Alerts

AD-ttorneys@law – July 9, 2018

Alerts / July 9, 2018

In This Issue:

Success Rates for Neurofeedback Therapies Reviewed by NARB

Brain-trainer Neurocore can’t support clinical claims, Board says

Trigger-Happy

The rising popularity of biofeedback technologies is a manifestation of our culture’s infatuation with personal tracking and measurement.

In a biofeedback session, sensors measure your body’s responses to situations or stimuli – brain activity, breathing, heart rate and temperature – providing real-time feedback. In response to this feedback, you might adjust your mindset, your environment or your behavior, thereby testing different ways to gain mastery over your previously automatic responses.

Neurofeedback – a subgenre, as it were, of biofeedback – provides feedback on brain waves, purportedly helping subjects understand and regulate their own brain function. Neurofeedback has been promoted as an especially effective method for treating behavioral issues like ADHD, especially by companies like Neurocore. Neurocore promises to “analyze the information your brain gives us to develop a personalized training program that may improve your brain for a better life.” The company claims to treat a number of disorders, including ADHD, anxiety, depression, migraines, sleep issues and stress.

The Jury’s Out … No, It’s In …

Unfortunately for Neurocore, some of the company’s advertising claims caught the attention of the National Advertising Division (NAD). Back in August 2017, NAD called Neurocore out, saying that the evidence furnished by the company failed to substantiate its “strong health-related advertising claims” including boasts about quantified outcomes – for example, “90% report fewer or less frequent Anxiety symptoms” or “78% achieve non-clinical status.”

Neurocore appealed NAD’s decision to the National Advertising Review Board (NARB or the Board).

NARB seemed to take a somewhat softer line, acknowledging that “there was evidence in the record that supported the potential efficacy of neurofeedback and biofeedback in treating a variety of disorders.” However, the Board determined that the third-party clinical studies on which Neurocore relied have produced inconsistent results, and noted that widely varying testing protocols rendered this evidence insufficient support for Neurocore’s claims.

The Takeaway

There isn’t enough room here to delve into the science of Neurocore’s assessment methods, but NARB’s opinion about how it interpreted its conclusions for its audience was clear enough. Neurocore claimed that its therapies produced a “clinically important” reduction of symptoms; NARB determined that this claim “reasonably conveys” the notion that there was a solid clinical determination in the first place. Similarly, according to NARB, Neurocore’s claims that its patients “no longer met symptomatic thresholds for a disorder” painted a picture that a clinically verified cure had occurred. The evidence presented, however, was not sufficient to support these strong health-related claims.

NARB recommended that Neurocore discontinue the claims, noting that it would allow the company to discuss its assessments in its marketing materials – as long as it did so in a “truthful and non-misleading” manner. The Board also disputed a number of non-quantified claims made by Neurocore and recommended that testimonials claiming that clients had a reduced need for medication be removed from various channels. Neurocore agreed to comply with NARB’s recommendations.

This decision demonstrates that health and safety claims continue to be a focus of NAD’s attention. Advertisers who make these types of claims should ensure that the evidence upon which they rely is a good fit for the claims they intend to make.

New Slack-Fill Class Action Gets to the Pint

Up-and-coming ice cream company Halo Top accused of skimping on the goods

Rocket Road

In July 2017, Halo Top became the best-selling ice cream brand in the United States.

Its ascent was as dizzying as a cold-stimulus headache. The brand, according to Inc. magazine, grew its revenues an incredible 21,000 percent between 2013 and 2016, leaving Ben & Jerry’s and Haagen-Dazs in the rear-view.

What accounts for the growth?

The company is one of those all-American success stories that makes everyone jealous: A couple of broke founders roll the dice, create an upstart food brand in their kitchen and get plenty of credit for using the healthiest ingredients they can find.

The draw of the product, though, is an ice cream that can be consumed not in guilty fits and starts, but by whole pints at a sitting. According to the company, the calorie count of a pint of Halo Top is less than a third of the pints of its two major competitors. The actual count features prominently on the front of Halo Top’s packaging, where the number of calories is printed in larger font than the brand name.

