Advertising Law

Stop Pulling My Leg: Pully Block Systems Not “Made in USA”

A distributor of pulley block systems agreed to stop making what the Federal Trade Commission said were false, misleading and unsupported claims that its products are “Made in USA.”

Texas-based Block Division sells metal pulleys for industrial use (to lift boats, for example, or operate overhead doors) and has touted its products for years as “Made in USA” and “American Made.” But in reality, the company’s pulley blocks and other products contained “significant” imported parts essential to the functioning of those products, the FTC asserted.

For several years the company used imported steel plates that entered the United States already stamped with the national origin claim, the agency alleged. Block Division furthered the deception by putting the “Made in USA” claim on its website, in stores, on social media, and in flyers and pamphlets, the FTC said.

Pursuant to the stipulated final order, the company is prohibited from making unqualified “Made in USA” claims unless it can show that “the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.”

Any qualified national origin claims must include a “clear and conspicuous” disclosure about the extent to which the product contains foreign parts, ingredients, and/or processing that must appear “immediately adjacent to the representation.” In addition, Block Division is prohibited from making country of origin claims unless they are true, not misleading, and the company has a reasonable basis for making them.

To read the complaint and the consent order in In the Matter of Block Division, Inc., click here.

Why it matters: “Consumers have the right to know that they can trust companies to be truthful when it comes to ‘Made in USA’ claims,” Acting FTC Chair Maureen K. Ohlhausen said in a statement. As the second “Made in USA” case in recent weeks, the Block Division settlement follows an action against the distributor of a water filtration system that reached a similar deal with the agency.

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Vizio Must Face VPPA Suit Over Smart TVs, Court Rules

Vizio’s woes continue over charges that the company installed software on smart TVs and collected viewing data on millions of consumers without their knowledge and consent.

Earlier this year, the company reached a deal with the Federal Trade Commission and the New Jersey Attorney General, requiring Vizio to pay $2.2 million and change its practices.

Now, Vizio must face a consumer class action alleging the company violated the Video Privacy Protection Act, a California federal court judge has ruled. The company moved to dismiss the consolidated litigation brought by six plaintiffs on the grounds that Congress never intended for the VPPA to apply to electronics manufacturers and that data allegedly collected about users did not constitute “personally identifiable information” protected by the statute.

As the information collected by the company on the smart TVs included zip codes, MAC addresses, IP addresses, and product model numbers, along with viewing data points about consumers, the plaintiffs characterized the information as highly personal.

U.S. District Court Judge Josephine L. Staton sided with the plaintiffs.

The VPPA establishes liability for a “video tape service provider,” defined as “any person, engaged in the business, in or affecting interstate or foreign commerce, of rental, sale, or delivery of prerecorded video cassettes tapes or similar audio visual materials.” The court had little trouble finding Vizio satisfied this definition.

Pointing to the “plain text of the statute,” the court explained that Congress used a disjunctive list of activities that “unmistakably indicates Congress intended to cover more than just the local video rental store.” The use of the phrase “similar audio visual materials” strengthens this reading and demonstrates that “the definition is medium-neutral; the defendant must be in the business of delivering video content, but that content need not be in a particular format,” the court added.

“Plaintiffs allege that Vizio has developed a product intimately involved in the delivery of video content to consumers, has created a supporting ecosystem to seamlessly deliver video content to consumers (including entering into agreements with content providers), and has marketed its product to consumers as a ‘passport’ to this video content,” the court wrote, finding that the plaintiffs qualified as “consumers” under the statute because they paid for Vizio’s applications.

Judge Staton also determined that the data collected by Vizio constituted PII under the VPPA. Again she noted that since Congress used a disjunctive list (using the word “includes”), it contemplated “that the Act would protect more than just a person’s name or physical address.”

However, the court stressed the posture of this case. “Ultimately, Plaintiffs will have to demonstrate that Vizio’s disclosures are ‘reasonably and foreseeably likely to reveal’ what video content Plaintiffs have watched,” the judge said. “But this is a factual inquiry ill-suited for resolution on a motion to dismiss.”

