Advertising Law

New in False Advertising Suits: "Natural" Claims, Healthy Beverages

Demonstrating that the focus on health-related claims has not abated, two new class actions were filed challenging the "natural" labels for deli meat and claims which implied that a sugar-filled beverage was a healthy drink for consumers.

In Florida federal court, Benjamin Phelps accused Hormel Foods Corporation of deceptively labeling 17 different products—including Natural Choice Honey Deli Ham and Natural Choice Rotisserie Style Deli Chicken Breast—by proclaiming that the products were "100% Natural" and had "No Preservatives" when they actually contain synthetic ingredients and/or preservatives, such as cultured celery powder and maltodextrin.

Hormel "knowingly and purposefully" mislabeled the products, Phelps alleged, to take advantage of the burgeoning market for healthy foods. Phelps cited research studies that consumers are willing to pay up to 25 percent more for "natural" products. The defendant's "Make the Natural Choice" advertising campaign included a website and ads on numerous social media sites with claims like "Preserve your right to no preservatives."

The complaint—which seeks to recover for violations of Florida state law—requested monetary relief (restitution, disgorgement, damages, costs, and attorney's fees) as well as corrective advertising.

In a second action, the Center for Science in the Public Interest filed suit in New York federal court against PepsiCo, asserting that, despite the company's labeling of its line of Naked Juice drinks as containing healthy ingredients such as apples, berries and kale, the beverages actually contain more sugar than a can of Pepsi.

The juice and smoothie beverage line touts itself as containing super nutrients in liquid form and "only the best ingredients," but instead is comprised of "cheaper and less nutritious ingredients like apple juice," according to the complaint filed on behalf of three consumers.

For example, Pepsi markets the Kale Blazer using pictures of kale and other leafy greens along with claims such as "dark leafy goodness" and "NO SUGAR ADDED," implying that the drinks are low in sugar. But the drink is mostly sugary orange juice, the group alleged, with some added kale flavor. As part of its marketing campaign, the company generally "exaggerated" the presence of kale in the drink and created a Twitter handle (@TweetsByKale) to promote the drink with tweets like "if you can't eat 'em, drink 'em," and images of the bottle surrounded by kale leaves.

According to the complaint, the statement "Kale flavored 8 juice blend" on the bottom of the label, was in "very small print" and was "neither prominent nor adjacent to the Kale Blazer name." The message also "overwhelmed the other marketing and messaging" in contravention of state and federal law.

"By misrepresenting the amount of the named ingredients and non-named ingredients (through omission), and by implying that Naked beverages are low in sugar, PepsiCo misleads consumers into believing that the products have a different nutrition and ingredient profile than they do," CSPI argued.

To read the complaint in Phelps v. Hormel Foods Corp., click here.

To read the complaint in Lipkind v. PepsiCo., Inc., click here.

Why it matters: Even though the lawsuits targeted different products—deli meats and smoothies—the complaints emphasize the risks advertisers take when trying to reach health-conscious consumers.

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Negative Option Billing Ban for Marketers of Skincare Products

A group of 29 defendants are subject to a permanent ban on deceptive marketing and negative option billing pursuant to an order obtained by the Federal Trade Commission.

The June 2015 complaint against seven individuals and 15 companies alleged that they sold skincare products such as Auravie, Dellure, and the Miracle Face Kit by offering "risk-free" trials to consumers, and by asking for credit card information to cover shipping costs. However, the defendants actually used the information to enroll consumers in a program at a rate of up to $97.88 per month for other products they did not order, the FTC said.

The defendants—a total of 33 in the case after the agency filed an amended complaint in October 2015 adding two individuals, another eight corporate defendants and one corporate relief defendant—often made it difficult to cancel membership in the program, stop the charges, or obtain a refund, the FTC alleged.

In addition to violating the Restore Online Shoppers' Confidence Act and the Electronic Funds Transfer Act, the defendants ran afoul of Section 5 of the Federal Trade Commission Act by falsely claiming to be accredited by the Better Business Bureau, the agency said.

Over the last few months, five of the defendants have agreed to court orders with the agency and the FTC obtained default orders against another 19 defendants in the California federal court overseeing the case. Only four defendants remain in active litigation with the agency.

Each of the orders prohibits the defendants from using negative option programs and from engaging in deceptive advertising. Monetary judgments of more than $72.7 million were largely suspended, with the exception of $2.7 million that will be turned over to the FTC.

To read the complaint and the final orders in FTC v. BunZai Media Group, click here.

Why it matters: "These defendants tricked people into paying for skin care products and abused the credit card system to extend their scheme," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement. "The Commission will continue to attack scams that rely on supposed 'free trial' offers and unauthorized credit card charges."

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FTC Targets Pop-Up Ad Tech Scam

The Federal Trade Commission hit Global Access Technical Support (and related individuals and entities) with an action accusing the defendants of hiring affiliate marketers to use pop-up ads to trick consumers into believing that their computers were infected with malware or viruses.

