Key Takeaway:

Companies making Made in USA claims should adhere to Federal Trade Commission guidance and state law, as such claims are likely to draw attention from regulators and class action plaintiffs.  Additional detail on regulatory compliance can be found in our prior post.

Deceptive Made in USA advertising continues to draw attention from the FTC. The FTC recently settled with hockey puck producer Patriot Puck and recreational equipment sister companies Sandpiper and PiperGearUSA regarding their allegedly false Made in USA claims. This brings the total number of FTC enforcement actions arising from misleading U.S.-origin claims to 25 since 1999, with six of those actions having been initiated since April 2017.[1] Continue Reading Made in USA: The FTC Moves Against Two More Retailers

Consumers notice and are more likely to buy products that are marketed as Made in USA, but companies face significant legal risk, negative publicity, and decades of government oversight if they overstate the extent to which their products are made in the United States.

  • Companies marketing their products without qualification as Made in USA must at least meet the “all or virtually all” standard, meaning that all significant parts and processing that go into the product are of U.S. origin.
  • Federal, state, self-regulatory, and private actors are increasingly bringing enforcement actions and other litigation for false or misleading use of Made in USA labels.

This update from September outlines the FTC’s enforcement policy on U.S.-origin claims and analyzes recent actions challenging such false or misleading claims. Read the full Update here.

Takeaways:

  1. Support any comparative claims and clearly disclose the basis of the comparison.
  2. Be specific about claims regarding products or components made in the United States.

Last month, the National Advertising Division (NAD), a self-regulatory body, recommended that Telebrands, Corp., discontinue certain advertising claims for the company’s Atomic Beam flashlight, including claims comparing its brightness and durability, associating it with the U.S. military, and identifying its components as made in the United States.

NAD recommended, among other things, that Telebrands discontinue its claims that the Atomic Beam is “40 times brighter” and more durable than ordinary flashlights and provides features (such as strobe or zoom) that ordinary flashlights do not provide because the company did not submit evidence showing a superior brightness over such “ordinary” or “regular” flashlights or that the “tactical” features of its flashlights were not available on other flashlights.

In response to the challenge from Energizer Brands LLC alleging that the advertising also created the false impression that the Atomic Beam was endorsed by or associated with the U.S. military, Telebrands changed the name of the product to “Atomic Beam” from “Atomic Beam USA” and removed a statement in a commercial that the Atomic Beam uses “U.S. Special Forces Tactical Technology” while displayed with an action shot of military commandos.

NAD also recommended that the company discontinue its claim that the “critical components” in the flashlights are “made right here in the USA” but confirmed that the company could make truthful and qualified claims that specific parts are made in the United States.

See NAD’s press release for more information about these and other claims about the Atomic Beam flashlight.

You see it and your heart sinks: a one-star review with negative feedback for your business on an online review site. You think it’s unlawful and want it taken down.

What do you do?

The California Supreme Court recently considered a case showing what not to do. In Hassell v. Bird, Ava Bird left one-star reviews for her lawyer, Dawn Hassell, on Yelp. Ms. Hassell wanted the reviews taken down so she sued Ms. Bird for libel in California. As part of the suit, Ms. Hassell obtained an injunction directing Yelp (who was not a party) to remove the reviews.

Reviewing the five years of litigation through which Ms. Hassell pursued the injunction against Yelp, the California Supreme Court concluded that the website was the wrong target:

“Nevertheless, on this record, it is clear that plaintiffs’ legal remedies lie solely against Bird, and cannot extend — even through an injunction — to Yelp.”

The Court’s decision was grounded in the federal Communications Decency Act (“CDA”), 47 U.S.C. § 230. In the CDA, Congress decided more than 25 years ago that online platforms that host users’ speech cannot be liable for what people say on their websites. It provides that:

“No provider … of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

47 U.S.C. § 230(c)(1). Further, “[n]o cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” Id. § 230(e)(3).

As applied in this case, the CDA immunized Yelp from liability for publishing (i.e. hosting) the reviews in question, and it could not be forced to remove Ms. Bird’s reviews. The decision in Hassell not only reaffirmed this core principle underlying the CDA, but also addressed Ms. Hassell’s attempted “end-run” on CDA immunity by rejecting the following arguments:

  • Ms. Hassell argued that because Yelp was not a party, it was not entitled to CDA immunity. The Court disagreed, holding that because Yelp was “being held to account for nothing more than its decision to publish the challenged reviews,” it was entitled to immunity even as a non-party.
  • Ms. Hassell argued the injunction did not impose liability on Yelp. Again, the Court disagreed, holding that the CDA was meant to “shield Internet intermediaries from the burdens associated with defending against state-law claims that treat them as the publisher or speaker of third party content, and from compelled compliance with demands for relief that … similarly assign them the legal role and responsibilities of a publisher qua publisher.”

