Advertising Law

Goldstein Invited to Speak at Fashion and Retail Law Seminar, May 20

Linda Goldstein, Chair of Manatt’s Advertising, Marketing and Media Division, will be speaking at the Fashion and Retail Law 2015: Trends and Developments seminar on Wednesday, May 20. The PLI program will focus on the key legal challenges for brands, retailers, and investors in the fashion and retail sectors.

Ms. Goldstein’s session, titled “Addressing Advertising and Marketing Risks,” will focus on FTC and state enforcement trends and priorities, social media risks, mobile marketing pitfalls, and sweepstakes, contests and other consumer promotions issues. Further information on the Fashion and Retail Law seminar may be found here.

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U.S. Supreme Court Could Decide Future of Privacy Law Class Actions

The future of consumer class actions alleging privacy violations may be in the hands of the U.S. Supreme Court now that the justices have granted certiorari in Robins v. Spokeo.

The case itself is a Fair Credit Reporting Act dispute brought by Thomas Robins after he discovered that Spokeo’s Web site contained inaccurate information about him. The people search engine and data aggregator allegedly stated that Robins was in his 50s and employed in a professional or technical field, information that was incorrect and would negatively impact his job search.

Spokeo moved to dismiss the suit, arguing that Robins lacked standing to sue under the federal statute. Even if the plaintiff could show that some of his information was inaccurate—a technical violation of the FCRA—he did not suffer an injury in fact as required by Article III, Spokeo said.

Robins countered that he did suffer injury, albeit not economic. Instead, he claimed “economic, reputational, and emotional injuries caused by the publication of false information about him.”

A federal district court sided with Spokeo and dismissed the suit, but the Ninth Circuit Court of Appeals reversed. According to the court, a violation of the FCRA triggered a cause of action under the statute and satisfied the standing requirement, as “the interests protected by the statutory rights at issue are sufficiently concrete and particularized that Congress can elevate them.” An additional harm—for example, economic loss—was therefore not required.

Spokeo appealed.

Absent an actual economic injury, consumers should be precluded from filing a suit, the company argued. The company suggested the following question for consideration: “Whether Congress may confer Article III standing upon a plaintiff who suffers no concrete harm, and who therefore could not otherwise invoke the jurisdiction of a federal court, by authorizing a private right of action based on a bare violation of a federal statute.”

The Court granted the petition and will hear oral argument next term.

A decision from the justices could have a major impact on consumer class actions generally and privacy cases specifically. In many of the cases brought against companies alleging privacy violations, the defendants have successfully argued that the plaintiffs should not be able to recover because they suffered no harm.

With high stakes on the line, amicus have lined up on both sides of the bar. Siding with Robins, the Consumer Financial Protection Bureau and Department of Justice filed a joint brief advising the justices not to grant cert. But companies including eBay, Facebook, Google, and Yahoo all filed an amicus brief in support of Spokeo, citing the rising cost of doing business for companies facing consumer class actions where the plaintiffs have not suffered an injury in fact.

To read the Ninth Circuit’s decision, click here.

To read Spokeo’s petition for writ of certiorari, click here.

To read Robins’ reply brief, click here.

Why it matters: The Court’s decision in the Spokeo case could have a potentially wide-ranging impact on consumer class actions. Multiple federal statutes—including the Telephone Consumer Protection Act, the Fair Debt Collection Practices Act, and the Video Privacy Protection Act, among many others—currently allow plaintiffs to file suit based on a statutory violation without the showing of an actual injury. A reversal of the Ninth Circuit’s opinion could deter future consumer class actions lacking an injury in fact, but if the Supreme Court were to affirm the decision, businesses could face a wave of litigation and potential multi-million dollar awards. The Court will hear oral argument next term.

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Bud Light Faces Backlash Over Label

Bud Light got into trouble recently over a label statement that critics characterized as promoting a culture of rape.

One of the scroll messages used by the company as part of its “Up for Whatever” campaign read: “The perfect beer for removing ‘no’ from your vocabulary for the night. #upforwhatever.”

Although Anheuser-Busch said the messages were “intended to inspire spontaneous fun,” this one inspired a firestorm of controversy on social media and beyond.

