Alerts

AD-ttorneys@law - April 10, 2019

Alerts / April 10, 2019

In This Issue

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Mommy’s Bliss Baby Cold Treatment Claims in Time Out

Johnson & Johnson challenges numerous product lines before NAD

Rival Johnson & Johnson (J&J) prevails over Mommy’s Bliss.

In two simultaneous inquiries, J&J took Mommy’s Bliss – a homespun baby medicine company – to task at the National Advertising Division (NAD or the Division). At issue were several claims about two product lines.

Gripes of Wrath

First up, the oxymoronically named Mommy’s Bliss Gripe Water.

For those who don’t know what gripe water is, it’s a nonprescription treatment for fussy babies that has a long and volatile history. Developed in the 19th century by an English pharmacist, gripe water has included many disparate ingredients over the decades – alcohol, sugar, herbs and more – and has been the target of interdiction by the U.S. Food and Drug Administration (FDA).

J&J had problems with a number of ad claims made by Mommy’s Bliss regarding the product, including performance, speed of action and novelty claims.

Mommy’s Bliss cited “overwhelming anecdotal support” for the claims regarding the speed of the water’s effect, evidence that the NAD has declared, with agreement from the Federal Trade Commission, had “insufficient support for product performance claims absent a showing that the experience of the individual consumers is representative of the experience of consumers generally with the product.”

J&J maintained that the novelty claims – that the product was the “Very First in the U.S.” – were given the lie by numerous U.S. patent applications describing similar products.

Cough Syrup

Next up: a bevy of cough syrups and probiotic drops – diet supplements for kids. J&J objected to a number of claims that the products would make babies feel better and relieve cough symptoms. Additionally, several claims, including that the product would “ease baby’s cold symptoms,” was a “sick baby toolkit” and was suitable “for when cold & flu season hits,” conveyed the message that the products were “as effective as FDA-regulated drug products” to treat coughs, cold and flu.

The NAD took exception to Mommy’s Bliss’ general claims about making sick children “feel better” along with the specific cough relief claims, which it argued were unsupported by any evidence and should be discontinued. (Mommy’s Bliss informed the NAD that it had discontinued the claims that triggered comparisons with FDA-regulated products, so they were not considered in the investigation.)

Claims made about the probiotic drops failed, according to the Division, because the studies Mommy’s Bliss provided were conducted on groups that were not the target audience for the products. Claims for the syrups and drops including “pediatrician recommended” and “recommended by pediatricians nationwide” were also put on the chopping block.

Back to the gripe water – all of Mommy’s Bliss’ claims about the product were shot down by the NAD. In the case of the novelty “first in the U.S.” claims, the NAD noted a mismatch between the narrow definition that the company placed its product within (“gripe water products that did not contain sucrose or petroleum by-products and that were distributed by American companies”) and the general claims, which did not follow the narrow definition.

The NAD found that the rest of the claims regarding speed of action, performance and doctor recommendations were unsupported by the available evidence.

The Takeaway

It was a long day for Mommy’s Bliss, but when the dust settled, it agreed to comply with the NAD’s recommendations. The lesson, one we often reiterate here, is to have sound and sufficient substantiation for your advertising claims or risk being challenged by competitors and regulators.

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NAD Investigations Keep Getting Meta and Meta

Influencer ad platform accused of false advertising; space-time continuum collapses

Not All Fun and Games

It’s true that most social media influencers are relatively below the radar for above-the-radar types; dependable experts in a particular field or successful practitioners of a certain art or skill, they attract attention that can be parlayed into sales and brand loyalty.

But there are, of course, the influencers who draw followers because of their over-the-top behavior or outrageous lifestyles. We write about this type of influencer all the time – it’s fun, and often allows us to indulge in a little schadenfreude.

Whether it’s expert advice or over-the-top behavior that attracts the marketing dollars, there’s a lot of behind-the-scenes effort that goes into influencer marketing. And we don’t mean just primping or selfie-taking; there’s also the business end, which is complicated.

Enter the influencer marketing platforms (IMPs).

