that accused the company of misrepresenting the speech capabilities of its iPhone 4S product. The majority of the appeals court agreed with the lower court’s assessment that the allegations about the capabilities of the Siri speech recognition software were too broad, and did not meet the pleading requirements under the Federal Rules of Civil Procedure.

Finally, a three-judge panel revived a class action that had previously been dismissed by a district judge against Hain Celestial’s Alba Botanica skincare line. Plaintiffs claimed that marketing the products as “natural” misled consumers into buying products that contained synthetic substances at a higher cost.

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:

Disinfecting Wipes

After a challenge by The Clorox Company, NAD recommended that Reckitt Benckiser, Inc., discontinue certain claims made in both print and television ads for Lysol Disinfecting Wipes and Spray products. The claims included statements declaring that Lysol “helps fight the flu before it starts” and kills “45% more types of germs” as compared to other wipes. NAD concluded that these claims were not supported by evidence in the record, and Reckitt Benckiser announced that it plans to appeal NAD’s findings to the National Advertising Review Board. Clorox has been active recently in challenging competitors’ claims–just a few weeks ago, in a challenge brought by Clorox, the NAD recommended that the maker of OxiClean White Revive non-chlorine bleach modify its television ad campaigns.

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

Outlet Retailers Sued over Allegedly Deceptive Pricing Practices

Class action lawsuits against several retailers, including Burberry and Dooney & Bourke, allege that outlet discount prices tags that compare the outlet price with purported retail prices deceive consumers into believing they are getting a bargain when, in fact, they are not. Reference pricing rules (e.g., the FTC’s Guides on Deceptive Pricing) prohibit sellers from offering fictitious bargains. In these cases, the plaintiffs allege that the retailers’ practice of offering for sale made-for-outlet goods that never were sold at the referenced price is deceptive.

This past week, the following regulatory and consumer actions made headlines:

National Advertising Division Weighs in on “Scary Bleach” Claims

After a challenge by The Clorox Company, the National Advertising Division (“NAD”) recommended that Church & Dwight, the maker of OxiClean White Revive non-chlorine bleach, modify its television ad campaign suggesting that chlorine bleach could be “scary.” The commercials in question highlighted garment care labels directing consumers to “use only non-chlorine bleach, when needed,” thus implying that Chlorox’s product was damaging to the kinds of white garments depicted in the ads. The NAD found that Church & Dwight was required to provide a reasonable basis for its use of care labels in its ads, particularly advertising claims that denigrated Chlorox’s product. This decision followed on a 2014 NAD recommendation that Church & Dwight avoid conveying the unsupported message that chlorine bleach is damaging to white garments.

Each week, we will present a summary of key consumer protection developments affecting the retail industry. This past week, the following regulatory and consumer actions made headlines:

FTC Continues Focus on False Weight Loss Claims, Settles with Sale Slash for $43 million

After a nearly year-long litigation, California company Sale Slash LLC has agreed to pay $43 million to settle Federal Trade Commission charges that the company deceptively sold “bogus” weight loss pills, including through unauthorized celebrity endorsements. As part of the settlement, Sale Slash may not represent that its products are endorsed by any specific individual, or claim that its products aid in weight loss or are safe for consumers unless the claims are supported by “competent and reliable scientific evidence.”

In response to an investigation by the National Advertising Division (“NAD”), Silver Star Brands will discontinue its “JuniorSlim” dietary supplement. JuniorSlim is a weight-loss product marketed toward children. In conjunction with the Council for Responsible Nutrition, which is designed to expand NAD’s review of advertising claims for dietary supplements, NAD requested substantiation for several claims—both explicit and implicit—on Silver Star’s website.

On January 27, 2016, the National Advertising Review Board (“NARB”) went after dietary supplements, recommending that Novartis Consumer Health, Inc. (“Novartis”) discontinue advertising claims that its supplement Benefiber “Helps Maintain Regularity.” The case was originally brought before the National Advertising Division (“NAD”) by a competitor claim from Proctor & Gamble Co., which argued that the fiber contained in Benefiber, wheat dextrin, is not clinically proven to promote regularity. After NAD recommended Novartis discontinue the claim ...

Last month, the American Tort Reform Foundation (“ATRF”) released the 2015-2016 edition of its annual “Judicial Hellholes” report. Each year, the report identifies the venues it deems the least favorable for defendants and highlights notable pro-plaintiff rulings and practices in each jurisdiction.

Late last year, as the holidays approached, the Federal Trade Commission issued enforcement guidance on “native advertising” — ads that purposely are formatted to appear as noncommercial and are integrated into surrounding editorial content. The agency’s guidance took two parts: an Enforcement Policy Statement on deceptively formatted ads, and a Guide for Business on native advertising. These long-awaited guidance documents follow on the FTC’s December 2013 “Blurred Lines” workshop on native advertising. Importantly, the FTC notes that its policy statement does not apply just to advertisers but also to other parties that help create the content: ad agencies, ad networks and potentially, publishers.

The chairwoman of the Federal Trade Commission, Edith Ramirez, has announced that the FTC is significantly increasing scrutiny and enforcement of mainstream advertising by reputable companies. Chairwoman Ramirez recently said that the FTC is increasing enforcement against not only “outright fraud,” but also national advertising campaigns. The FTC’s recent approach of vigorous false advertising enforcement is intended to support the goal that, as the chairwoman stated, “advertising must be truthful and non-deceptive.”

On May 13, 2014, in Millennium Laboratories, Inc. v. Darwin Select Insurance Company, Case No. 12-CV-2742 H (KSC), a California federal district court ruled that Darwin Select Insurance Company breached its duty to defend Millennium in a pair of lawsuits in which two business rivals accused Millennium of false advertising, finding that the underlying lawsuits sufficiently alleged covered disparagement claims. In so doing, the court reaffirmed the longstanding rule in California that a carrier’s duty to defend is broad and requires the carrier to defend where there exists a ...

As reported in the Privacy & Information Security Law blog, the Federal Trade Commission announced that it has approved final consent orders with two companies that marketed genetically customized nutrition supplements. In addition to charges that the companies’ claims regarding the effectiveness of their products were not sufficiently substantiated, the settlements also allege that the companies misrepresented their privacy and security practices.

Read the full post.

Most marketers and retailers know that the consumer protection laws require that their advertising claims be substantiated, truthful and not misleading. But the new year is a good time to take stock of advertising campaigns, practices and procedures to make sure they pass muster under the Federal Trade Commission’s (FTC’s) latest guidance. The FTC’s recent enforcement actions provide a starting point.