Advertising Law

Webinar: Asked and Answered: Key Takeaways From the FTC's Latest Social Media FAQ Guidance

In its latest social media FAQ guidance, the Federal Trade Commission has taken a "deeper dive" into forms of social media promotion that were in their infancy just a few years ago. If you are responsible for ensuring social media compliance, it is essential that you understand the requirements the FAQs clarify and appreciate the widening liability net. On Thursday, September 10, Manatt, Phelps & Phillips, LLP and Bloomberg BNA will host a complimentary CLE accredited webinar, "Asked and Answered: Key Takeaways form the FTC's Latest Social Media FAQ Guidance," featuring Linda Goldstein, chair of Manatt's Advertising, Marketing & Media practice, and Richard Cleland, Assistant Director for Advertising Practices in the FTC's Bureau of Consumer Protection. The webinar will outline the latest practical strategies for running a high-impact social media campaign without putting your organization in legal jeopardy.

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FDA Wants to Pour Some Sugar on the Nutrition Label

Adding to the proposed changes to the Nutrition Facts label—the first tweaks in 20 years—the Food and Drug Administration has suggested yet another: adding the percentage of "added sugars" to the daily value list on the labels of packaged foods.

"Without information like this about a nutrient, it's hard to know if you're eating too much or too little in a given day," Susan Mayne, director of the FDA's Center for Food Safety and Applied Nutrition, wrote in a blog post about the proposal. "For example, a consumer who drinks a 20-ounce sugared beverage may be surprised to know it contains about 66 grams of added sugar, which would be listed on the label as 132 percent of the daily value."

Last year, the FDA announced the first changes to the Nutrition Facts label since 1993. Pursuant to the proposal, specific elements will now be emphasized, including the calorie content and servings per container, both of which would appear in larger, bolder type. Serving sizes will be adjusted to "reflect the amounts people currently eat," the agency said, rather than amounts based on consumption data from the 1970s and 80s. The daily values for certain nutrients will also be updated.

Other proposals add new data points for potassium and vitamin D, while others remove items such as calories from fat and vitamins A and C. Products typically consumed in a single sitting (a 20-ounce soda, for example, or a 15-ounce can of soup) must include information for a single serving instead of breaking down information for multiple servings on a label.

And the "sugars" column will now read "added sugars," as a percentage of daily values, to exclude naturally occurring sugar in the product.

The agency also announced a recommendation for daily value of added sugars: 50 grams for persons aged 4 and up and 25 grams for those ages 1 to 3, based on a 2,000-calorie-per-day diet.

The change came after the FDA reviewed a new report—the Scientific Report of the 2015 Dietary Guidelines Advisory Committee—that "provided evidence suggesting a strong association between a dietary pattern intake characterized, in part, by a reduced intake of added sugars and a reduced risk of cardiovascular disease," the agency explained in the Federal Register notice of the proposal.

Interested parties have until September 25 to comment on the change.

The FDA also reopened the comment period to invite responses on two consumer studies that the agency added to the administrative record, although neither caused the FDA to make any changes to its planned approach. One examined how label changes potentially effected 160 participants, while the second, a web-based experiment involving more than 5,000 individuals, was designed to see if the proposed Nutrition Fact modifications would impact their interpretation of the information presented.

To read the FDA's blog post announcing the "added sugars" proposal, click here.

To comment on the proposal to add the percent daily value of added sugars to the Nutrition Label, click here.

To comment on the two consumer studies being added to the FDA's administrative record, click here.

Why it Matters: The proposed changes to packaged food labels will have a major impact not only on the food industry, but will significantly effect a company's marketing and advertising claims. Changing serving size and the new sugar information, particularly the inclusion of percent daily values, could alter how a product is advertised and the claims that a company can make.

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FTC Halts Medicare Card Scam Against Elderly Consumers

The Federal Trade Commission reached a deal with a group of defendants accused of scamming elderly consumers by promising to provide new Medicare cards.

Florida-based Sun Bright Ventures and individual defendants Benjamin Todd Workman and Glenn Erikson were the subject of a lawsuit last October alleging violations of Section 5 of the Federal Trade Commission Act and the Telemarketing Sales Rule.

According to the FTC, the defendants called senior citizens—many of whom had listed their numbers on the federal Do Not Call Registry—and requested bank account and debit account numbers in order to send them new Medicare cards. The information was necessary to verify the consumers' identities and no money would be withdrawn from the accounts, the defendants assured the consumers.

Instead, the agency said the defendants debited either $399 or $448 using remotely created checks, and provided nothing in return. In some cases, the defendants also falsely promised to provide identity theft protection services for the consumers.

The settlement agreement prohibits the defendants from selling healthcare-related products or services, or billing or charging consumers without consent, or from violating the Telemarketing Sales Rule. They are also banned from selling identity theft protection-related products, creating or depositing remotely created checks or payment orders, and from misrepresenting material facts about any product or service.

A $1.4 million judgment will be suspended upon payment of $35,000 by Workman and the surrender of certain bank accounts.

To read the complaint and the stipulated order in FTC v. Sun Bright Ventures, click here.

