- Regulators continue to emphasize that relative comparisons in advertising must be supported by fact-based evidence.
- Each claim in an advertisement remains subject to review by the National Advertising Division.
The annual ABA Antitrust Law Spring Meeting held in Washington, D.C., last month included sessions on consumer protection. Key takeaways include the following:
This update details discussions on the above topics covered at the April meeting. Read the full Update here.
Because pricing discount and sales class actions are likely to continue and retailers, especially brick-and-mortar ones, may have difficulty enforcing arbitration agreements and class action waivers, companies will want to not only check the ways in which they draft and enforce arbitration agreements, but carefully monitor compliance with pricing laws.
The Tenth Circuit recently affirmed a district court’s denial of J.C. Penney’s bid to compel arbitration in a putative class action challenging J.C. Penney’s pricing discounts and sales in Cavlovic v. J.C. Penney Corp., Inc., No. 2:17-CV-02042-JAR-TJJ (10th Cir. March 7, 2018). The case involved an in-store transaction. The Court of Appeals rejected J.C. Penney’s attempt to enforce (1) an arbitration clause contained in a credit card agreement; and (2) an arbitration clause contained in the agreement governing J.C. Penney’s rewards program.
Plaintiff purchased a pair of earrings at a J.C. Penney retail location with an advertised price of $209.99. The earrings were marked with a previous price of $524.98, and Plaintiff also received 25% off due to an additional sale. After purchasing the earrings and retuning home, Plaintiff claimed that she noticed an original price tag of 225, which was blacked out. Alleging the former price of $524.98 was fraudulently inflated and that she should have been given a discount off the $225 price, she sued J.C. Penney. She alleged false advertising under the Kansas Consumer Protection Act and asserted that she suffered emotional distress.
In response, J.C. Penney tried to enforce two different arbitration clauses–one from a J.C. Penney’s branded credit card (used to purchase the earrings) and the other from a rewards program (of which Plaintiff was a member). J.C. Penney lost on both arguments. The Tenth Circuit held that J.C. Penney was not a party to the credit card agreement formed between the issuing bank and the Plaintiff, and could not enforce the contract as a third party under Utah law, which governed the agreement. As for the rewards program, while J.C. Penney was a party to that agreement, the Court determined Plaintiff’s complaint was outside the scope of the arbitration clause, which governed disputes only “arising from or relating to” the rewards program itself.
The Federal Trade Commission (FTC) and the State of Maine recently delivered yet another “gut check” to businesses engaging in weight loss advertising, obtaining a $2 million dollar settlement against an advertising agency related to allegedly false claims. While challenges related to weight loss claims and related offers are all too familiar for brands, this settlement serves as a heavy reminder to ad agencies that they can also be held responsible for false advertising.
In its complaint against Marketing Architects Inc. (MAI), the FTC and Maine alleged that radio ads created and disseminated by MAI for its client, Direct Alternatives (the maker of Puranol, Pur-Hoodia Plus, PH Plus, Acai Fresh, AF Plus, and Final Trim) made a number of (1) false or unsubstantiated weight loss claims; (2) false or inadequately-disclosed “free trial” claims; and (3) false testimonials or ads disguised as testimonials. Continue Reading Agency Beware: False Advertising Liability Applies to Agencies Too