The ads, which sometimes hijacked browsers with loud alarms or recorded messages, intimated that they originated from the computer's operating system and came from legitimate technology companies like Apple and Microsoft, the FTC alleged. If consumers called the number provided in the ads, they were connected with a call center in India and then given a hard sell by a telemarketer who claimed that access to the consumers' computer was necessary.

Once remote access to the computer was obtained, the telemarketer would show the consumer innocuous screen shots (sometimes of directories, for example) and claim that they demonstrated the presence of malware or a virus. Consumers were duped into paying between $200 and $400 for unnecessary repair services as a result, the FTC said, and the defendants paid the affiliate marketers a commission based on the number of leads or calls generated from consumers seeking technical support.

A federal court judge in Missouri granted the agency's request for an order halting the defendants' operations and freezing their assets.

To read the complaint and temporary restraining order in FTC v. Global Access Technical Support, click here.

Why it matters: The FTC has brought prior actions against similar tech scams in recent months. It halted an operation that used software designed to trick consumers into believing there were problems with their computers and expanded a suit in conjunction with the Attorneys General of Connecticut and Pennsylvania involving consumers who paid for unnecessary technical support plans and services.

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Lanham Act Suit Against Uber Crashes to an End

A competitor's false advertising lawsuit against Uber Technologies crashed when a federal court judge in New York found the challenged claims to be nonactionable puffery.

Two black car companies, XYZ Two Way Radio Service and Elite Limousine Plus, filed a Lanham Act suit against Uber Technologies, alleging that the ride service company overstated claims about its safety and service. The challenged statements appeared on Uber's website, including "From the moment you request a ride to the moment you arrive, the Uber experience has been designed from the ground up with your safety in mind" and "We believe deeply that, alongside our driver partners, we have built the safest transportation option … around the world."

The claims also emphasized the strength of Uber's background checks, with claims that the company used "Background safety checks you can trust" and that Uber's checks are "often more rigorous than what is required to become a taxi driver."

Uber moved to dismiss the suit, arguing that the advertising constituted puffery. The court agreed.

"No doubt, these statements are intended to convey the impression that Uber takes the safety of its passengers seriously," U.S. District Court Judge Frederic Block wrote. "But they do so in terms that clearly fall within one or more of the accepted definitions of puffery. The overall tone is boastful and self-congratulatory. Many of the statements are couched in aspirational terms—'committed to,' 'aim to,' 'believe deeply'—that cannot be proven true or false. Others are vague and hyperbolic; if Uber literally set the 'strictest safety standards possible' at the outset, it could not 'improve them every day.' In sum, the Court concludes that the challenged statements cannot reasonably be understood as specific representations of objective facts."

The black car companies urged the court to take a close look at the background check claims, arguing that Uber's process could not be "more rigorous" than that of a taxi driver background check because the company does not require fingerprints, a medical clearance, or a drug test, as mandated by New York City's taxi regulator.

However, Judge Block again disagreed. Uber's statement was qualified by the term "often," he pointed out, and referred to the basic background check conducted on drivers across the country, with a proviso on the website that the "specifics vary depending on what local governments allow" for background checks.

As for Uber's claims about its relationship with partners, the court did not find a problem with the company's language even though Uber has gone to great lengths to treat its drivers as independent contractors, not employees. Nothing in the defendant's statements suggested that customers understand the use of "partners" as a legal term of art, Judge Block wrote. In granting Uber's motion to dismiss the suit, the court noted that "the term 'partner,' as used on Uber's website, reads like euphemistic adspeak devoid of any inherent meaning."

To read the memorandum and order in XYZ Two Way Radio Service, Inc. v. Uber Technologies, Inc., click here.

Why it matters: Judge Block recognized that the arrival of Uber on the New York City ground transportation market resulted in upheaval for yellow cabs and black cars in the city, but put his foot on the brakes of the plaintiffs' Lanham Act suit. "The plaintiffs have every right to demand that the competition they face from Uber be fair," the court said. "However … the Court concludes that they have failed to allege that Uber made any statements that constitute false advertising."

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Manatt Attorneys Tapped for 38th BAA Marketing Law Conference

Linda Goldstein, Marc Roth and Richard Lawson are featured speakers at the Brand Activation Association's upcoming 38th annual Marketing Law Conference.

Linda Goldstein, chair of Manatt's advertising, marketing and media practice, will share insights on the key issues and developments in her annual Year in Review. Marc Roth, co-chair of the firm's TCPA compliance and class action defense practice, will-moderate a panel on issues surrounding mobile marketing, and Richard Lawson, partner in Manatt's consumer protection practice, will join directors from the Florida and California Offices of the Attorneys General and the Deputy Chief of Consumer Protection of the Texas Attorney General's office. Lawson's session is titled, "State A.G. Policy Enforcement Priorities in Consumer Protection—An Inside and Outside Look."

The conference will be held on November 9-11, 2016 at the Downtown Chicago Marriott. For more information, click here.

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