Apples and Kardashians

IMPs purport to help businesses find influencers who are trustworthy and lucrative, monitor the operation of their campaigns, keep the ads aboveboard and otherwise assist with compliance, and measure success and awareness – it’s a mountain of effort that would otherwise cost a company significant time and money in-house.

MLW Squared, which does business as Ahalogy (get it?), is an IMP offering a solution it has dubbed the “tri-verified influencer marketing platform.”

The added value that Ahalogy claims for its platform addresses the often-deceptive or opaque nature of influencer advertising. In a world with fake influencers, how does a company know whether its influencer campaign is effective? How can it tell whether the money it spends on influencers stacks up against traditional ad dollars?

“Partnering with third-party verification solutions will be the first of many steps taken to correct the uncertainty that currently resides in the influencer marketing space,” claims a 2017 press release announcing the arrival of Ahalogy’s platform. The company claims that a tri-verified IMP uses just such third-party analysis to determine whether the ad traffic is high-quality and the metrics are sound.

Ahalogy’s marketing claims for its platform were challenged before the NAD by Collective Bias, an IMP that competes with the company.

At the center of the challenge lies the difference between promoted and native posts. Promoted posts are paid-for content, easily tracked and assessed by third parties. But the efficacy of native posts – content posted by influencers on their personal social media accounts – is much harder to judge. Collective Bias accused Ahalogy of promising the accuracy associated with promoted content when tracking and assessing native posts.

The NAD held that “the advertiser’s broad and unqualified claims that the Tri-Verified platform – and its integrated third-party verification service – allows for influencer marketing campaigns to be ‘100% verified’ and can guarantee that ‘impressions, traffic and other key engagement measures are valid,’ reasonably suggests to consumers that its platform is able to verify 100% of all social media content ….”

Even though the company had used the term “paid media” in its advertising, the NAD maintained that the claims were not narrowed to promoted posts only. In addition, the Division found that Ahalogy had made claims that the platform was able to detect influencer fraud.

The Takeaway

The NAD’s final recommendation split the difference – Ahalogy could either abandon the “100% verified” claims or modify the claims to make it clear that they applied only to promoted posts. Ahalogy agreed to comply with all the Division’s recommendations.

All this summons up a nightmare scenario: Someday soon, influencer marketing will require a platform to provide third-party verification of the claims made by IMPs.

Mind. Blown.

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Dealerships Have Quarter-Billion-Dollar False Ad Suit Trimmed

Car sales armada can proceed with disgorgement under Lanham Act

Catalog of (Dealer) Ships

A ginormous horde of car dealerships sued TrueCar Inc. in the Southern District of New York back in March 2015.

How many car dealerships, you ask? More than 100 from across the country; the list of plaintiffs takes up 28 pages of the original 65-page complaint, and if stretched end to end, would threaten to cover the ocean and to blot out the sun from the eyes of man.

Sorry.

What is TrueCar accused of, that would merit the arrival of such an array of enemies on its shores?

Referral Madness?

The defendant is a website that refers consumers (attracted by web, TV and print ads) to car dealerships and lists available cars and pricing information.

However, the dealers allege that TrueCar engaged in underhanded advertising, telling consumers that they could purchase vehicles at TrueCar-listed dealerships without negotiation at “guaranteed” low costs. Among other tactics, the suit claims, consumers were offered a printable “price certificate” to bring with them to dealerships.

Let’s just say this got the dealers a little bent out of shape. By their account, consumers were showing up expecting prices and a process that the dealers could not deliver. The dealers had never promised a no-haggle sales process or any sort of guaranteed price. In many cases, they claimed, consumers would arrive seeking TrueCar-listed vehicles that were out of stock or were being offered at prices or financing terms different from TrueCar’s “locked-in price.”

The dealers charged TrueCar with false advertising under the Lanham Act and unfair competition and deceptive practices under a plethora of state laws. In addition to accusing TrueCar of allegedly making false no-haggle claims, the dealers accused the website of bait-and-switch advertising as well as false factory invoice claims, false financing claims, false transparency claims and false rebate claims.

The dealers sought monetary relief to the tune of $250 million (!) as well as an injunction against the offending advertising.