Reaction ranged from dismay to outrage, with tweets ranging from a comment that Bud Light “just got super rapey,” to a commenter asking the brewmaker to define consent, and yet another “calling the Bud Light PR Team, you’re needed for clean up in the stupid/thoughtless decisions aisle.”

Even lawmakers got involved, with Rep. Nita Lowey (D-N.Y.) tweeting: “RT if you agree @budlight #UpForWhatever campaign should promote responsible—not reckless—drinking. #NoMeansNo.” Rep. Lowey followed up with a statement taking Anheuser-Busch to task. “This grossly shortsighted marketing tactic shows an epic lack of understanding of the dangers associated with excessive alcohol consumption, such as sexual assault and drunk driving. We need responsible companies to help us tackle these serious health public health and safety problems, not encourage them.”

The company apologized in a tweet that the “message missed the mark” and that Anheuser-Busch “would never condone disrespectful or irresponsible behavior.” It later followed up with a statement that “No means no. … We’ve stopped producing this label.”

Why it matters: The label misstep—and resulting media backlash—has already had a real impact on Bud Light. ListenFirst, a data analytics company, reported that in the days following the controversy, there were 45,600 tweets about Bud Light. For comparison purposes, ListenFirst said there were 3,900 tweets during the same time period last year. And a measurement of daily brand consumer perception by YouGov BrandIndex reported that the beer’s “buzz” fell from a 6 (the average score for domestic beers is 4) to 0, with the rating among women dropping from a 5 to a -3.

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Vermont’s GMO Law Survives Judicial Review

The country’s first genetically modified organism (GMO) food labeling law will take effect as scheduled despite a lawsuit from food industry groups seeking an injunction.

In 2014, Vermont became the first state to enact labeling requirements for GMOs, set to take effect July 2016. While Connecticut and Maine previously passed GMO labeling requirements, the laws in those states are not triggered until a specific number of neighboring states have enacted similar legislation.

Pursuant to Vermont’s law, fresh produce and processed foods offered for retail sale in the state must include special labeling if they are entirely or partially produced by genetic engineering. Processed foods containing one or more genetically engineered ingredients must include label statements such as “partially produced with genetic engineering” or “may be produced with genetic engineering.”

The law also prohibits foods with genetically engineered (GE) ingredients from concurrently using labels like “natural,” “naturally made,” “naturally grown,” or “any words of similar import that would have a tendency to mislead a consumer.”

Groups including the Grocery Manufacturers Association sued in response, arguing that the new law violated their First Amendment rights and the Commerce Clause and was preempted by various federal statutes. In addition, according to the plaintiffs, producers would have to re-label their products, “a costly, time and resource-intensive effort,” establish dual inventories, and create production and distribution systems for Vermont-bound products. Such costs might push smaller manufacturers out of the state market, the groups added.

The state filed a motion to dismiss in defense of the law and the plaintiffs asked the court for a preliminary injunction to halt the law from taking effect.

In an 84-page decision, U.S. District Court Judge Christina Reiss denied the preliminary injunction and granted the state’s motion to dismiss on multiple claims related to the GMO labeling requirements. However, she denied the motion regarding the “natural” terminology provision.

She noted that the legislature included a “Findings” section in the bill where lawmakers concluded “that food produced from genetic engineering should be labeled as such, because [l]abeling gives consumers information they can use to make decisions about what products they would prefer to purchase, because public opinion polls indicate labeling is relevant to consumers, and because [p]ersons with certain religious beliefs object to producing foods using genetic engineering [and object] to tampering with the genetic makeup of life forms and the rapid introduction and proliferation of genetically engineered organisms and, therefore, need food to be labeled as genetically engineered.”

Since the GMO labeling requirements are supported by the legislature’s “Findings” and based on these legislative purposes, the requirements survived constitutional scrutiny, the court said.

“The safety of food products, the protection of the environment, and the accommodation of religious beliefs and practices are all quintessential governmental interests, as is the State’s desire to ‘promote informed consumer decision-making.”

As for the Commerce Clause claims, Judge Reiss found that Vermont’s law treats both in-state and out-of-state entities in the same manner. The statute “does not require [genetically engineered] manufacturers to alter their labeling, production, and distribution practices nationwide and it is indifferent regarding whether and how GE products are labeled in other states.”