Why it matters: The enforcement action highlights several areas of concern for the FTC: the targeting of elderly consumers with deceptive claims about healthcare-related products, the increasing violations of the Do Not Call Registry, and the re-occurring use of remotely created checks.

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Raise Your Glass: Maker's Mark Gets "Handmade" False Ad Suit Tossed

A California federal court judge dismissed a false advertising lawsuit against Maker's Mark, holding that the whiskey's "handmade" claim would not mislead a reasonable consumer.

Travis Williams and Safora Nowrouzi sued the distillery last year, alleging that although the company touts its whiskey as "handmade" in three different places on the label, Maker's Mark employed an automated and/or mechanized process for mixing, fermenting, distilling, and the bottling of its whiskey, with "virtually no human involvement in [the] system, other than perhaps the pressing of a button."

The advertiser moved to dismiss the suit on two grounds. First, Maker's Mark relied upon the safe harbor doctrine, which bars a suit if a federal agency reviews and preapproves labels for regulatory compliance. The Alcohol and Tobacco Tax and Trade Bureau (TTB) reviewed and approved the label for its whiskey, the distillery told the court, and determined that it complied with applicable laws and regulations, including whether the label is false and misleading.

U.S. District Court Judge John A. Houston was not persuaded, due in part to a March decision from another California federal court that denied a motion to dismiss on safe harbor grounds even after a favorable TTB review.

The company had better luck with its second contention: that the plaintiffs failed to allege a likelihood of deception under California's unfair competition and false advertising laws. Not only was the "handmade" claim not a specific and measurable claim, but Maker's Mark also noted that its website contains videos and photographs that demonstrate the actual production process for its whiskey, and the label encourages customers to visit the website for more information about the product.

In granting Maker's Mark's motion to dismiss on the unfair competition and false advertising claims, Judge Houston wrote: "This Court finds that 'handmade' cannot reasonably be interpreted as meaning literally by hand nor that a reasonable consumer would understand the term to mean no equipment or automated process was used to manufacture the whiskey."

As for the plaintiffs' allegations of intentional and negligent misrepresentation, the court agreed with the defendant "that plaintiffs cannot plausibly contend defendant intends to deceive consumers about the nature of its processes when its label clearly describes the process and points consumers to its website."

To read the order in Nowrouzi v. Maker's Mark Distillery, Inc., click here.

Why it matters: The court dismissed the lawsuit with prejudice, ruling that no reasonable consumer would believe that Maker's Mark's "handmade" claims meant the whiskey was literally made by hand. Judge Houston also found persuasive the fact that the advertiser disclosed its entire production process in videos and photographs on its website and suggested on the label that consumers visit the site for more information.

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Feds Move to Halt State GMO Laws, Order FDA to Define "Natural"

Could the federal government call a stop to the enactment of state laws governing the labeling of foods containing genetically modified organisms and order the Food and Drug Administration to establish requirements for "natural" labeling?

The answer is a solid "maybe" after the House of Representatives voted in favor of H.R. 1599 on July 23, a bill that would prevent state and local governments from enacting legislation regulating GMO labeling and require the FDA to define the term "natural" for purposes of food labeling.

The Safe and Accurate Food Labeling Act (which passed by a margin of 275 to 150) directs the U.S. Department of Agriculture to establish a voluntary non-GMO food certification program to govern the labeling of such food in a "nationally uniform" manner. The legislation would allocate $2 million to initially fund the program, which would later be subsidized by user fees. The Department of Agriculture would also create a registry on its website listing all genetically engineered plants intended for use in food.

The bill would also prohibit non-GMO foods from suggesting on their labels that they are safer than GMO foods.

The proposed law will not change the current FDA requirement that producers of food made from a genetically modified plant must provide a label that explains how it is different from a non-GMO comparable food if a "functional, nutritional or compositional" difference exists. If a food producer plans to use a genetically modified plant not found on the Department of Agriculture's list, it must obtain FDA approval that the food is as safe as comparable foods.

Rep. Mike Pompeo (R-Kansas), who sponsored the legislation, cited the potential for a confusing patchwork of state laws as part of the impetus behind the measure, as well as First Amendment concerns. In the wake of federal inaction, several states have enacted laws regulating GMO labeling, including Vermont, where the law is set to take effect next year.

Lawmakers cited the recent wave of litigation challenging "natural" advertising claims for tomato sauce, granola bars, fruit juice cups, and ice cream as a compelling reason to regulate the term "natural." A formal FDA definition of the term and rules on how to use it would go a long way toward ending the lawsuits, legislators said. Currently, the agency's informal policy prohibits the use of a "natural" label for foods containing added colors, artificial flavors, or synthetic ingredients.

To read H.R. 1599, click here.

Why it matters: The future of the Safe and Accurate Food Labeling Act is unknown. The bill has its opponents, and several lawmakers have argued that it creates consumer confusion as to what their food actually contains. Whether the bill will find success in the Senate remains to be seen, and President Barack Obama's position on the legislation remains unclear. A few days after the House passed the bill, two citizen petitions were filed with the FDA on GMO labeling. When asked for a comment, the White House issued a statement that the activities are "just the latest part of an ongoing conversation about how our food is produced. Stay tuned."

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