Crashing

TrueCar pushed back with a motion for summary judgment in July 2018, claiming, among other things, that the dealers had failed to prove that they had suffered any injury. And in its recent opinion regarding the motion, the Southern District agreed. (State law claims were not challenged in the motion.)

“Plaintiffs’ deposition testimony describes only vague, general perceptions of injury,” the court held. “If credited, plaintiffs’ evidence would not be sufficient for a reasonable trier of fact to find a link between TrueCar’s advertisements and any injury to the plaintiffs.”

This argument was based on the court’s assertion that the dealers competed with other dealers – but not with TrueCar. “A sale made through TrueCar is not necessarily a sale lost by a plaintiff dealership, as opposed to some other competing dealership in the same market,” the court claimed. “At most, the testimony offered by plaintiffs describes witnesses’ perceptions of the ads’ falseness and why the false statements could be material to consumers’ buying choices, but they do not identify discernable injury to the dealerships linked to TrueCar’s advertisements.”

The Takeaway

Before shutting down the case altogether, though, the court left room for the dealers to continue the effort.

Based in part on communications between TrueCar executives and its corporate counsel, the dealers argued that the company willfully violated the Lanham Act – which merited disgorgement of TrueCar’s profits as a remedy.

Here’s one example: An alleged 2013 email from TrueCar’s counsel to the company’s CEO stated that he “strongly [advised] against using the phrase ‘negotiation-free’ in any form in our ads or other self-attributed public communications … In my view it is a much greater risk than we should bear at this point.” The CEO allegedly responded, “I am inclined to take some practical risk here.”

And so, while the bulk of the Lanham Act charges were left in the lot, the case will still be taken out for a spin. “Because plaintiffs have come forward with evidence that TrueCar acted against the advice of counsel and willfully ran false advertisements,” the court held, “the summary judgment motion is denied as to a disgorgement-based remedy.”

Listen to your counsel, folks!

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Arkansas State House Contemplates Bill Restricting Riced-Veggie Labels

But does this put the rice industry in a double bind with its own rice milk product?

Carb Fatigue

Low-carb diets, including the “paleo” subgenus, have spawned some strange species of recipe. Parsnip fries, squash hash browns, cloud bread (made from eggs and cream cheese) and zucchini noodles instead of pasta (blasphemy!) all have had their 15 minutes of fame.

But the replacement of an entire staple food with a low-carb alternative is a category shift that’s bound to raise eyebrows and maybe even rile a temper or two.

If you’re a regular reader, you’re familiar with the epic milk controversy that’s raged for more than 20 years now. As a story, it possesses a certain Dickensian sweep, so please, spare us carpal tunnel and read about it here.

For the purposes of this article, we’ll simply note that the folks who produce milk don’t take kindly to the wide variety of vegetable-, seed- and nut-derived dairy substitutes that have crashed the market. But until now, despite some recent rumblings, federal authorities have been unable or unwilling to weigh in.

Verbing Weirds Language

But just when you were getting tired of the endless slosh of the milk wars, a new conflict is opening over another basic kitchen staple: rice.

Adherents of popular low-carb diets can’t consume rice, which is packed with carbohydrates; to compensate, they’ve exercised their considerable culinary inventiveness to create a number of alternatives, cauliflower rice being the most well-known.

And while there’s plenty of information out there on how to create veggie-derived rice from scratch, vegetable companies have introduced prepackaged “riced” veggies to capitalize on the trend. (No matter how much it galls us, “rice” seems to be becoming a legitimate verb.)

Care to guess how the rice industry feels about this development? Let’s just say it is not keen on the trend, and Big Rice – that’s now a thing – has found allies in at least one corner of the country. Arkansas State Rep. David Hillman and Arkansas State Sen. Bruce Maloch recently introduced a bill to cut through rice-related nomenclature debates.

House Bill 1407 would prohibit representing agricultural products “as rice when the agricultural product is not rice” and “affixing a label that uses a variation of rice in the name of the agricultural product when the agricultural product is not rice or derived from rice.”

There are similar prohibitions in the bill regarding meat generally and pork and beef in particular. (As if you needed another link – check out our article on Indiana’s effort to corral synthetic meat labeling. We’re on top of this, folks.)