Claims that the law was preempted by the Federal Food, Drug, and Cosmetic Act, the Nutrition Labeling and Education Act, the Federal Meat Inspection Act, and the Poultry Products Inspection Act also failed to sway the court.

The Food and Drug Administration has not promulgated any formal standards for GMO labeling, the court noted, and the agency has issued guidelines for the voluntary disclosure of GE ingredients. “This clearly implies that, at least from the FDA’s perspective, GE ingredient information may be provided without violating federal law or misbranding a food product,” Judge Reiss wrote.

“While plaintiffs’ pleas for GE labeling uniformity reflects economic sense, and perhaps common sense as well, it runs afoul of the presumption against preemption which ‘is particularly weak where Congress had indicated its awareness of the operation of state law in a field of federal interest, and has nonetheless decided to stand by both concepts and to tolerate whatever tension there [is] between them,” the court said.

Turning to the restrictions on the use of “natural” terminology, the court ruled the potential benefits of the law did not outweigh concerns about the lack of a definition for the term “natural.”

Because the law’s “‘natural’ restriction is bereft of definitional content, it will either sweep too widely or too narrowly in penalizing commercial activities that employ an advertising term that is ‘susceptible to more than one interpretation,’” Judge Reiss wrote. “Moreover, because [the law] does not restrict food product manufacturers’ use of ‘natural’ terminology generally, this raises the question of what governmental interest could be directly advanced when only certain commercial speakers are prohibited from using a potentially misleading term.”

To read the opinion in Grocery Manufacturers Association v. Sorrell, click here.

Why it matters: Food manufacturers should brace themselves for the new law to take effect July 1, 2016. Based on the court’s extremely thorough review—and denial of the plaintiffs’ motion for a preliminary injunction—it seems likely that the GMO labeling provision will withstand judicial scrutiny. However, the court’s concerns about the restrictions on “natural” terminology used in conjunction with GE ingredients could present a partial victory for the plaintiffs as the court expressed skepticism that the law advanced a substantial state interest and was no greater than necessary to serve that interest. Whether the success of the law nudges other states to pass similar legislation remains to be seen.

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Congress Considers Consumer Right to Review

Consumers would be endowed with a protected right to post reviews pursuant to a new bill introduced in Congress.

The Consumer Review Freedom Act of 2015—introduced by Reps. Darrell Issa (R-Calif.), Eric Swalwell (D-Calif.), Blake Farenthold (R-Texas), and Brad Sherman, (D-Calif.)—would prohibit businesses from including a provision in consumer contracts restricting the ability to post reviews. Also banned by H.R. 2110: asserting a copyright interest in a review.

Penalties of up to $16,000 per day could be levied against businesses that required consumers to sign a non-disparagement clause. Consumer rights groups and entities like Angie’s List and Yelp backed the legislation, which is modeled on a similar law passed last year in California.

The issue became a hot topic, as the number of online reviews increased and businesses struggled with managing negative commentary. Some companies tried to foreclose the possibility of bad reviews by including a non-disparagement clause in the terms of service.

Last year, one company elected to act on the provision, when KlearGear sent a couple that posted a negative review a bill for $3,500 for allegedly violating the non-disparagement clause in its terms of service. The couple refused to pay and responded with their own lawsuit alleging their credit was damaged as a result. A federal court judge in California ordered KlearGear to pay the couple $306,750.

When the case made headlines and consumers learned about the existence of such clauses, the California legislature sprang into action and passed a bill that bans non-disparagement clauses or similar terms that restrict a consumer’s right to post a review.

The federal proposal tracks California’s measure but also includes a prohibition on copyright claims, a tactic highlighted in a recent case in New York where a dentist included an assignment of a copyright interest in a patient agreement. When the patient posted a negative review of the dentist, he sued for copyright infringement (although a federal court judge tossed the suit).

Why it matters: Companies should take note of the federal legislation and when considering the use of either non-disparagement clauses or assignment of copyright interest with regard to online reviews, they should remember that in addition to the negative publicity from acting on such clauses, courts have been reluctant to actually enforce them.

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