Low in calories, low in fat and high in protein, Halo Top’s pints started flying off the shelves. For a while, the company couldn’t keep up with demand.

The Takeaway

Two California consumers aren’t taken with the company’s charming story, however. In a June 2018 class action suit, Youssif Kamal and Gillian Neely claim that Halo Top routinely underfills its pints, “oftentimes dramatically so.”

This allegation, they believe, is rendered all the more grave because the packaging pushes the product as an ice cream pint that can be guiltlessly consumed (“GUILT FREE ZONE…Keep digging” is an example of the slogans the company prints on the inside foil lid).

The duo alleges that Halo Top violated California’s Unfair Competition Law and Consumers Legal Remedies Act, and committed breach of implied contract. They seek injunctive relief, damages and attorney’s fees.

Clearly, slack-fill remains on the class action radar.

Seventh Circuit Not Moooved by False Advertising Appeal

Milk-maker Arla Foods’ ad campaign put out to pasture for hormone ‘dis’

Here Be Monsters

The advertisement is kind of brilliant.

Back in 2017, Arla Foods launched a series of 30-second TV spots as part of a $30 million campaign to expand cheese sales in the United States (Arla’s parent company is based in Denmark).

In one commercial, a child (“Leah, age 7”) is asked to describe recombinant bovine somatotropin (mercifully abbreviated rBST), a hormone given to cows to stimulate milk production. Our young narrator dives in with all the élan of Tolkien:

“razor-sharp horns … it’s so tall that it can eat clouds … you may want to pet it but the fur is electric … and then it starts laughing … heh heh heh heh!”

Underneath the adorable narration, animation brings the monster to life in loving and imaginative detail.

The spot ends with a sober adult explaining, “Actually, rBST is an artificial growth hormone given to some cows. But not the cows that make Arla cheese. No added hormones. No weird stuff. Arla – live unprocessed.”

Can you guess what happened next?

Fondue Venue

Eli Lilly and Co. and subsidiary Elanco US sued Arla in – yes, you guessed it – the Eastern District of Wisconsin, Green Bay Division. The American pharma giant and its veterinary subsidiary charged Arla with false advertising under the Lanham Act as well as violation of a Wisconsin statute. The plaintiffs argued that the commercial constituted a claim that Arla cheeses were safer than competitor cheeses made with rBST, and requested an injunction barring the offending advertisements and requiring corrective ads as well.

The complaint maintained that rBST was neither dangerous or unsafe, citing the U.S. Food and Drug Administration’s (FDA) determination that the hormone is harmless – “there is no discernable difference between milk from cows supplemented with rBST and milk from unsupplemented cows.” The complaint went on to note that the FDA had declared such ads ‘“false and misleading” if they state or “imply that milk from untreated cows is safer or of a higher quality than milk from [rBST] treated cows.”

The Takeaway

With the exception of Elanco’s request that Arla publish corrective advertising, the district court issued an injunction completely in Elanco’s favor in June 2017. Arla appealed the order to the 7th Circuit Court of Appeals.

In the appeal, Arla argued that Elanco didn’t produce any evidence that proved consumers were confused by the ad, and that the company did not demonstrate the ad had diminished demand for the rBST product.

The 7th Circuit affirmed the injunction, maintaining that consumer surveys and other such evidence of consumer confusion are not required at the preliminary injunction stage. Moreover, the court agreed with Elanco when it claimed that an attack on rBST was tantamount to an attack on Elanco, since it is the only manufacturer of FDA-approved rBST supplements currently in the marketplace.

As advertisers continue to tout differentiating features of their products, particularly claims that their products are “free of” certain ingredients, care should be taken to ensure that such claims do not imply the unsupported message that a product is better based on the absence of those ingredients.

Come See About Fees: The Supremes Demolish Tax Barrier

In 5-4 split, the Court allows states to levy taxes on online retailers

Commerce Reverse

All right, this is big..

On June 21, 2018, the Supreme Court handed down a decision that eliminated a foundational concept in e-commerce.