The Takeaway

All of this effort might be for naught – a recent milk case in the Ninth Circuit found that federal labeling requirements superseded state regulation. We’ll see whether federal guidance on cauliflower rice or any of the other variants is released.

But, Big Rice, beware – rice milk is a product that’s taken its place beside oat milk, almond milk and the other combatants in dairy’s own Twenty Years’ War. Can Big Rice quash the aspirations of cauliflower rice products while championing its own milk substitute?

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StarKist Gets a Heart-Check Gut Check

Class action alleges American Heart Association logo is a paid endorsement

Sorry, Charlie

When New York resident Abraham Warner filed suit against tuna giant StarKist Co. for its packaging art, it wasn’t over its beatnik-inspired mascot, Charlie the Tuna.

The offending decoration on the StarKist can – Warner purchased StarKist Low Sodium Solid White Albacore Tuna in Water, in case you’re curious – is the “Heart-Check mark,” an infographic promoted by the American Heart Association (AHA). According to the AHA, the mark is “a simple tool to help you Eat Smart. When you see it, you can be confident that a product aligns with the American Heart Association’s recommendations for an overall healthy eating pattern.”

While there are nutrient-, sodium- and fat-level requirements for products bearing the mark, the complaint asserts that the logo’s popularity is due to more commercial preoccupations.

Smells Fishy?

Warner claims that companies must pay the AHA to use the mark on their packaging and that “the AHA makes a significant profit off the sale of rights to use the Heart-Check Mark.”

Furthermore, the claim alleges, the AHA actively promotes the commercial appeal of the mark. Warner quotes AHA materials describing the Heart-Check mark: “Shoppers want clear, simple purchase guidance from a trusted source. The American Heart Association heart-check mark increases product sales because seeing the mark on a package assures shoppers they are making a smart choice.”

Unfortunately for StarKist, argues Warner, the inclusion of the mark on the product label violates state and federal laws because it fails to disclose that the mark is an endorsement the company paid for – #Sponsored! According to rules published by the FDA, for instance, “a statement should be included in close proximity to the claim, informing consumers that the organization or individual was compensated for the endorsement.”

Warner says that the paid mark, which was used without explanation on at least 13 of StarKist’s products, artificially raised the price of the goods.

The Takeaway

With that argument, Warner filed against StarKist in the Northern District of New York in April 2018, alleging deceptive acts or practices and false advertising under New York General Business Law and false or misleading labeling under the New York Agriculture and Markets Law. He sought injunctive and monetary relief.

StarKist filed to dismiss in May 2018, arguing in part that the mark was not misleading because it accurately conveyed the endorsement, an argument whose ship had sailed. “The complaint adequately alleges that StarKist pays an annual fee to use the Heart-Check Mark but omits this fact from its labels,” the court’s opinion maintained.

But the court sided with StarKist when responding to the request for injunctive relief. “Warner does not expressly allege that he is at risk of future injury. Moreover, Warner is now aware that StarKist pays the AHA to place the Heart-Check Mark on its labels.” The court held that this meant there was no real and immediate threat of future injury to justify injunctive relief.

So this case sails along, for now at least.

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Check Out Our Latest Blog Posts

What’s in the Box? FTC Solicits Public Comments Regarding Video Game Loot Boxes Amidst Uncertainty

Imagine you are playing golf, badly, and at the fourth hole a caddy appears out of nowhere with a large box and an offer. In exchange for $20, you can open the box, which may contain high-tech clubs to improve your game, fashionable new gloves or a voucher for a free round. Perhaps you hesitate, uncertain whether paying $20 will be worth the potential reward, but those new golf clubs are tempting. Now imagine a similar offer, but digital and within one of your favorite mobile games, where items are nontangible and there is more uncertainty around reusability. In the gaming world, these offers are referred to as “loot boxes.” Read more and subscribe here.

Fifth Annual Data Security Incident Response Report and Webinar – Managing Enterprise Risks in a Digital World

This year’s report provides metrics from the 750+ potential incidents our team led clients through in 2018, as well as “Take Action” segments that feature insights from our team on key response items. Because it is our Report’s fifth year, we included a special section that provides a five-year trend summary on core incident response metrics. Download the report here and register to attend our webinar here.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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