The court denied Vizio’s motion to dismiss with regard to the VPPA claims, but did toss claims under the Wiretap Act, California’s False Advertising Law, and Invasion of Privacy Act, albeit with leave to amend.

To read the order in In Re: Vizio, Inc., Consumer Privacy Litigation, click here

Why it matters: The California federal court ruling is the latest decision that applies a 1988 statute to 21st Century technology. While some courts have ruled the law was meant to be flexible and found it can be used to sue app manufacturers, others—such as a Georgia federal court—have held the VPPA did not apply to a free app.

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Hobby Lobby Crafts a Deal With Virginia AG

Hobby Lobby reached a deal with the Virginia Attorney General in an action accusing the retailer of deceptive pricing.

According to the complaint, the arts and crafts retail chain “routinely” advertised discounts compared to “other sellers,” but did not disclose what its prices were actually being compared to, as required by state law.

“Comparison shopping can be a useful tool for finding good deals, but comparison price advertising only works if businesses are clear about their prices and how they compare to competitors,” AG Mark Herring said in a statement.

In addition to paying the state an $8,000 civil penalty, Hobby Lobby is subject to a permanent injunction against future violations of the state’s Comparison Price Advertising Act.

Why it matters: Deceptive pricing suits have been a popular choice for consumer class actions—JCPenny was one recent target—and now regulators, such as the Virginia AG, are getting in on the act.

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Nike Sprints to Victory in Pricing Suit

Nike lived up to its “just do it” tagline with a victory in Oregon federal court when a judge granted the company’s motion to dismiss a deceptive pricing suit.

Monika Taylor claimed that Nike outlet stores ran afoul of California consumer protection laws by using fictional “suggested retail” prices that are higher than the items’ actual prices to scam consumers into thinking they are getting a bargain. The store used tags with two prices: a “Sugg. Retail Price” and a lower “Our Price,” leading her to believe that the items with tags were discounted, she said.

The court granted Nike’s motion to dismiss. Although her complaint listed the date on which she purchased her items, the location of the outlet store, and the type of product she purchased, Taylor failed to state her claims with sufficient specificity, the court said, finding it “unclear what exactly Ms. Taylor is alleging.”

She provided no meaning to the terms “former,” “original,” or “regular,” which U.S. District Court Judge Michael W. Mosman said represent three different concepts even though the complaint treated them as if they were indistinguishable, leaving it hard to determine the exact theory upon which Taylor claims she and other consumers were deceived by the dual price tags.

“Did she believe the Sugg. Retail Price to be one at which the same items were previously offered at Nike retail stores or other, non-outlet retailers?” the court asked. “Or, did she believe the Sugg. Retail Price to be one at which the same items were being currently offered by other stores in the relevant market? Or, did she believe the Sugg. Retail Price to be one at which an independent manufacturer determined the items to be worth? Without answering these or similar questions, it is difficult to identify Ms. Taylor’s theory of fraud in a way that allows Nike to adequately defend against the allegations.”

The court also struggled with the plaintiff’s allegations that Nike’s items were “outlet exclusive,” and was unclear if Taylor was alleging the products were never sold anywhere but Nike Outlet stores or that they did not sell at the suggested retail price within 90 days of being marked.

Lacking clarity, Judge Mosman dismissed the complaint’s fraud allegations, also finding that Taylor lacked standing to seek injunctive relief. Her “economic injury is rooted in Nike’s alleged deception; without such deception, she would not have purchased the merchandise or paid as much as she did,” the court said. “By virtue of her past injury, however, Ms. Taylor is now aware of any false pricing scheme in which Nike might be engaged. Therefore, she cannot demonstrate ‘the imminent prospect of future injury’ because she can no longer be deceived.”

To read the opinion and order in Taylor v. Nike, Inc., click here

Why it matters: The court’s order eliminates liability based on Nike’s outlet store pricing model—for now, as Taylor was granted leave to amend her complaint. The shoe giant is only the latest retailer facing a deceptive pricing suit, joining the likes of Kohl’s and Columbia Sportswear Company.

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