In a 5-4 split, the Court held that the “physical presence” test – which barred a state from levying sales or use taxes on retailers that did not have a physical presence in the state itself – was “unsound and incorrect.” The decision in South Dakota v. Wayfair, Inc. overturned a 1992 case, Quill Corp. v. North Dakota. In the earlier case, North Dakota attempted to force Quill, an office equipment firm, to pay use taxes for its customers living in North Dakota.

Snail Mail? Fail!

In 1992, the Court decided in favor of Quill, which claimed it didn’t have any real connection to North Dakota – no stores, employees or offices there at all – and was therefore exempt from the state’s authority to levy taxes. Quill’s argument relied on a much earlier case involving a company that was mailing products to customers in a state in which it did not have a physical presence.

So from the Quill decision until June 2018, the physical presence test meant that an online business was allowed to dodge sales tax, except in the state where it was incorporated.

Although South Dakota v. Wayfair, Inc. was largely similar to Quill, the Court used it as an opportunity to review the physical presence rule, which has remained a cornerstone of online commerce since its inception.

At issue in South Dakota was a state law that authorized the levy of sales tax on certain vendors located outside of the state. Supported by the retail industry, South Dakota didn’t argue that its case differed from Quill, but rather that the earlier decision needed to be reversed. The state argued that Quill harmed local IRL retailers and that the physical presence test itself was not sound.

The Supreme Court agreed, vacated the South Dakota Supreme Court judgment under review and kicked the case back down to that court.

The Takeaway

The effects of the Court’s decision on marketing and advertising are hard to anticipate, although the impact on underlying commerce will be vast.

While online retail giant Amazon will mostly shrug off the decision – it had already decided to pay sales tax in every state that levied them – other online retailers will have to begin paying up, which may depress online sales and shift some of the balance of commerce between online and brick-and-mortar retailers. Click here for a more in-depth analysis of this decision and its potential implications.

FTC Plans Big Ol’ Hootenanny

Upcoming mega-hearings will discuss myriad topics affecting enforcement policies and priorities

Gift of Gab

The Federal Trade Commission (FTC or Commission), responding to what it calls “broad-based changes in the economy, evolving business practices, new technologies, [and] international developments,” is planning a series of public hearings to address how these changes might impact the business of enforcement law. The hearings, consisting of 15 to 20 public sessions, will kick off in September 2018.

Calling the hearings an occasion for “serious reflection and evaluation,” the Commission assembled an exhaustive list of items for public comment, ranging from the development of antitrust and consumer protection law and enforcement to the competitive effects of mergers and acquisitions to the effects of algorithms, artificial intelligence and analytics on consumer welfare.

The Takeaway

This meeting is the first of its kind since 1995’s “Global Competition and Innovation Hearings,” to which the current series of hearings harkens back in “form and structure.” Those hearings – also known as the “Pitofsky Hearings,” after then-FTC Chairman Robert Pitofsky – produced two major reports on competition policy and consumer protection in the “new high-tech, global marketplace.” Both are worth a read for anyone interested in how the Commission forecast the unprecedented onrush of technological change that was about to follow (in one vision of the future, the report states that consumers may “not view the Internet as a source of entertainment or fun, but rather as a tool to accomplish mundane tasks more conveniently and cheaply than they might through conventional means”).

How will the FTC fare this time around? It’s partly up to you and other interested parties who want to contribute to the conversation. The Commission is accepting public comment on the announced topics here through Aug. 20, 2018. As individual sessions approach, the Commission will issue instructions on how to submit comments on the pertinent topic.

Linda Goldstein Joins Esteemed Faculty of DigitaLatest Summit in New York

Linda Goldstein, leader of BakerHostetler’s advertising, marketing and digital media practice, has joined the faculty of DigitaLatest, an essential summit for marketing executives taking place on August 6-9 in New York. Senior management from leading digital marketing platforms, tools and technologies, including Google, Twitter and Snapchat, will share their latest developments and best brand use cases. Linda’s session will cover the latest legal developments and highlight best practices for minimizing risk. For registration information, click 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.