So what should Ms. Hassell have done? The Court set out her legal remedies: enforce against Ms. Bird the existing judgment, which required Ms. Bird to take efforts to remove the reviews. And then explore civil contempt remedies against Ms. Bird if she failed to comply with the court order entering judgment. In a blog post, Yelp’s deputy general counsel also suggests that “litigation is never a good substitute for customer service and responsiveness, and had the law firm avoided the courtrooms and moved on, it would have saved time and money, and been able to focus more on the cases that truly matter the most — those of its clients.”

California’s updated automatic renewal law (ARL) took effect on July 1, 2018.  We covered these changes in a 2017 client alert, but a reminder is important here because the new law is now “live” and we expect to see more enforcement efforts for alleged noncompliance with the law.

The ARL sets rigid rules about transparency for subscription-based business models where the subscription is automatically renewed, and the subscriber is charged, on a recurring basis (e.g., monthly for a video-on-demand service or beer-of-the-month club). Specifically, such businesses must (1) disclose the automatic renewal offer terms clearly and conspicuously; (2) obtain affirmative consent from the consumer before charging his/her payment method; (3) provide the consumer with an acknowledgement of the automatic renewal terms and cancellation policy in a manner that can be retained for their records (e.g., an email receipt); and (4) notify consumers of any material changes to the automatic renewal terms. The recent changes in the law also now (5) require an online cancellation option for automatic renewal offers that the consumer signed up for online, and (6) clarify that the business must clearly and conspicuously disclose the price that will be charged after a free trial period ends and how and when to cancel before such charge occurs. Continue Reading Reminder: Updates to the California Automatic Renewal Law Are Now in Effect

A California appeals court has allowed a putative-class-action complaint to proceed against an online retailer based on a consumer’s allegation that the retailer falsely advertised price discounts and that the consumer would not have purchased the items if he knew he was not receiving a discount.

In Hansen v. Newegg.com Americas Inc., Case No. B271477, the Fifth Appellate District of the California Court of Appeals reversed the lower court. The lower court had dismissed for lack of standing, reasoning that plaintiff received exactly what he paid for. The Court of Appeals held, however, that the plaintiff had established standing because he claimed the “list prices” (which were crossed out and next to a lower, actual price) were inflated and that he would not have purchased his items if he had known the list prices were misrepresented. This was enough to establish injury to “money or property,” as required by California law. The opinion discussed both California Supreme Court and Ninth Circuit precedent interpreting California’s Unfair Competition Law and False Advertising Law.

Takeaway: Companies will want to carefully monitor compliance with pricing laws as pricing and discount class actions will continue to be filed in California.

 

Takeaways:

  1. Health-related advertising claims must be supported by competent and reliable scientific evidence, generally consisting of human clinical trials that are methodologically sound and statistically significant to the 95% confidence level.
  2. Advertising claims must be clearly expressed as ingredient claims if the substantiation addresses only the efficacy of the ingredients in the product, not the product itself.

Continue Reading National Advertising Division Recommends that VH Nutrition Discontinue Claims for TriDrive Supplement Marketed to Athletes

Facebook has implemented a new policy regarding ads related to cryptocurrency. While Facebook previously banned all such ads, under the revised policy effective June 26, advertisers of cryptocurrency content may apply online for approval of their advertisement. “Cryptocurrency content” is considered by Facebook to include “any advertisements or content in any way related to cryptocurrency”. In the application, advertisers are asked about their relevant licenses, whether their company is traded on a public stock exchange, and other public background information regarding their company. Facebook clarified in its press release that its ban on products such as binary options and initial coin offerings (ICOs) remains intact.  Continue Reading Facebook Creates a Process of Review for Previously-Banned Cryptocurrency Ads

The NAD recently recommended that Perdue Farms, Inc. modify or discontinue certain TV and YouTube ads about Perdue’s “Harvestland Organic” chicken. Tyson Foods, Inc. challenged the Perdue ads before the NAD, arguing that they broadly communicated that all of Perdue’s chickens are “happy” and raised “organically” (free-range, non-GMO, 100% vegetarian-fed, and raised without antibiotics). Perdue responded that ads only communicated claims about Perdue’s “Harvestland Organic” sub-brand. The NAD, however, viewed the overall “net impression” conveyed by the ads and found that they communicated broad claims about all of Perdue’s chickens, in part because the ads contained many visual and audio references to the primary Perdue brand, but only fleeting visual references to the Harvestland Organic logo. Perdue announced that it will appeal the NAD’s decision. Continue Reading National Advertising Division Recommends that Perdue Farms Discontinue Ads About Happy, Organic Chickens

In the first half of 2018, on the heels of the Equifax breach last fall, a number of state legislatures addressed privacy and data security issues, and in particular, data breach notification. Most notably, Alabama and South Dakota passed their first breach notification laws, making it so there now breach notification laws in all 50 states. In addition, Arizona, Louisiana, Colorado and Oregon updated their existing laws.

Both the new laws and the revisions reflect national trends over the last several years to clarify (and shorten) notification periods, broaden the scope of information that prompts notification requirements, and increase engagement with regulators. The changes add complexity, but because they are in line with changes made by other states, they should not require substantial changes to existing procedures for responding to larger incidents. Continue Reading What You Need to Know Regarding The New Data Breach Notification Laws